Irish Finance Minister Michael Noonan | Julien Warnand/EPA Europe’s tax crusade Europe and the G20 want to stop losing a fortune in corporate tax receipts.

LUXEMBOURG – With wealthy countries around the world desperate to reel in billions of dollars in unreported corporate tax receipts, the EU is rushing to finish negotiations on how to share tax information for the first time in order to combat evasion.

Governments are losing up to $250 billion (€223 billion) globally in taxes annually, or around 10 percent of global corporate tax revenue, from this type of evasion, according to a new report by the Organization for Economic Cooperation and Development.

At a time when national balance sheets are feeling the pinch and many governments have been forced to slash spending or hike taxes, these revenues are sorely missed.

EU finance ministers met in Luxembourg Tuesday to discuss the automatic exchange of tax information, part of legislation launched by the European Commission in March. Once implemented, EU countries would share information about how much tax multinational corporations pay in their country every six months.

At issue in Tuesday's meeting was how deep, and how far back in time, this exchange of information would probe. The Commission originally proposed 10 years' retroactivity but finance ministers have whittled it down to five.

“We’re against long retroactive effect," Hans Jörg Schelling, the Austrian finance minister, said when he arrived for the meeting. "Five years would be accepted as a compromise.”

Tax loopholes

Brussels wants to bring so-called "comfort letters" or "tax rulings," issued by some countries to help corporations determine their tax bill in advance, into the light of day. These arrangements facilitate aggressive tax planning that allow corporations to find gaps in different tax administrations.

“The question is whether tax rulings accommodate avoiding paying taxes, and we shouldn’t allow that," Jeroen Dijsselbloem, the Dutch finance minister, told reporters. "One way to do that is to exchange between countries the tax rulings so countries know what companies are paying what taxes where.”

The European Parliament is leading its own crusade against corporate tax evasion, with its "LuxLeaks" tax hearings in Brussels following media revelations in 2014 that more than 300 multinationals, including McDonald’s and Ikea, had favorable tax rulings in Luxembourg.

"We're not a tax haven" — Michael Noonan, Irish finance minister.

The push for transparency has put some EU countries on the defensive, especially those who have been criticized for luring corporations with favorable deals.

“We’re not a tax haven. We’ve never been involved in any type of tax malpractice,” Michael Noonan, the Irish minister of finance, said on arrival in Luxembourg. “Sometimes international tax planners used Ireland in so-called ‘double Irish,’ but the double Irish wasn’t an Irish policy, it was a consequence of residency laws in Ireland doubled with tax arrangements elsewhere."

To Noonan's point, many countries are playing catch-up with tax codes that were designed with brick-and-mortar economies in mind — not the globalized economy of today, in which intellectual property rights are increasingly a source of revenue.

Armies of tax lawyers employed by corporations have been finding legal ways to profit from the outdated laws, including maneuvers to pay taxes on intellectual property in countries with advantageous rates.

At a 2012 meeting in Los Cabos, Mexico, the leaders of the G20 countries asked the OECD, a global public-sector consultancy in Paris, to come up with common rules for developed economies to fight tax evasion — known in the trade as tax-base erosion and profit shifting, or BEPS.

On Monday the OECD released its guidebook, which governments hope will force corporations to be more careful about trying to skirt the rules.

“You are certain that you will be caught or if you’re not caught you’re really at risk," Pascal Saint-Amams, director of the OECD's Centre for Tax Policy and Administration, told POLITICO.

Bells and whistles

The types of evasion included in BEPS are: manipulation of transfer pricing, or taxes charged on transactions between different subsidiaries of the same corporate group (think Ikea, with its byzantine network of corporations around the world to handle different parts of the business); patent boxes, which allow countries to pay the taxes on revenues connected with intellectual properties in countries with favorable rates; and stateless income, or revenues that companies aren’t taxed on anywhere.

While the OECD's report toolkit has won broad support and isn't mandatory, the Commission's parallel push for transparency raises questions for member states nervous about losing sovereignty over their own tax administrations.

“We’d be very interested that what has been decided at the OECD is the policy and that there aren’t bells and whistles that will work against our interest added on by the Commission," Noonan said. He was referring to sovereign states' ability to fix their own tax rates.

“It is ordinary citizens ... that will lose out unless we get a real reform of the global tax system" — Maria Ryding, Eurodad.

One EU official at the Luxembourg meeting said the transparency legislation meant that "for the first time the Commission would have the possibility of enforcing that by launching infringement (proceedings)" if countries decline to share tax arrangements.

Any changes to EU tax codes will require unanimous approval by member countries, which the Commission hopes to have by the end of 2015. The hope is that EU countries will be able to pass legislation in their national governments to put the automatic exchange of tax information in place by the beginning of 2017.

Some critics of the OECD's approach say the new rules are simply too complex — and that the guidelines put developing countries at a disadvantage, which is a constant criticism of tax evasion reform led by advanced countries.

“It is ordinary citizens, national small and medium-sized businesses and the poorest countries in the world that will lose out unless we get a real reform of the global tax system," said Maria Ryding, tax justice coordinator at the European Network on Debt and Development (Eurodad), a network of NGOs working on the topic of development finance.