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Commissioner responsible for Taxation and Customs Union, Statistics, Audit and Anti-fraud
Midday statement on Parent-Subsidiary Directive
Press Room / Brussels, 25 November 2013
Ladies and Gentlemen,
It is just under a year since the Commission presented an ambitious Action Plan to combat tax evasion and avoidance in the EU.
Since then, we have seen unprecedented progress in this field – at global as well as at EU level.
The agenda to clamp down on tax evaders has been endorsed and propelled at the highest political level – by the G8 and G20, as well as the EU's own leaders.
Internationally, there has been a paradigm shift, and the world is now committed to both a new global standard of tax transparency and to the BEPS project against tax avoidance.
The EU's contribution to achieving this international consensus has been pivotal – which is proof of what can be achieved when we truly work as a Union. And our work goes on.
This week, I am travelling to Australia to discuss their upcoming Presidency of the G20.
The message I will bring is simple: the EU will remain an active partner in the global fight against evasion and will do all it can to support Australia in pushing things forward.
The impressive international commitments on tax evasion must be turned into impressive, effective and long-lasting results.
Meanwhile, at EU level, the Commission has delivered on its promise to accelerate the drive against tax evasion in Europe.
Proposals to expand automatic information exchange, better fight VAT fraud, launch the debate on digital taxation and ease VAT compliance are just some of our initiatives over these past months.
We rely on Member States now to keep pace: to agree what needs to be agreed; to adopt what should be adopted.
With today's proposal, the Commission is once again delivering on its promises from last year's Action Plan.
The Parent-Subsidiary Directive's primary purpose is to ensure that companies from the same group are not taxed twice when they operate in different Member States.
It is a business friendly law.
However, mismatches between Member States tax systems have enabled some companies to exploit loopholes in this law, to minimise their tax bill or even escape taxation altogether.
As I have said before, businesses are offered all the benefits of the Single Market, and we strive to reduce any obstacles to their cross border activities.
But in return, these businesses need to make their fair contribution to public finances.
We can no longer afford freeloaders who reap huge profits in the EU without contributing to the public purse.
At the same time, however, we cannot put the entire burden on corporate shoulders.
Policy-makers also have a responsibility to ensure clear and watertight tax rules for all businesses.
And if our rules don't fit the reality, then we need to fix them.
As President Barroso pointed out in his letter to the Council last week, 90% of citizens surveyed want more effective action to ensure that companies pay their fair share.
That is what today's proposal is about:
We are adapting our legislation to the market realities and shutting off opportunities for aggressive tax planning.
While the amendments to the Parent-Subsidiary Directive may seem technical, they are very important.
Essentially, they will close the door on a specific and well-known tax avoidance arrangement, known as hybrid loans.
If a hybrid loan payment is tax deductible in the subsidiary's Member State, then it will have to be taxed by parent company's Member State.
Double non-taxation ceases to be a risk.
Moreover, Member States will have to implement a common anti-abuse rule, in line with our Recommendation on aggressive tax planning.
This will allow them to ignore artificial tax planning and tax on the basis of real economic substance instead.
With today's proposal, we will ensure that the spirit, as well as the letter, of our law is respected.
The result should be fairer revenues for national budgets, fairer competition for businesses and fairer taxation across Europe.