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EU unveils draft legislation requiring automatic exchange of tax rulings
EU unveils draft legislation requiring automatic exchange of tax rulings

[JURIST] The European Commission [official website], the EU’s executive body, on Wednesday released [press release] a package of proposed legislation aimed at combating tax deals between individual EU member states and multinational companies. Included in the “Tax Transparency Package” is legislation requiring member states to automatically exchange information regarding their tax rulings to other member states every three months. European Commission vice president Valdis Dombrovskis [official profile] highlighted the importance of the tax transparency agenda stating that “everyone has to pay their fair share of tax. This applies to multinationals as to everyone else. With today’s proposal on the automatic exchange of information, tax authorities would be able to better identify loopholes or duplication of tax between Member States.” A number of EU members, including Luxembourg [ICIJ report], Ireland, the Netherlands and Belgium [BBC reports], have come under scrutiny for alleged “sweetheart” tax deals between national governments and multinational companies allowing them to greatly reduce foreign tax costs. According to the European Commission corporate tax avoidance is believed to reduce EU Member States’ public budgets by billions of euros a year.

The EU in recent years has attempted to crack down on the growing multinational company tax avoidance schemes. Leaked documents released by the International Consortium of Investigative Journalists (ICIJ) [official website] in November revealed [report] that more than 340 international companies, including Pepsi, IKEA, Accenture and FedEx, had negotiated private tax rulings from the government of Luxembourg to secure favorable tax rates.