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EU Strengthens Capital Market Union, Punishes Tax Avoiders

© REUTERS / Yves LoggheThe headquarters of the European Commission in Brussels, Belgium
The headquarters of the European Commission in Brussels, Belgium - Sputnik International
The European Commission (EC) has announced that a series of new legislative measures regarding the EU's economic system are to come into force on 1 January 2019. The Securitisation Regulation and Anti-Tax Avoidance Directive should promote economic stability and bolster cooperation between EU member states.

On 30 December the EC issued several press releases where it outlined new regulations that will take effect beginning 1 January, 2019.

The Securitisation Regulation (SR), which is aimed at strengthening "banks' ability to support the economy and spread risks across market participants, while avoiding the excesses that led to the financial crisis" is considered to be "an important building block of the Capital Markets Union" — a plan for establishing an integrated capital market in the EU by 2019, which was adopted earlier.

"This legislation…will help build a sound and safe securitisation market in the EU, bringing real benefits to investment, jobs and growth. It will free up bank lending so that more financing can go towards supporting our companies and households", Valdis Dombrovskis, the EC vice-president said, according to an EC press release.

The SR creates "common rules and sets the criteria for simple, transparent and standardised (STS) securitisation in the EU" and is expected to "lead to more investment opportunities and increased lending to households and businesses".

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Another piece of legislation slated to enter into force in 2019 is the Anti-Tax Avoidance Directive (ATAD), which will target the "main forms of tax avoidance practiced by large multinationals" in EU member states.

According to the press release, some companies "exploit the differences in Member States' rules to minimise their tax bills by shifting profits within the EU", which leads to the necessity of establishing an effective taxation system, and which is "heavily dependent on close coordination between Member States".

"The Commission has fought consistently and for a long time against aggressive tax planning. The battle is not yet won, but this marks a very important step in our fight against those who try to take advantage of loopholes in the tax systems of our Member States to avoid billions of euros in tax", Pierre Moscovici, commissioner for Economic and Financial Affairs, Taxation and Customs, was cited in the press release as saying.

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The ATAD has presented 5 key anti-avoidance measures, three of which will take effect on 1 January 2019. These are the "Controlled Foreign Company (CFC) rule", aimed at deterring "profit shifting to no or low tax countries"; "Interest Limitation", which has to limit companies' ability to create "artificial debt arrangements designed to minimise taxes"; and the "General Anti-Abuse Rule" as a last resort for countering "aggressive tax planning when other rules do not apply".

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Earlier, the EC announced that new rules regarding the Schengen Information System (SIS) had come into force, "closing a critical security gap" in the EU.

In 2015 the European Commission adopted the Action plan on building a capital market union in the EU. The plan was reviewed in 2017, incorporating approaches towards contemporary challenges that the EU is trying to tackle. Among these was the planned departure of the UK from the EU, with the solution being to strengthen the "EU-27 capital markets".

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