EU Commission seeks to plug national tax loopholes for big companies

October 19, 2016 12:09 PM EDT

The European Union (EU) flag is seen on a sunny day and blue sky at the Chancellery in Berlin, Germany, April 29, 2016. REUTERS/Fabrizio Bensch


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By Francesco Guarascio

BRUSSELS (Reuters) - Large companies in every European Union country will have to pay their taxes on a common set of revenues and reductions under an EU draft law seen by Reuters and aimed at curbing tax avoidance.

The 28 EU countries apply a wide range of tax exemptions and deductions, making it difficult to calculate the tax base - the amount of net profits subject to taxation - for corporations operating in more than one country.

The national variations also allow companies with bigger accounting departments to exploit these differences to reduce their final bill - a practice that has raised public outcry after revelations of widespread tax dodging by companies and rich individuals.

To close this loophole, the European Commission, the EU executive arm, is proposing a "mandatory" tax base for companies with a total group revenue that exceeds 750 million euros ($820 million) a year.

"All revenues will be taxable unless expressly exempted," the draft proposal read. It envisages some dividends and proceeds from the disposal of shares could be exempt. Countries will remain responsible for setting tax rates.

The Commission is set to unveil the proposal on a Common Corporate Tax Base (CCTB) next week, according to an agenda of the EU executive. The draft is still subject to changes.

EU states will have to back the proposals unanimously. A plan in 2011 to set a common tax base for companies was shelved after opposition from some EU states.

The new proposal postpones proposals on consolidating multinationals' accounts when they operate in more than one EU country. This is seen as the most controversial part of the earlier plan and has been delayed until agreement is reached on a common tax base, the Commission said.

Brussels is also proposing to allow deductions for the issue of equities, seeking to increase this form of financing for companies rather than debt, whose favorable treatment has encouraged high stocks of corporate debt.

($1 = 0.9117 euros)

(Reporting by Francesco Guarascio; Editing by Ruth Pitchford)



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