EU finance ministers on Tuesday agreed to a cluster of new rules intended to disrupt cross-border tax avoidance, a decision that must now be ratified by the European Parliament before coming into force on July 1, 2020.
The European Commissioner responsible for tax policy, Pierre Moscovici, hailed the new rules as “progress for tax justice.” The main aim of the new measures will be to reduce profit shifting in low-tax countries. A European Parliament study estimated the annual cost of tax avoidance for taxpayers at €70 billion.
The new transparency measures will require tax consultants – including banks, lawyers, and accountants, – to inform governments when companies are pursuing aggressive tax avoidance schemes, or they will face heavy fines. The information will then be recorded in a central database that will accessible to all EU Member States.
Seven EU Member States – Belgium, Luxembourg, Ireland, the Netherlands, Malta, Cyprus, and Hungary – were singled out by Moscovici out for encouraging tax avoidance.
EU ministers have also added a series of new tax-heavens on their tax avoidance blacklist that includes the Bahamas, Saint Kitts and Nevis, the US Virgin Islands, the Marshall Islands and Saint Lucia, while at the same time removing Bahrain from the list.