January 12, 2016 / 5:56 PM / 5 years ago

EU to propose binding multinational tax rules: official

BRUSSELS (Reuters) - The European Commission will propose a new set of binding rules by the end of January to curb corporate tax avoidance, in another move to counter unfair or illegal tax practices of multinationals, EU officials said.

An European Union flag flutters outside the EU Commission headquarters in Brussels, Belgium, January 12, 2016. REUTERS/Francois Lenoir

Multinational corporations have long been in the sights of European Union authorities because of the way they can reduce their tax bills by basing themselves in low-tax centers or negotiating special deals with governments.

The EU executive will propose new measures on Jan. 27, EU commissioner Pierre Moscovici told European lawmakers on Monday.

Some of the new proposals will oblige EU countries to accept as binding a set of voluntary guidelines, known as BEPS, which aim to close gaps in existing international tax rules, an EU official said on Tuesday.

The official said the Commission would propose that the 28 EU states turn some of the BEPS guidelines - which were backed by leaders of the G20 group of the world’s largest economies - into binding legislation.

Interest deductions applied by multinationals are among the areas where the Commission plans to go beyond BEPS. The guidelines already recommend corporations link deductions to the economic activities of each group entity, rather than shifting debt among national branches, officials said.

Moscovici told EU lawmakers on Monday he plans to propose stricter rules on taxes applicable to controlled foreign companies and on hybrid financial products which may avoid taxation because of their complexity.

The Commission proposals will follow a crackdown on deals some multinationals have made with individual EU states, which are seen as damaging competition.

On Monday, the EU Executive ordered Belgium to recover 700 million euros ($763 mln) from 35 large companies in taxes not paid because of a model that gave multinationals a more preferential treatment than smaller firms.

In October, the Commission ruled that Starbucks Corp. (SBUX.O) and Fiat Chrysler Automobiles (FCHA.MI) benefited from illegal tax deals with the Dutch and Luxembourg authorities and ordered each country to recover 20-30 million euros in back taxes. Brussels is also investigating the tax arrangements of Amazon (AMZN.O) in Luxembourg and Apple (AAPL.O) in Ireland.

To avoid such deals in the future, European Union finance ministers agreed in October to automatically exchange information on agreements struck with multinational companies from 2017.

The package to be proposed on Jan. 27 will also include measures to make company tax declarations more transparent and may go as far as obliging them to make their tax bills public.

Editing by David Clarke

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