EU improves transparency rules on cross-border tax

The economic and financial affairs ministers of the European Union (EU) member states reached an agreement on the automatic exchange of information on cross-border tax rulings.

The ministers' meeting in Luxembourg agreed on a directive aimed at improving transparency in the assurances given by member states to companies about how their taxes are calculated, Xinhua quoted an EU statement as saying on Tuesday.

The directive is one of a number of EU initiatives aimed at preventing corporate tax avoidance. It will require member states to exchange information automatically on advance cross-border tax rulings, as well as advance pricing arrangements.

The European Commission welcomed the decision in another statement, saying "the new rules should lead to greater cooperation between member states on tax matters and act as a deterrent from using tax rulings as an instrument for tax abuse".

Following the announcement of the agreement, European Commission President Jean-Claude Juncker said "the current system of corporate tax rules is unjust and unfit for purpose".

"There is a plethora of national rules that allows some companies to win, while others lose out. This unfair competition is anathema to the principles of fair competition within our internal market," Juncker said.

The European commission said all EU member states will be equipped with the information they need to protect their tax bases and effectively target companies that try to escape paying their fair share of taxes.

"The automatic exchange of information on tax rulings will provide national authorities with insight on aggressive tax planning. It marks a leap forward in our efforts to advance on tax coordination and tax harmonisation," Juncker said.

Pierre Moscovici, commissioner for Economic and Financial Affairs, Taxation and Customs, said the agreement was an important signal that EU member states are ready to deliver on common goal of fair and effective taxation.

"The EU will continue to work to implement these transparency rules worldwide," he said.

According to the agreement, EU member states will have to transpose the new rules into national law before the end of 2016, meaning that the directive will have to be applied from January 1, 2017.