The Finance Ministers of EU member-states have agreed to close loopholes in tax legislation allowing multinational companies to avoid paying taxes on dividends, reported Reuters.
The agreement is a step in the direction of terminating the practice of companies declaring their taxes where they find it most expedient to pay taxes.
The rules agreed on Tuesday are expected to enter into force in 2020. It is expected that these will help EU countries compensate for losses from the current practice of multinational companies reducing the amount of taxes owed by declaring their profits in countries with lower taxes.
Such schemes are used by giants like Apple, Amazon, Google, Starbucks etc. and, at present, these are completely legal.
The agreement reached on Tuesday postponed by a year the implementation of the new rules to January 2020 because some countries pointed out that it might have certain negative consequences for competitiveness should the amendments to tax laws be adopted too quickly. In some cases, the rules will be valid as of 2022.
With the new agreement, the ministers managed to reach a compromise definition of a tax haven. So far, there was no agreement in the EU on a common list of countries used as tax havens. Some countries insisted on having their own list which normally remained blank, added Reuters.