Multinational companies may find it trickier to reduce their tax bills after European Union states adopted new rules on Tuesday aimed at combatting tax avoidance.
Measures approved include new powers for taxing profits shifted by corporations based in the EU to low-tax or tax-free countries where they have no real activity. There are also provisions to tax intellectual property developed in the EU when it is transferred outside the bloc.
The rules were provisionally agreed last week by EU finance ministers. Belgium and Czech Republic asked for a temporary suspension of the agreement, but have now withdrawn their objections, officials said.
“Today’s agreement strikes a serious blow against those engaged in corporate tax avoidance,” the EU commissioner in charge of tax issues, Pierre Moscovici, said in a statement.
“For too long, some companies have been able to take advantage of the mismatches between different member states tax systems to avoid billions of euros in tax,” he added. A report of the European Parliament said that these practices cost EU states an estimated 70 billion euros ($76.10 billion) a year in lost revenues.
The deal was reached after ministers had scrapped some of the most controversial proposals initially put on the table by the EU Commission to fight tax avoidance.
EU countries will have to incorporate the new rules into their national laws to make them effective.