Next, the Commission is cracking down on tax drawer companies in tax havens. They must themselves disclose themselves to the taxpayer for the exchange of information.
EU countries despite expectations, finance ministers could not reach an agreement on Tuesday in the economic and financial affairs council (ecofin) to agree on a minimum tax rate of 15% for all member states.
Tax matters require the unanimous approval of all countries in order to materialize
Poland is holding back a historic tax decision aimed at inciting tax competition between nation states. Poland tends to pack its consent for the progress of its other goals.
The idea of a minimum tax is that companies should always pay at least 15 percent tax on their taxable income.
For example, if a subsidiary of a Finnish group paid only 10 per cent tax in its foreign subsidiary, the Finnish tax authorities would be entitled to tax the group the difference between that tax rate and the 15 per cent tax rate, ie five percentage points.
OECD According to calculations, the annual benefit of the Minimum Tax Act to Finnish tax revenues could be in the order of up to EUR 200 million, a partner of the consulting company Deloitte, which is familiar with international taxation. Tomi Viitala says.
Tomi Viitala, a shareholder in Deloitte, predicts that the Commission’s new proposal for a directive on shell companies will go through the “sock”.
In its own calculations, the tax department of the Ministry of Finance has reached a clearly more cautious estimate of the tax increase.
Viitala says that many low-tax countries have already started to increase their own taxes so that the tax rate in that country is already 15 percent.
In this way, the tax authorities of other EU countries would not have access to part of the tax revenue.
“Many low-tax countries ensure that the minimum tax amount is paid in that state of residence,” Viitala says.
According to Deloitte, such countries are planning such tax increases, such as Malta, Hungary, Cyprus and Ireland, or non-EU countries such as the United Arab Emirates and Hong Kong.
The 15% minimum tax rate is a global project run by the Organization for Economic Co-operation in Developed Countries (OECD) to curb international tax competition and aggressive tax planning.
Specially big internet and technology companies around the world have been able to use tax planning to minimize their taxes by taking advantage of state tax competition so that they have had to pay almost no taxes.
The EU Minimum Tax Directive was adopted in December 2021. Its key content is to guarantee companies and entities an effective tax rate of 15% in all member states.
The adoption of the directive has progressed rapidly in the Member States. It was originally scheduled to take effect from the beginning of 2023. At the request of Sweden and some other countries, the implementation of the law was postponed so that it will enter into force at the beginning of 2024.
In Finland, the application of the Minimum Tax Directive applies to about 50–60 international groups and only some domestically operating groups. The latter have been given a five-year transitional period to adapt to the new legislation.
The EU is inciting tax evaders also with the shell box directive being prepared by the Commission. It is due to enter into force at the beginning of 2024.
“It forces companies to declare themselves with a tax return in their country of residence. The local authorities forward this information to the tax authorities of the EU member states, ”says Viitala.
In this way, for example, information on Finnish-owned companies operating in Luxembourg without personnel would go to the Finnish tax authorities.
If companies do not meet certain minimum requirements for operations and personnel, they are considered to exceed the limits of tax planning. In that case, the owner of the desk drawer company is taxed on the company’s income according to personal taxation.
“Shell companies are bypassed for tax purposes.”
The directive typically aims to give private investment and holding companies better control and guidance in the field of taxation when the company’s main purpose seems to be to minimize taxes without minimum requirements that meet the characteristics of operations, Viitala says.
“The Commission’s proposal goes through a sock, there is no doubt about it,” says Viitala.
The rationale is that politicians are quite unanimous in their readiness to make regulations that try to incite international tax evasion.
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