THE European
Commission yesterday presented a series of measures for a coordinated
EU-wide response to corporate tax avoidance, notably through implementation
of the global standards developed under the OECD/G20 Base Erosion and
Profit Shifting Project. The Commission proposal would align tax laws
in all 28 EU countries, in order to fight aggressive tax practices by
multinational enterprises. The package includes legally-binding measures
to block the most common tax avoidance methods, a recommendation on preventing
tax treaty abuse and the proposed sharing of tax-related information
on multinationals operating in the EU.
OECD Secretary-General Angel Gurría welcomed the Commission’s proposal, which
he said marks an important milestone toward the development of a comprehensive,
coherent and coordinated approach against corporate tax avoidance in Europe.
“Implementing the international standards against base erosion and profit
shifting developed by the OECD and the G20 will help put an end to double
non-taxation, facilitate a better alignment of taxation with economic activity
and value creation and render many of the most aggressive tax planning structures
ineffective. We welcome the Commission’s proposal, which is entirely BEPS-compatible,
and will help bring about greater transparency, fairer competition and a
more certain tax environment for the benefit of all businesses across Europe.”
The European Commission proposal came one day after 31 countries signed a
landmark agreement at the OECD for the automatic exchange of country-by-country
reporting under the BEPS Project. The signing ceremony for the Multilateral
Competent Authority Agreement (MCAA) for the automatic exchange of Country-by-Country
reports marks an important milestone towards implementation of the BEPS Project
as well as a significant increase in cross-border cooperation on tax matters.
Approved by G20 Leaders during their November 2015 summit in Antalya, Turkey,
the BEPS Project provides governments with solutions for closing the gaps
in existing international rules that allow corporate profits to “disappear”
or be artificially shifted to low/no tax environments, where little or no
economic activity takes place. It is based around a 15-point Action Plan,
structured around three fundamental pillars: introducing coherence in the
domestic rules that affect cross-border activities; reinforcing substance
requirements in the existing international standards, to ensure alignment
of taxation with the location of economic activity and value creation; and
improving transparency and certainty for businesses and governments alike.
The OECD conservatively estimates revenue losses from BEPS at USD 100-240
billion annually, or anywhere from 4-10% of global corporate income tax (CIT)
revenues.
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