Luxembourg: European Union finance ministers moved on Friday to close a widely used loophole that allowed multinationals to reduce their tax bills by taking advantage of divergent revenue policies across member states.
The decision, passed at an EU finance ministers meeting in Luxembourg, comes as governments step up efforts to clamp down on tax avoidance by the world’s biggest companies.
“Our campaign against corporate tax avoidance marches on,” said EU Tax Affairs Commissioner Algirdas Semeta.
“No longer will companies be able to exploit this loophole in our legislation to minimise their tax bills,” he said.
The proposal fixes an earlier EU measure, the so-called parent-subsidiary directive, that created an opportunity for companies to exploit mismatches in national tax policies.
The loophole enabled “a prevalent form of aggressive tax planning” known as hybrid loan arrangements, the commission said.
Greek Finance Minister Gikas Hardouvelis, who presided the ministers meeting, praised the decision, which required full unanimity of the 28 bloc ministers.
The measure had met resistance by Malta, which lifted its objections after receiving certain guarantees on its implementation.
Member states have until the end of 2015 to apply the directive to their national legislations.
This latest move comes as companies Apple and Starbucks — as well as a number of other multinationals including Amazon and Google — have come under intense pressure from politicians and campaigners over their tax dealings.
Earlier this month, the European Commission used another method to fight tax avoidance by launching a probe into sweetheart tax deals negotiated by Apple, Starbucks and Fiat with three member states.
That investigation will attempt to determine whether the deals offered by Ireland, Netherlands and Luxembourg give companies an unfair competitive advantage and thus amount to illegal state aid.