Germany Sees Privacy Road Block to EU Plan on Tax Rulings

A European Union plan to crack down on corporate tax loopholes ran into German privacy concerns, as EU finance ministers met in Luxembourg on Friday.

The European Commission wants countries to share information on tax rulings and pricing arrangements, as proposed in response to hundreds of leaked Luxembourg pacts that showed some international companies effectively lowered their tax bills to less than 1 percent of profit.

German Finance Minister Wolfgang Schaeuble said the proposal needs changes to ensure it doesn’t violate national rules on privacy, trade secrets and tax confidentiality. He also expressed concern about how much access the European Commission would have to the shared information, an issue cited by Ireland, the U.K. and others who took part in public debate on the plan.

“I doubt whether we should really try to move in the way that the commission will become a tax authority -- it is not,” Schaeuble said during the public debate on the issue.

Dutch Finance Minister Jeroen Dijsselbloem said any delays will hurt the EU’s ability to limit “aggressive tax planning” and close tax loopholes. “I fully support the initiative and hope for agreement as soon as possible,” he said.

Tax rules must be approved unanimously by all 28 EU nations to take effect, so the plan may be delayed by the ministers’ concerns. Regulators also are examining whether some arrangements are illegal state aid and are looking into deals that affect Starbucks Corp., Amazon.com Inc., Apple Inc. and a unit of Fiat SpA.

Proposal Adjustments

The tax proposal now will be adjusted to take account of the concerns on confidentiality, the role of the Brussels-based commission, and the retroactive impact of the information-exchange rules, according to Latvia, which holds the EU’s administrative presidency in the first half of 2015. The coordinating role will shift to Luxembourg on July 1.

EU Economic and Tax Commissioner Pierre Moscovici said the commission needs to play a central role to make sure the new system works smoothly.

“I don’t think you can use the confidentiality argument to play the commission out of the game,” Moscovici said. “We’re very sensitive about this sort of thing.”

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