The finance ministers of Germany, France and Italy have urged the EU to frame common corporate tax law to tighten restrictions on tax havens and avoid member states from attracting investors with lower tax rates.
In a letter to European economics commissioner Pierre Moscovici, the finance ministers of the three countries said that a new EU directive should ensure greater transparency and hinder companies from gaming Europe’s divergent tax laws.
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"The lack of tax harmonization in the European Union is one of the main causes allowing aggressive tax planning, base erosion and profit shifting (Beps) to develop within the internal market," Germany’s Wolfgang Schäuble, France’s Michel Sapin, and Italy’s Pier Carlo wrote.
The letter also urged the Commission to close tax loopholes used by companies and member states to limit their tax bills.
The letter said: "It is our common duty to meet their expectation by ensuring that everyone pays their fair share of tax to the state where profits are generated.
The ministers said the EU should adopt rules similar to that of the anti-BEPS initiative adopted by OECD and Group of 20 countries. The rules must include automatic exchange of tax information, transfer pricing, a register identifying beneficiaries of non-transparent entities and measures against tax havens.
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By GlobalData"The European Union needs to protect its internal market from tax avoidance through the use of tax havens. The anti-Beps directive will be an opportunity to fix this issue through countermeasures towards jurisdictions whose behaviour fosters non-transparency and aggressive tax planning,’ the letter said.
"Since certain tax practices of countries and taxpayers have become public recently, the limits of permissible tax competition between member states have shifted. This development is irreversible," the ministers said in their letter.
