Tax ‘sweetheart deals’ between multinationals and EU countries at record high

Over the last few years, advance pricing agreements (APAs) – also known as ‘comfort letters’ or ‘sweetheart deals’ – have been at the centre of several tax scandals, as well as state aid cases that the European Commission has launched against EU Member States, involving alleged loss of millions of Euros in tax income.

But according to new data, the number of APAs continues to grow, and saw a sharp increase across the European Union from 2015 to 2016. In particular, the number of unilateral agreements – which are the most problematic kind – increased dramatically in EU countries, from 1,252 at the end of 2015 to 2,053 at the end of 2016 (an increase of 64 per cent).

As part of a very harmful ‘race to the bottom’, some government engage in ‘tax competition’, to try and attract multinational corporations to their countries by offering lucrative tax arrangements. But international concern about these types of practices is growing. Earlier this week, the European Commissioner for Economic and Financial Affairs Pierre Moscovici named seven EU Member States as a cause of concern due to their aggressive tax policies. These were Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands. Two of these countries – Belgium and Luxembourg – are at the absolute top of the list of countries that have the highest number of secret APAs in force. The Netherlands would also probably be very high on the list if they reported the number of APAs in force in the country.