* EU states to determine level of "effective" penalties
* Draft law to be published by the end of June
* Accounting firms, banks to be forced to disclose information
BRUSSELS, June 8 (Reuters) - Tax advisers in the European Union will be penalised for helping companies to set up schemes to cut their tax bills excessively by shifting profits to low-tax countries, under a draft law seen by Reuters.
The measure, prepared by the EU executive, the European Commission, and still subject to changes, would force accounting firms such as PricewaterhouseCoopers(PwC), KPMG, Ernst & Young and Deloitte, banks and other tax advisers to inform authorities about "potentially aggressive tax planning arrangements" set up for their clients.
The move is part of a set of measures adopted by the European Union after last year's Panama Papers and other revelations of widespread tax avoidance by wealthy individuals and big firms through carefully constructed plans.
The draft law, expected to be published in June, dictates "effective, proportionate and dissuasive penalties" for non-compliance, but leaves EU states free to decide sanctions or fines at national level.
Tax advisers will have to disclose cross-border tax schemes deemed to be too "aggressive" to tax authorities in the countries where they operate. The information should then be "automatically" shared among EU countries' administrations.
This requirement for an early warning is intended to discourage the transfer of corporate profits taxable in one EU state to other countries or jurisdictions where they would be taxed at much lower rates.
If there is no intermediary, or the tax adviser is located outside the EU, the obligation of disclosure would fall on the taxpayer using the arrangement.
The draft law does not define "aggressive tax planning", because any definition would risk being overtaken by ever-evolving avoidance schemes.
But a list of red flags, or "hallmarks", will be drafted to spot arrangements that present "a strong indication of tax avoidance or abuse", the draft law says. The list will be regularly updated by the European Commission.
The Commission's legislative proposal will need the approval of the European Parliament and all EU states to become law.
Some EU states have shown little appetite to move fast in the fight against tax avoidance, saying it could hamper the competitiveness of European companies.
Malta, which holds the rotating presidency of the EU, proposed to slow down the pace of tax reform in a document circulated among finance ministers in April. (Reporting by Francesco Guarascio zfraguarascio)