EU proposes rules against shell companies to fight tax abuse

BRUSSELS (AP) — The European Union’s executive arm proposed measures Wednesday to better detect shell companies that do not carry out any real economic activities to prevent them from receiving tax advantages and crack down on their tax abuse.

The European Commission said the directive, which needs to be approved by the bloc’s 27 member nations, would help national authorities identify shell companies through a filtering system, analyzing criteria such as income, transactions and management.

“This is another important step in our fight against tax avoidance and evasion in the European Union,” EU Commissioner for Economy Paolo Gentiloni said.

According to EU estimates, tax dodging causes the bloc to lose up to 1 trillion euros ($1.13 trillion) in income each year.

The commission also proposed another directive ensuring a minimum effective tax rate for large multinational companie s. The EU said it would help implement the deal reached in October by more than 130 countries to make sweeping changes to how big global companies are taxed, including a 15% minimum corporate rate designed to deter multinationals from stashing profits in low-tax countries.

All 27 EU member countries will need to agree to the proposal.

In the shell company rules, companies identified as such will no longer be entitled to tax advantages meant to support real economic activities. The proposal also will allow EU countries to request other members to conduct tax audits of companies.

Once adopted, the rules would take effect on Jan. 1, 2024.