EU Commission welcomes agreement on tackling tax avoidance

The European Commission has welcomed an agreement on new rules to tackle tax avoidance.

New measures have been approved to tackle tax avoidance | Photo credit: Press Association

By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

21 Jun 2016

Measures approved include new powers for taxing profits shifted by corporations based in the EU to low-tax or tax-free countries where they have no real activity. 

There are also provisions to tax intellectual property developed in the EU when it is transferred outside the EU.

Political agreement on the far-reaching rules to eliminate the most common corporate tax avoidance practices were agreed on Tuesday.


The agreement was reached following discussions by the economic and financial affairs Council in Brussels.

First proposed by the Commission in January, the legally-binding rules seek to spur global efforts to clamp down on "aggressive tax planning."

They are particularly timely given the recent Panama Papers revelations.  

The measures were welcomed by Parliament in a resolution voted on earlier this month.

MEPs, nonetheless, advocated stricter limits on deductions for interest payments and tougher rules on foreign income. 

They also called for more transparency for trust funds and foundations, common rules for "patent box" tax reductions on intellectual property earnings, and an EU blacklist of tax havens and sanctions against uncooperative jurisdictions.

Deputies say Parliament's position is more ambitious than the Commission proposal, in particular with regard to the "switch-over rule" for earnings taxed in a country outside the EU and then transferred to an EU member state.

The measures in the newly-agreed directive target the main forms of tax avoidance practiced by large multinationals and builds on global standards developed by the OECD last year.

Commenting on the outcome of Tuesday's meeting, Pierre Moscovici, European economic and financial affairs, taxation and customs Commissioner, said: "Today's agreement strikes a serious blow against those engaged in corporate tax avoidance."

He added, "For too long, some companies have been able to take advantage of the mismatches between different member states tax systems to avoid billions of euros in tax.

"I congratulate our member states who are now fighting back and working together to make the changes needed to ensure that these companies pay their fair share of tax. I also thank the Dutch EU Council presidency for their dedication in achieving this deal." 

The rules were provisionally agreed last week by EU finance ministers. Belgium and the Czech Republic asked for a temporary suspension of the agreement, but have now withdrawn their objections.

In December 2014, the European Council cited "an urgent need to advance efforts in the fight against tax avoidance and aggressive tax planning, both at the global and EU levels".


Read the most recent articles written by Martin Banks - New EU regulations on AI seek to ban mass and indiscriminate surveillance