(Bloomberg) European Union proposals to crack down on corporate-tax avoidance are getting stuck in a fight over how to curb aggressive tax strategies through foreign ownership, threatening the possibility of a deal by June.
The EU in January proposed a slate of new measures to stamp out loopholes and make sure companies pay what they owe. In March, nations agreed on plans to share country-by-country levy data among tax authorities, and next week the European Commission will unveil proposals to make this data public.
Also on tap is passing the proposed Anti-Tax Avoidance Directive by June, when the Netherlands wraps up its six-month term at the head of the EU’s administrative presidency. The Dutch have made tax reform one of their main goals and are seeking a general agreement at May’s meeting of EU finance ministers.
The EU’s overall effort to ramp up corporate-tax collection received a political boost this week after revelations that some of the world’s richest people are using Panama-based lawyers to channel funds through off-shore accounts. Tax avoidance is “the economic scourge of a world without rules,” EU Economic Affairs and Tax Commissioner Pierre Moscovici said Thursday in Brussels, calling on nations to agree on a common blacklist of tax-haven nations within the next six months.
At a working group in Brussels on Wednesday, one of the biggest battles was over so-called controlled foreign companies and a related “switch-over clause,” according to three EU officials, who asked not to be named because talks are ongoing. These regulations are aimed at preventing the use of foreign units to avoid paying taxes.
The rules, which tie into last year’s base erosion and profit-shifting plans from the Organization for Economic Cooperation and Development, have generated intense debate among nations and efforts by the Dutch to strike a compromise. According to documents prepared for the meeting, some nations consider the plans “too far reaching” while others say they aren’t ambitious enough.
“The current political priorities in international taxation highlight the need for ensuring that tax is paid where profits and value are generated,” one of the documents said. “It is thus imperative to restore trust in the fairness of tax systems and allow governments to effectively exercise their tax sovereignty.”
—With assistance from John Glover.
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