The European Parliament votes to expand proposed rules targeting shell companies.

On January 17, the European Parliament voted to broaden the proposed regulation's purview in an effort to combat tax evasion and avoidance throughout the Union and prevent the improper use of shell companies.

The European Parliament has approved a report from its Committee on Economic and Monetary Affairs that makes changes to "Unshell," a proposed directive that adds additional standards for identifying EU companies that exist merely to benefit from tax advantages.

The revised version reduces the levels below which businesses are free from reporting requirements and adds more information about the consequences for organizations that disobey the new legislation, including those with no income or little income. Additionally, it makes clear that "there can be valid reasons for using companies with minimal economic substance."

During a discussion about the position of the parliament on the proposal on Monday, Lidia Pereira, the Committee's rapporteur, stated that "the battle against fraud and evasion has never been so important to our citizens [as it is now]."

Before the vote, she remarked, "We need to be uncompromising when it comes to abuses but we can’t create too many barriers for companies." Banks and other regulated institutions are not among the "financial undertakings" that are the focus of the proposal.

After the International Consortium of Investigative Journalists and 150 media partners published the Pandora Papers, an investigation based on a leak of 11.9 million in files from 14 offshore service companies, the European Commission recommended the new law in December 2021.

It was discovered that 29,000 individuals, including businesspeople, politicians, and criminals, used shell companies and trusts. Additionally, it demonstrated how sanctioned Russian oligarchs and their connections exploited the organizations to get around restrictions and amass property in European nations.

By fLEXI tEAM