Multinationals availing of permissive tax regimes could have their tax assessments ignored and be forced to pay the full amount, under plans released by the European Commission.
Ireland will be asked to nominate representatives to sit on a board to identify ways companies are avoiding or minimising their tax, including through regimes such as that in Ireland and the Netherlands.
This is the latest development in the EU’s growing battle to ensure countries benefit from an estimated €1tn of tax being lost through avoidance and evasion annually.
While Ireland is not considered a tax haven, the country has been under severe pressure to increase its corporate tax rate and the tax structure that allows what is known as the “double Irish”.
The body, to be known as the Platform for Tax Good Governance, will monitor countries’ progress in tackling aggressive tax planning and clamping down on tax havens.
“The aim is to ensure that real and effective action is taken by member states to address these problems, within a coordinated EU framework,” said Algirdas Semeta, commissioner for taxation.
The platform will have about 45 members including a representative from each national tax authority, European Parliament, and up to 15 from businesses, academics, NGOs and other stakeholders. “This will also facilitate dialogue and exchange of expertise, which can feed into a more coordinated and effective EU approach against tax evasion and avoidance,” he said.
The 15 will be appointed by the Commission which launched a request for applicants to serve a three-year mandate with the first meeting to be held in June.
The platform will track two specific issues — member states progress on identifying tax havens and putting them on national blacklists; and blocking off opportunities exploited by companies to avoid paying their fair share of tax.
“These include reinforcing the anti-abuse provisions in bilateral tax treaties national legislation and EU corporate legislation. Any artificial arrangement carried out for tax avoidance purposes would be ignored and companies would be taxed instead on the basis of actual economic substance”.
The Department of Finance did not respond to a query on the Irish attitude to the platform but said the Irish presidency was working very closely with Mr Semeta and the Commission in tackling tax fraud and evasion.
“The issue of combating tax fraud and evasion is a priority for the Irish presidency. We are taking this work forward on a number of fronts in this area. We are currently preparing a Council response to the Commission Action Plan to strengthen the fight against tax fraud and tax evasion. We are working hard at the code of conduct sub group (chaired by Presidency) — on a proposal to combat double non-taxation and other tax evasion. We put forward a Vat anti-fraud package but achieving agreement on the package is proving difficult,” the department said.
While normally the spotlight is on Ireland for transfer pricing, the Netherlands has been used by some of the largest multinationals and in 2011 they funnelled some €57bn through the country using letter box companies.
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