The European Council of Ministers has agreed to take steps to combat the use of corporate tax strategies that shift profits to low-tax countries to avoid paying taxes.
Wednesday’s agreement comes amid growing pressure on companies like Google, Amazon, Starbucks, Apple and other companies to pay a greater share of taxes on the profits they earn in Europe and the U.S. (see
“Tax fraud and tax evasion limit countries’ capacity to raise revenue and carry out their economic policies,” said a
The Council said that priority would be given to efforts to extend the automatic exchange of information at the EU and global levels. Other measures will include improving the EU’s agreements with Switzerland, Lichtenstein, Monaco, Andorra and San Marino, which have traditionally enjoyed a reputation as low-tax states. Work will also be carried out on the European Commission’s recommendations on dealing with aggressive tax planning and profit shifting, as well as what the Council refers to as “harmful tax measures” and base erosion.
They noted that efforts are required to respond to the challenges of taxation in the digital economy, while taking full account of the work of the international Organization for Economic Cooperation and Development, which issued a
Other measures aim to ensure that third countries, including developing countries, are able to meet standards of good governance in tax matters, and that large companies and corporate groups report key financial information on a country by country basis. The Council noted that identification of beneficial ownership of companies, trusts and foundations is essential.
The agreement comes on the heels of the
The Washington, D.C.-based research and advocacy group Global Financial Integrity
“The European Council’s commitments reflect the new Western consensus on the critical importance of greater transparency in the world’s financial system, and we are extremely pleased to witness this positive development, but there is an acute need for any new measures in this area to benefit developing countries,” said GFI legal counsel and director of government affairs Heather Lowe in a statement. “This is the time for governments to grasp the relationship between the causes of their own financial situations and the struggles of developing countries, and to ensure that actions and policies moving forward benefit all peoples.”