EC proposes new rules to clamp down on profit shifting by multinationals

THE European Commission is to restrict companies shifting their profits to low tax jurisdictions as part of a package of measures aimed at curbing multinational companies’ aggressive tax practices, proposed yesterday.

It calls on member states to take a stronger and more coordinated stance against tax avoidance and suggests that tax authorities share tax-related information on multinationals operating in the EU, as earlier agreed by 31 countries in a deal with the OECD.

Other proposals include a series of legally legally-binding measures to block the most common methods used by companies to avoid paying tax, while the EC is expected to consider imposing a so-called Common Consolidated Corporate Tax Base (CCCTB) across the EU.

The measures, which build on the OECD Base Erosion and Profit Shifting project, will require the support of all 28 EU member states to become law.

Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: ” Today we are taking a major step towards creating a level-playing field for all our businesses, for fair and effective taxation for all Europeans.”

The proposals come as the influential UK Treasury Committee launched an inquiry into the country’s corporate tax system, after the government was criticised over the ‘derisory’ nature of its tax settlement with Google.

Although not aimed at Google, MPs will consider broader measures to protect the UK’s shrinking corporate tax base and look at HMRC measures to tackle aggressive tax avoidance.