The European Commission has presented a key initiative to fight against the misuse of shell entities for improper tax purposes, announced the Community Executive in a press release. „The proposal should ensure that entities in the European Union that have no or minimal economic activity are unable to benefit from any tax advantages and do not place any financial burden on taxpayers. This will also protect the level playing field for the vast majority of European businesses, who are key to the EU’s recovery, and will ensure that ordinary taxpayers do not suffer additional financial burden due to those that try to avoid paying their fair share. ”, it is mentioned in the press release.
While it is true that shell entities (or letterbox) can serve useful business and commercial functions, some international groups and even individuals abuse them for aggressive tax planning or tax evasion purposes. „ Certain businesses direct financial flows to shell entities in jurisdictions that have no or very low taxes, or where taxes can easily be circumvented. Similarly, some individuals can use shells to shield assets and real estate from taxes, either in their country of residence or in the country where the property is located ”, the EC says.