EU Parliament closes multinationals’ tax loopholes

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The European Parliament amended today the EU’s anti-tax avoidance directive to prevent multinationals to avoid paying tax .

In the wake of the “Luxleaks” scandal in 2015, which revealed mismatches between EU and third countries’ tax rules to reduce their tax bills, the Tax Rulings Committee has held a series of meetings and public hearings in which players from across the tax spectrum have shared their knowledge and given their views.

These included at the time representatives of the “Big Four” consultancy firms (Pricewaterhouse Coopers, Ernst & Young, Deloitte, and KPMG), tax association representatives, the “Luxleaks” whistle blowers and investigative journalists, representatives of the OECD, European Commission and EU member states, academics and transparency NGOs.

Today, a resolution was approved by 591 votes to 36, with 12 abstentions.

“These arrangements are frequently used by the largest companies with the sole purpose of reducing corporate taxation. We have seen it in both the Apple case and in the McDonald’s case. It is about time these corporations paid their fair share of taxes,” said rapporteur Olle Ludvigsson (S&D, SE).

If EU ministers back these amendments, corporations established in two jurisdictions (inside and outside the EU) for example, will no longer be able to have the same expenditure deducted from tax in both jurisdictions.

MEPs also want to put an end to the practice of having a payment recognised as tax deductible in one jurisdiction but not recognised as taxable income in the other.

The report now goes to the Council for their consideration and final approval.


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