EU supports tougher anti-tax avoidance directive

The European Parliament has passed a resolution to take forward the anti-tax avoidance directive approving recommendations made by the Economic and Monetary Affairs Committee last month.

The proposal builds on the principle that tax should be paid where profits are made. It includes legally-binding measures to block the methods most commonly used by companies to avoid paying tax. It also proposes common definitions of terms such as permanent establishment tax havens transfer prices royalty costs patent boxes and letterbox companies.

MEPs have further altered and extended many of the committee’s original proposals. These include advocating stricter limits on deductions for interest payments and calling for a 20% restriction on taxpayers’ earnings as opposed to 30% originally mooted. Other proposals extend the scope of the so-called ‘switch-over’ rule under which income taxed at a low rate outside the EU would be subject to tax in...