Reuters :
The European Union on Friday moved to close a loophole that has allowed multinational companies to reduce their tax bills by exploiting differences in national tax rules, ending months of negotiations and potentially boosting EU states’ tax revenues.
Corporate tax avoidance has become a hot issue in industrialized nations. Campaigners have drawn support from public anger at companies avoiding taxes at a time of austerity.
“The aim is to close a loophole that currently allows corporate groups to exploit mismatches between national tax rules so as to avoid paying taxes on some types of profits distributed within the group,” finance ministers said in a statement.
The change in the so-called parent-subsidiary directive addresses “hybrid loan arrangements”, a combination of equity and debt often used as a tax-planning tool.
Some member states classify profits from such tools as a tax-deductible debt; others do not. That has prompted some multinational companies to open subsidiaries in other member states so they pay little or no tax.
