Germany, France, Italy Press EU to End Company Tax Deals

Germany, France and Italy urged European Union regulators to speed up and widen curbs on tax-lowering deals for companies, saying the EU should adopt rules by the end of next year.

Measures should go beyond greater transparency and company registries to a “general principle of effective taxation” to stem the EU’s lack of “tax harmonization” that entices companies to cherry-pick where they pay, according to a joint letter by finance ministers Wolfgang Schaeuble, Michel Sapin and Pier Carlo Padoan to the EU Commission.

“Our citizens and our companies expect us to cope with tax avoidance and aggressive planning,” the ministers said in the proposal obtained by Bloomberg News. “The diagnosis is made and the solutions are already known, so we should act without any delay.”

Pressure for European countries to halt sweetheart tax deals for international companies has grown as governments compete for revenue in the wake of the debt crisis. European Commission President Jean-Claude Juncker became a lightning rod after revelations that he helped more than 340 companies reduce their tax bill when he was Luxembourg’s prime minister.

The proposal by the finance ministers of the three biggest euro-area economies to Economic and Tax Commissioner Pierre Moscovici asks him to prepare a draft directive by the end of the year and suggests an end-of-2015 deadline for adopting EU-wide rules.

Limiting Competition

The EU directive should include disclosure requirements for companies’ intra-European cross-border restructuring and other operations, the ministers say. Tax benefits obtained “through inappropriate arrangements” should be banned, they say.

“Since certain tax practices of countries and taxpayers have become public recently, the limits of permissible tax competition between member states have shifted,” the finance ministers said in the letter. “This development is irreversible.”

The European Commission welcomes suggestions on how to combat so-called base erosion and profit shifting, though it’s “too early to comment on the timing of such initiatives,” commission spokeswoman Vanessa Mock said in an e-mail.

Before it's here, it's on the Bloomberg Terminal.