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EU Cracking Down on Multinational Firm Tax Loophole

August 25, 2014

EU planning to adopt more stringent tax policies after multinationals expose loophole to cut taxes.

The European Union (EU) is closing a loophole that has allowed multinational companies to reduce their tax responsibilities. Companies like Starbucks and Apple have been able to dodge taxes on certain profits under the current loophole by using certain equity and debt combinations in their tax planning.

New Changes and Developments

New developments that the EU will be correcting or changing by the end of 2015 include:

  • Unanimity Among Member States- While multinational companies were previously able to open subsidiaries in other member states so that they paid little or no tax, EU tax law now requires unanimity among member states.
  • “Patent Box”- A tax planning tool known as a "patent box" is under close scrutiny. Countries use this to assign lower tax responsibility to their companies so that the companies may concentrate on research and development projects.

This is not expected to be an easy task for the EU as companies are resisting the changes however, more developments are expected in the near future. For a more detailed explanation of the EU's changes, read our article "EU Closing Tax Loophole for Multinational Firms".

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