Photo by Wesley Tingey on Unsplash
The European Parliament has adopted a near-unanimous position on proposed EU legislation intended to prevent tax evasion by establishing fake companies.
Some 637 members voted in favour of what has become known as the Unshell Directive and only two against, an endorsement the Parliament says gives a “uniquely strong message in support of tax justice.”
MEPs, who have long advocated for the new law, have now called on EU member states to “take full account” of the institution’s strong position and “act swiftly” to adopt and enforce the new rules.
The draft Unshell Directive aims to prevent EU companies with zero or minimal economic activity benefiting from any tax advantages in the member states where they are established.
It was drafted in the wake of the OpenLux scandal and seeks to set transparency standards and objective indicators related to income, staff and company premises that would help tax authorities to detect abuse and single out entities that exist merely on paper.
MEP reaction to the vote in Strasbourg was swift with Paul Tang, shadow rapporteur on the Unshell directive, saying, “This legislation, the first of its kind, will change the fiscal landscape of the EU.”
Tang added, “No longer can companies abuse the differences in our tax systems by setting up fake companies. We can make a clean sweep through European businesses by distinguishing legitimate businesses from the letterboxes merely set up to obtain tax benefits. By dismantling these letterboxes, companies will have to pay their fair share of taxes just like everyone else. Consequently, government revenues can increase by €60bn. This is the money we desperately need to bring the bills down.
“The overwhelming support from my colleagues is unprecedented in tax matters and delivers a clear message to EU member states: act now. Implement this directive without exemptions for conduit companies of the financial sector. Act to tax the super-rich and act to tax the big multinationals,” he concluded.
Further comment to the vote on Tuesday came from Socialist member Jonás Fernández,his party’s spokesperson on economic and monetary affairs.He noted, “We have long called for the introduction of minimum substance requirements related to companies’ premises, bank accounts as well as tax residency of its directors and employees. Shell companies that serve merely as conduits to shift profits to low tax jurisdictions should not benefit from any tax breaks in the EU. With this vote, we have confirmed our steadfast commitment to the fight against tax evasion and aggressive tax planning in the EU and across the world.
“We urge the member states to take an ambitious and forward-looking approach to make this proposal a reality as soon as possible.”