EU countries to share tax deals with multinationals

Tax arrangements between countries and cross-border companies will be communicated to all EU states under revised rules in a follow up to the LuxLeaks scandal, in which Luxembourg was found to have struck tax deals with individual companies.

Finance Minister Michael Noonan welcomed the agreement reached unanimously by EU countries yesterday and which will have implications for multi-nationals headquartered in Ireland.

It would cover arrangements such as the alleged sweetheart deal Ireland made with Apple, which is currently being investigated by the Euroepan Commission.

The cross-border tax arrangement also opens up other possibilities as revenue commissioners in one country will be able to check what tax is being paid elsewhere by companies that also have a base in their territory.

In this way, they can judge if undue sums of money are being transferred to a sister company in a low-tax country through loans or underpricing goods for example, a regular complaint by states such as France and Germany against companies with bases in Ireland.

The new directive, which comes into force in 2017, will apply to agreements from 2012, with some provisos. It requires states to automatically make available details on advance cross-border tax rulings as well as advance pricing arrangements.

The definition of a tax ruling has been broadened to include any assurance a tax authority gives to companies on how they will be taxed while advance pricing arrangements deal with the value to be attached to goods or services transferred between companies.

The information will be lodged in a secure central directory to be developed by the European Commission and to which member states will have access.

The commission will only have access to monitor that the directive is being implemented correctly and may not use information for state aid investigations.

This and the fact that the details will not be available to the public were criticised by the European Parliament’s Green group economics spokesperson Molly Scott Cato, who said that true transparency on corporate tax policy remained elusive.

Companies with an annual net turnover of less than €40m may be excluded by member states.

The ‘look-back’ arrangement means details must be made available of any cross-border rulings and advance pricing arrangements issued or amended in 2012 and 2013. If they were still valid in January 2014, they will fall under the rules as will any arrangements issued or renewed after January 1 2014.

The strengthened rules are in line with the OECD developments on base erosion and profit shifting announced earlier this week.