Brussels Unveils Plan To Crack Down On Corporate Tax Loopholes
27 November 2013
Posted by: Author: The Irish Times
Author: The Irish Times
Ambitious proposals to block tax loopholes in
cross-border financing structures were revealed by Brussels yesterday,
in an attempt to force multinationals to pay billions of euros more in
corporate taxes to members of the EU.
crackdown, which would hit one of the most common forms of international
tax planning, follows growing public pressure for action against
The EU proposals come at a time when
international authorities are mounting a concerted attack on "hybrid”
structures that allow corporations to exploit mismatches between
different countries’ tax systems to escape taxation.
to tackle hybrids have been drawn up by the Paris-based Organisation
for Economic Co-operation and Development and are now being circulated
around tax authorities.
structures that rely on hybrids are "key” to many European
multinationals’ low tax rates, according to an analysis by Citigroup.
In September the bank told investors there was a risk of
"significantly” rising tax bills for companies that use hybrid financing
The plans drawn up by the European Commission
will tackle gaps in the taxation of "hybrid” instruments, such as
convertible preference shares. The OECD plans will have a wider reach,
potentially hitting transatlantic structures used by multinationals such
as Tate & Lyle, the sweetener maker, FirstGroup, the transport operator, and Linde, the industrial gases group.
three companies together could be saving up to $150 million (€110
million) a year by lending billions to their own US subsidiaries and
then exploiting legal differences to offset the interest payments
against tax in the UK and the US, according to an analysis by the Financial Times.
FirstGroup gets an estimated deferred tax benefit of $49 million a year
from a structure set up after its acquisition of Laidlaw, the
Greyhound coach company, in 2007. The firm did not dispute the benefit
but said removal of the structure would not make a difference to its
cash tax payments in the US.
Tate & Lyle
declined to comment on the estimate that it had saved $385 million of
tax since 2007 but said full details of the arrangement had been
disclosed to, and accepted by, US and UK tax authorities.
declined to comment on the details of its internal financing structure.
But the company confirmed it was claiming tax relief in the US on debt
used to acquire Lincare Holdings, a homecare service company, last year. – Copyright The Financial Times Limited 2013
This article first appeared in irishtimes.com.