The European Commission will propose on Wednesday a new taxation framework for corporate taxation that is projected to tackle tax avoidance, Reuters reports.
In a draft European Commission document leaked to the press, Brussels proposes that VAT rates will be set by the country where economic activity takes place rather than the base of operation. That does not mean the tax revenue will be going to the country where the product is being sold. But, the amount of VAT payable to the country of origin will be equal to the amount paid for local products.
By November, VAT charges could become a level playing field, reducing the advantage of setting up companies in countries that facilitate tax avoidance, such as Luxembourg, Ireland, Malta, and Cyprus.
Still, the proposal falls short of a harmonized corporate tax rate or the principle of taxing companies where they are economically active rather than where they set up their base of operations. The issue of taxation has polarized member states and is at the core of EU reforms championed by the French President Emmanuel Macron.
The policy proposal is certain to hit particularly hard US technology giants, such as Apple, Google, and Amazon.