* EU tax chief moves to stop abuse using letter-box firms
* Commission needs backing from all EU countries to make
BRUSSELS Nov 25 The European Commission will
attempt to close a loophole that allows companies to cut their
tax bill, a top EU 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
Semeta declined to name countries or companies that
exploited the loophole but said that billions of euros were at
stake. One EU official, speaking anonymously, said the drive
would in particular hit Luxembourg and the Netherlands.
By forcing large companies to disclose how much tax they pay
to which country, Semeta hopes they will be shamed into paying
more. Without international agreement, companies will be able to
arbitrage between different tax regimes.
Schemes used by Starbucks, Apple, Amazon
and others, operating within the law to minimise taxes,
put aggressive tax "planning" at the top of the political agenda
earlier this year.
But progress in tackling the problem is likely to be slow.
Europe is torn between the demands of small countries, such as
Luxembourg and Ireland, fiercely resisting change to their
low-tax regimes which attract foreign investment, and states
such as Britain and Germany, wary of driving away big employers.
Taken at face value, the global political direction towards
tax reform is clear. But Semeta's limited success so far points
to the difficulties ahead.
His suggestion for a 'Common Consolidated Corporate Tax
Base' - including a standard way to calculate tax breaks - made
scant progress, with countries such as Ireland, worried it would
lead to a single EU tax rate.
Semeta also wants tighter control of so-called hybrid
financing, where companies take advantage of varying definitions
of loans versus equity stakes between countries to cut their tax