The European Commission has today announced proposals for new laws to tackle tax avoidance and evasion in the EU. This new legislation will mean that Member States will need to take a common approach to preventing tax avoidance and tackling tax havens.
The new Directives come soon after a report written by Anneliese Dodds MEP was approved in the European Parliament, demanding that the Commission makes the issue of tackling aggressive tax avoidance and evasion one of its primary goals.
The new Directives call for Member States to require all companies above a certain size to report where they make their profits and where they pay their taxes, on a country-by-country basis. This information will then be shared between tax authorities in different Member States, to allow every EU country to have access to the data.
By sharing tax information across Member States, it becomes harder for companies to shift profits to low- or no-tax jurisdictions or to avoid paying tax altogether. Companies will have to report information such as the amount of revenue, profit or loss before income tax, income tax paid and tangible assets with regard to each jurisdiction that they operate within. By sharing information, EU states can make sure that the tax is paid in the correct jurisdiction.
For now, the Commission proposal stops short of recommending that this information also be made available to the public - something which has been called for by the European Parliament on a number of occasions.
The Commission also today called for a commonly agreed list of recognised Tax Havens for EU states. The Commission wants to establish a ‘scorecard’ system for states that are suspected of not adhering to tax governance standards, that will lead to common sanctions and counter measures that are to be agreed by Member States by the end of 2016.
Anneliese Dodds has welcomed the Commission taking the issue of aggressive tax avoidance and evasion seriously so soon after her report (co-authored with a centre-right MEP) was overwhelmingly approved in the European Parliament.
Anneliese said: “It is encouraging to see the Commission picking up the recommendations from my report and turning them into concrete actions. In the week when we've seen in the UK just how little Google has got away with paying in tax, and the Tories trying to claim success for clawing a token amount back, it is clear that much, much more needs to be done.
"So this is only the beginning. There are still a number of recommendations from my report that have not been adopted which must be taken on board to stop tax fiddling.
“Most pressingly, the Commission has not yet taken the step of making companies report publicly where they make their profits and where they pay their taxes. This is something that the European Parliament has consistently called for in response to the justified anger of citizens and smaller businesses who want more tax transparency. The Commission must listen, and come forward with proposals as soon as possible.
“The Commission's proposals will now be in the hands of the Member States in the Council. They must not water down the proposals, but must step up to the plate and turn these recommendations into meaningful tax reforms.”