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No, not the popular Richard Quest from the CNN show. The other Mr. Quest – Director General for Taxation and Customs Union, European Commission, Stephen Quest – who apparently also ‘means business’ when it comes to piloting the EU’s aggressive package of tax avoidance measures through the Economic and Financial Affairs Council of the European Union .
His department is responsible for the package of draft anti-tax avoidance measures to ensure increased tax transparency and effective taxation within, and outside of, the EU. The package includes:
- a proposed Directive on tax avoidance practices;
- amendments to the Directive on automatic information exchange in order to gather and share information on Multinational Enterprise Groups to ensure they pay their fair share of tax where profits are made;
- a recommendation paper on how Member States should reinforce their tax treaties against abuse by aggressive tax planners,
- and a communication on external strategy for effective taxation in countries outside of the EU and
- a study on effective taxation.
(Image;) Martin Schulz re-elected President of the European Parliament.)
The proposed Directive on tax avoidance focuses on some of the proposals set out in the Base Erosion and Profit Shifting (BEPS) project. This is to ensure that these proposed measures are enacted uniformly across the EU in order to strengthen its collective stance on tax avoidance. Some of the specific measures include:
- limiting interest deductions to 30% EBITDA or €1 million (whichever is higher) in order to mitigate the bias against equity financing. ( NOTE: EBITDA is a measurement of a company’s operating profitability. It is equal to earnings before interest, tax, depreciation, and amortization divided by total revenue. Because EBITDA excludes depreciation and amortization, EBITDA margin can provide an investor with a cleaner view of a company’s core profitability.)
- introducing an exit tax on capital gains on assets transferred out of a Member State whether or not the gain is realised
- introducing a “switch over” clause, meaning that foreign income received from a “low tax” jurisdiction (which imposes tax at below 40% of the recipient Member State’s tax rate) will be taxable, with a credit for any foreign tax paid
- a general anti-abuse rule (GAAR) to tackle artificial tax arrangements
- controlled foreign company (CFC) rules in relation to foreign entities subject to corporate tax at below 40% of the Member State’s tax rate
- hybrid mismatch rules to prevent taxpayers benefitting from a double deduction or a deduction with no corresponding inclusion in taxable profits