While important progress has been made in this area in the last years, especially with the adoption of the anti-tax avoidance directive (ATAD) 2 and the expansion of scope of the directive on administrative cooperation (DAC) 3, legal entities with no minimal substance and economic activity continue to pose a risk of being used for improper tax purposes, such as tax evasion and avoidance, as confirmed by recent massive media revelations 4. This proposal is one of the short-term, targeted initiatives which were announced in the Communication as a means to improve the current tax system with a focus on ensuring fair and effective taxation.

It aims to create an equitable and stable business environment, which can boost sustainable and job-rich growth in the Union. It sets out both a long-term and short-term vision to support Europe's recovery from the COVID-19 pandemic and to ensure adequate public revenues over the coming years.

On, t he European Commission adopted a Communication on Business Taxation for the 21st century 1 to promote a robust, efficient and fair business tax system in the European Union. Reasons for and objectives of the proposal.