The European Commission recently outlined plans for a new Directive which – if implemented – would see the introduction of more rigorous rules for tackling corporate tax avoidance.
Last week, the European Parliament supported the proposals and indeed went further, advocating stricter limits on deductions for interest payments as well as tougher rules relating to foreign income.
Other measures discussed in Strasbourg include greater transparency over trust funds, common rules for “patent box” tax reductions and the creation of a specific European Union blacklist of tax havens.
In a press statement, the European Parliament said: “MEPs are more ambitious than the Commission with regard to the ‘switch-over rule’ for earnings taxed in a country outside the EU and then transferred to an EU member state.
“This so called ‘foreign income’ is often exempt from taxation, so as to avoid double taxation. MEPs favour setting a minimum rate of 15 per cent, i.e. if foreign income was taxed at a lower rate outside the EU, then the difference would need to be paid.”
However, any proposals would have to be agreed by all 28 member states and it can traditionally be difficult to achieve consensus among the different nations on the subject of taxation, many of whom remain concerned about the possibility of alienating businesses by overly punitive requirements.
Wilson Wright LLP
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