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New EU rules to stop businesses using legal loopholes to pay less tax


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New EU rules to stop businesses using legal loopholes to pay less tax

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Brussels is pushing for new rules to reduce tax avoidance.

Among the planned measures EU countries would be able to tax company profits in some circumstances even if the money has been transferred elsewhere to avoid such payments.

The European Commission wants to deter multinationals from shifting their profits from parent companies to subsidiaries in low or no tax countries.

EU tax commissioner Pierre Moscovici said: “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.”

Governments would be allowed to tax profits generated in their territories after they are moved somewhere else, provided that the effective tax rate in the country where the profits have been transferred is less than 40 percent of that of the original country.

Corporations will have to reveal their taxes, profits, revenues and other financial data to the administrations of all countries where they operate, which then will exchange data among themselves, the proposed rules say.

By increasing transparency, the measure is expected to deter aggressive tax planning, but it falls short of a fully public disclosure that may have exposed companies to further scrutiny. The Commission did however not rule out that such a measure may be proposed in the future.

The proposed measures will need the approval of all 28 EU countries.

Markus Beyrer, head of EU companies’ lobby group BusinessEurope, complained the proposed measures could hurt business.

“The EU must not undermine the competitiveness of EU industry or damage the EU’s attractiveness as an investment location,” he said in a statement.

Moscovici also confirmed the EU Commission would investigate a recent much criticised UK tax deal with Google “if a complaint arises”. Google agreed last week to pay 130 million pounds (170 million euros) in back taxes, but it was seen by many as too little compared with the profits made by the company in Britain.

Google, Amazon, Starbucks, Apple and others have taken advantage of legal loopholes to lower their tax bills.

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