European Commission presents package of measures on combating tax avoidance

On 28 January 2016 the European Commission presented its package of measures on combating tax avoidance. This is part of its agenda for more efficient corporate taxation in the EU. The package comprises an anti-base erosion and profit shifting/BEPS directive, a revision of the administrative cooperation directive (“country-by-country reporting”), a recommendation on implementation of measures to combat abuse of tax treaties as well as a communication on an external strategy for effective taxation between the EU and third countries.

BDI and BDA broadly welcome the European Commission’s initiative for uniform minimum standards in corporate taxation. Consistent definitions and a coordinated procedure for implementation of the OECD BEPS action plan within the EU could limit the danger of Europe-wide double taxation of companies. Nevertheless, the European Commission must secure the competitiveness of Europe as a location for business. Investments and cross-border business activity must not be impeded through new tax standards. It is therefore all the more important to have binding dispute settlement mechanisms. An appropriate proposal is currently missing and needs to be added urgently by the European Commission.

Even if many of the European Commission’s proposals are very close to German legislation on anti-abuse rules to deter tax avoidance by companies, some points still need to be fine-tuned. These are for instance the definitions in the general abuse clause or tax adjustments in the area of restrictions on interest deductibility. In these fields, the European Commission proposes provisions which are sometimes in conflict with successfully practiced national legislation.

In the upcoming deliberations with the European Commission, German business will act to ensure that clarifications are made on these points. In addition, it is important that the European Commission does not go beyond the requirements set out by OECD.

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