Business

Tax avoidance targeted by European Union

  • 6 December 2012
  • From the section Business
Euro notes
Image caption The Commission said EU members lose 1tn euros a year through tax evasion and avoidance

The European Commission has announced a series of proposals designed to tackle the "scandalous loss of much-needed revenue" EU members suffer through tax evasion and tax avoidance.

These include a tougher stance on tax havens and ways to close loopholes.

Some big companies take advantage of these loopholes to avoid paying millions of euros in tax.

The Commission said around 1tn euros ($1.3tn; £800bn) is lost every year in the EU by tax avoidance and evasion.

"While member states must toughen national measures against tax evasion, unilateral solutions alone won't work," said Commissioner for Taxation Algirdas Semeta.

"In a single market, within a globalised economy, national mismatches and loopholes become the play-things of those that seek to escape taxation.

"A strong and cohesive EU stance against tax evaders, and those that facilitate them, is therefore essential."

'Harmful competition'

The package of measures includes two main recommendations. The first "encourages" member states to identify tax havens and place them on "national blacklists". Measures to persuade these havens to apply EU law are also laid out.

The second suggests ways for member states to address the kinds of legal technicalities and loopholes companies use to pay less tax.

Members should also adopt a common General Anti-Abuse Rule, whereby they can ignore artificial tax avoidance schemes and tax the underlying sum of money, the Commission said.

It also called for a clampdown on what it called "harmful tax competition", where member states compete with each other to provide the most benign tax environment. If necessary, the Commission said it would come up with the "legislative proposals for action".

A number of major global companies, including Amazon, Starbucks and Google, have come under fire in recent weeks for paying very little tax relative to their profits in the UK.

The UK Treasury is also clamping down on tax evasion and avoidance, both by companies and individuals, in an effort to raise much needed-revenue. This includes giving greater resources to the Inland Revenue to pursue those paying less tax than they should.

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