EU closes in on corporate tax loopholes; decision due by Tuesday

EU finance ministers reached a provisional deal Friday on measures aimed at clamping down on corporate tax cheats, but gave themselves three more days to raise any final objections, after some member states said they had to consult domestically.

The measures, proposed by the European Commission in January, are part of a wider battle against multinationals that use loopholes to cut their tax bills.

Once finalized, the agreement will "shut down many of the channels most commonly used by aggressive tax planners to minimize their tax bills," said commission Vice President Valdis Dombrovskis.

Corporate tax-dodging is thought to deprive EU member states of up to 70 billion euros (78 billion dollars) in revenues annually - more than five times the bloc's funding of Europe's refugee crisis in 2015-16.

But negotiations were tough, with many technical details and conflicting national interests, said Dutch Finance Minister Jeroen Dijsselbloem, whose country holds the European Union's rotating presidency. Tax decisions require unanimity in the 28-country bloc.

The compromise reached Friday addresses issues raised by Belgium and the Czech Republic in particular. Both ministers have until midnight Monday to consult domestically and raise any further objections, Dombrovskis said. If not, the deal will be adopted.

"In truth, the issue is through. It is an important step," German Finance Minister Wolfgang Schaeuble said.

The deal, which is due to take effect from 2019, aims to ensure that companies pay taxes where they earn their profits. Its provisions include so-called "exit taxation" on assets moved out of a member state, as well as a general rule against abusive tax arrangements.

The approach is based on guidelines laid out by the Organisation for Economic Co-operation and Development and endorsed by the G20.

The issue of tax avoidance made headlines in April with the Panama Papers, a massive data leak by Panama-based law firm Mossack Fonseca that put politicians, athletes and celebrities in the spotlight by detailing how money was being funneled to shell companies in tax havens.

"We cannot shirk the desire of citizens to see companies conform to a fiscal ethics that normal people abide by," EU Economy Commissioner Pierre Moscovici said ahead of Friday's talks in Luxembourg.

The ministers also approved a road map outlining ways of further shoring up Europe's banking industry in the coming years, to avoid taxpayers having to foot the bill of any future bank bailouts.

The issue is sensitive, as it foresees the creation of a common deposit insurance scheme that Germany has opposed out of fear that Berlin would end up paying for banking crises in other countries.

Member states agreed in their road map on the need for steps to reduce financial sector risks before sharing them, in response to Germany's concerns.

Last update: Fri, 24/06/2016 - 08:49
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