EU to discuss better coordination of tax rules in effort to balance drive against tax avoidance

European Union countries should better coordinate tax rules to avoid hitting corporations too hard, the Slovak presidency of the European Union proposed, in an effort to provide more balance to an EU campaign against tax avoidance by multinational companies. The proposal, to be discussed at an informal meeting of EU finance ministers in Bratislava on Sept. 10, comes as the EU cracks down on corporate tax-avoidance schemes, which some fear could backfire and drive multinationals away from the continent. The Slovak proposal aims mostly to reduce cases of double taxation for multinational companies and to make taxation more predictable for corporations. Slovakia, which took over the six-month rotating EU presidency in July, praised EU efforts to fight tax dodging. But it called for an approach “that supports the EU’s attractiveness as a place for business, investment,” according to a paper seen by Reuters. The document calls on the EU finance ministers to discuss measures to enhance tax certainty. Those would include “further cross-border harmonisation of tax rules” and more cooperation among national tax administrations.Last week, the European Commission told Apple Inc to pay up to 13 billion euros ($14.5 billion) in back taxes to Ireland to compensate for a scheme that has cut the iPhone maker’s tax bill to next to nothing over a decade. Dublin appealed the ruling on the grounds it would undermine Ireland’s long-established policy of attracting multinationals with low taxes. Apple’s chief executive, Tim Cook, said the company’s overseas profits would be taxed in the United States when the money was repatriated. And U.S. Treasury Secretary Jack Lew said the EU was trying to grab revenue that ought to go to the United States. In June, EU countries agreed to put an end to some of the most common practices used by multinationals to reduce their tax bills, such as shifting profits made in Europe to no-tax countries where they have no real business activity. Fair-taxation campaigners considered the agreed measures too mild, but industry groups raised concern about damage to EU competitiveness if the anti-tax avoidance drive made tax bills too unpredictable. “It appears that more needs to be done to prevent and reduce tax uncertainty (that) can directly affect domestic investment and, hence, productivity as well as cross-border trade and foreign direct investment,” the Slovak presidency said in a paper that seems to endorse some of those concerns. To keep up the pressure against tax avoidance, the Slovak presidency is also proposing mandatory disclosure rules for banks and other intermediaries that help set up tax-dodging schemes for corporations and wealthy individuals. Following up on non-binding proposals circulated by the European Commission in July, the Slovaks will ask ministers to consider an obligation for banks to disclose to tax authorities offshore tax-avoidance schemes that they advise on. Reuters