New EU rules to curb tax avoidance among giant multinational firms, following Google’s £130m “sweetheart” tax deal with HMRC
The European Commission proposed a set of new rules to curb tax avoidance by large companies. This follows Google’s £130m “sweetheart” tax deal with UK’s HM Revenue and Customs to allegedly avoid paying its fair share of corporate tax that spreads across ten years.
Euronews reported that one of the measures would allow EU countries to tax firms even if they have transferred their money to another location to avoid tax payments. This aims to discourage multinational firms from shifting their income from their main companies to their subsidiaries in countries where there are less tax payment requirements.
“Every year we lose between 50 and 70 billion euros through tax avoidance. This is unacceptable and we are acting to tackle it. These measures will impose on multinational corporations the same tax rate and the same rules as for other businesses operating within the EU,” said EU tax commissioner Pierre Moscovici.
According to Reuters, the European Commission also wants to strengthen its guidelines in tax data disclosure. European Parliament studies show that giant corporations can avoid taxes of up to 70 billion euros, or $76.10 billion annually in Europe. These schemes can bring global losses somwere from $100 billion up to $240 billion. This can easily be done legally by reporting the profits made in high-tax countries in other countries with lower tax bands.
The European Commission’s official website posted the Anti Tax Avoidance Package. Its key features includes new proposals such as legally-binding measures to stop the common schemes used by firms to avoid paying tax; recommendation to Member States on how to stop tax treaty abuse; suggestions for Member States to share tax-related data on corporation with businesses in the EU; actions to enhance tax good governance internationally; and a new EU process for recording third countries that does not agree to play fair.
These new measures don’t come out without opposition. Businesses and banks warned that these new rules may have a negative effect on competitiveness, discourage investments, and raise administrative costs.