The European Commission will attempt to close a loophole that allows companies to cut their tax bill, a top official said on Monday, but the EU executive will first need to persuade member countries to back the change.
The commission wants rules to prevent companies setting up “letter-box subsidiaries” in countries solely to qualify for a softer tax regime and cut their bill.
Algirdas Semeta, the EU’s taxation commissioner, wants to insert an anti-abuse clause by the end of next year, allowing authorities to target artificial “parent-subsidiary” schemes that flout the spirit of the tax code.
“When our rules are abused to avoid paying any tax at all, then we need to adjust them,” he said. “Today’s proposal will ensure that the spirit, as well as the letter, of our law is respected.”
Semeta declined to name countries or companies that exploited the loophole but said that billions of euros were at stake.
When our rules are abused to avoid paying any tax at all, then we need to adjust them
One EU official, speaking anonymously, said the drive would in particular hit Luxembourg and the Netherlands.