MEPs advocated stricter limits on deductions for interest payments and tougher rules on foreign income, more transparency for trust funds and foundations, common rules for “patent box” tax reductions on intellectual property earnings, and an EU blacklist of tax havens, among other measures.
The proposal builds on the principle that tax should be paid where profits are made and includes legally-binding measures to block the methods most commonly used by companies to avoid paying tax. It also proposes common definitions of terms like “permanent establishment”, “tax havens”, “minimum economic substance” “transfer prices”, “royalty costs”, “patent boxes”, “letterbox companies” and other terms hitherto open to interpretation.
MEPs are more ambitious than the Commission with regard to the “switch-over rule" for earnings taxed in a country outside the EU and then transferred to an EU member state. This so called “foreign income” is often exempt from taxation, so as to avoid double taxation. MEPs favour setting a minimum rate of 15%, i.e. if foreign income was taxed at a lower rate outside the EU, then the difference would need to be paid.
Further recommendations include, inter alia:
drawing up an exhaustive 'black list' of tax havens and countries, including those in the Union, complemented with a list of sanctions for non-cooperative jurisdictions and for financial institutions that operate within tax havens,
© European Parliament
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