Commission requests Poland to implement rules on strengthened mutual assistance and exchange of information – 29 September
As part of its monthly infringements package, the European Commission announces that it has requested Poland to comply with the rules on mutual assistance and exchange of information in the area of income and capital taxation. Member States were supposed to inform the Commission of measures they are taking to transpose the relevant provisions by 1 January 2016, but Poland has not yet done so. Poland will now have to provide a “satisfactory response” within the next two months, or the Commission may refer it to the Court of Justice of the EU (CJEU).
European Parliament report on access to AML information by tax authorities – 12 September
The European Parliament draft report on access to Anti-Money Laundering (AML) information by tax authorities has been published. It is a response to the European Commission’s earlier proposal on the same topic that was published on 5 July. The Parliament draft report has been prepared by the MEP Emmanuel Maurel (S&D/FRA), who will be leading the institution’s work on the dossier. The draft report puts forward amendments to the initial Commission proposal, such as including the AML information when relevant to the framework of automatic exchange of information between Member States and delaying the application of the relevant provisions by one year. In terms of next steps, the ECON Committee will vote on the draft report on 10 November, whilst a Plenary vote for final adoption is currently scheduled for 30 November. The European Parliament’s report will not have legal binding as it follows the consultation procedure. The Member States will have to approve the proposal unanimously.
PANA Committee public hearing with journalists – 27 September
The PANA Committee of the European Parliament has held its first public hearing, this time with guest speakers from the International Consortium of Investigative Journalists (ICIJ). Each of the speakers is a journalist working for different media across Europe. The hearing focused on whistle-blowers, transparency of beneficial ownership information, and the role of financial sector intermediaries in tax planning schemes. For example, Jan Strozyk from the German public television and radio broadcaster NDR pointed to a “whole industry of middlemen and intermediaries”, including “accountants”, that have helped in the establishment of offshore accounts and companies as revealed in Panama Papers and Bahama Leaks. The MEP Petr Jezek (ALDE/CZE), who is also the co-rapporteur to the PANA Committee’s report expected for March, asked the journalists why have governments failed to address tax evasion and avoidance through offshore structures so far. Julia Stein from NDR replied that there are conflicts of interest within governments coupled with efforts to keep businesses competitive, and that these have effectively led to an environment that enables such offshore activities. Dariusz Rosati (EPP/POL) asked the journalists where exactly has EU law failed. They replied by recommending a set of measures that would be needed to tackle offshore practices, including the establishment of inter-linked data registers, exchange of information between all countries, better enforcement of already existing robust rules, whistle-blower protection, as well as better collaboration between tax authorities.
Greens’ Group launches EU Leaks platform – 27 September
The Greens-EFA Group of the European Parliament has launched a so-called EU Leaks platform. The Platform enables potential whistle-blowers to submit sensitive intelligence and documents under complete anonymity. The stated main purpose of the Platform is to harness evidence of incorrect implementation or non-implementation of European law, including “cases of corruption, wrongdoing and maladministration, negligence, administrative irregularities, omissions, abuses of power, unfairness, incompetence, discrimination, unfounded privileges, avoidable delays and unjust refusals to provide information”. Moreover, the Platform is also open for the provision of information on “public interest” questions such as “in the fields of tax justice, the protection of public health and the environment, the promotion of a sustainable and zero carbon economy, the fight against corruption and fraud, the call for more democracy, transparency and socioeconomic fairness in Europe, or the rejection of free trade agreements designed with the interests of large corporations in mind”.
Responsible taxation and corporate social responsibility – 15 September
The European Commission has replied to a question asked by the MEP Ramón Jáuregui Atondo (S&D/SPA) with regard to responsible taxation and corporate social responsibility (CSR). In his question, Mr. Atondo argues that illegal and legal tax schemes will grow into a major CSR issue in the next few years. He refers to the Accounting Directive and its non-financial requirements as a positive step, and asks the Commission how widely the Directive has been transposed by Member States, and what additional steps the Commission is taking to tackle tax avoidance. In his reply, Vice-President Dombrovskis states that Member States have until December 2016 to transpose the Directive’s provisions, and four Member States have already notified the Commission of this. Moreover, he gives the proposals on public Country by Country Reporting (CBCR) and the Anti-Tax Avoidance Directive (ATAD) as examples of measures that the Commission has taken to address tax avoidance. And finally, Vice-President Dombrovskis points to the anticipated consultation on tax advisors and states that it will go beyond the “narrower issue of tax evasion” and will cover “aggressive tax avoidance”, in line with the “principles underpinning” OECD BEPS Action 12 on mandatory disclosure of aggressive tax planning arrangements.
FATCA (Foreign Account Tax Compliance Act) – 16 September
The European Commission has replied to a question asked by the MEP Sophia in ‘t Veld (ALDE/NLD) with regard to the Foreign Account Tax Compliance Act (FATCA). In her question, Ms. in ‘t Veld states that the US has not yet passed legislation to ensure reciprocal automatic exchange of information with its FATCA partners. This has had a negative impact on the extraterritorial application of third countries’ law in the EU, and a “disproportionate effect” on EU citizens (so-called Accidental Americans). She consequently asks the Commission what it will do in order to persuade the US Government to ensure reciprocity, whether it considers that the refusal of the Accidental Americans by banks is a violation of the Payment Accounts Directive and of the Charter of Fundamental Rights, and what the Commission will do to remedy the situation. In his reply, Commissioner Moscovici maintains that bilateral agreements and FATCA do not fall under the competence of the European Commission. The Commission is, however, working in international fora in order to ensure that the automatic exchange of financial account information meets the highest transparency standards and is fully reciprocal. Moreover, the Commission will assess the implementation of the Payment Accounts Directive and will initiate infringement proceedings in case of non‐ or incorrect transposition.
Systematic securities lending to avoid capital gains tax – 20 September
The European Commission has replied to a question asked by the MEP Jeppe Kofod (S&D/DEN) with regard to securities lending in order to avoid capital gains tax. In his question, Mr. Kofod refers to a scheme whereby “major banks” are helping clients lend their shares for short periods in order to avoid paying capital gains tax. He asks the Commission whether it is aware of the practice, whether the practice is legal from EU law perspective, and whether it will propose legislation to address the issue. In his reply, Commissioner Moscovici states that there are no anti-avoidance EU rules regarding the tax treatment of the described transactions. In the Commission’s view, Member States themselves are best placed to address such practices.
Exchange of tax information with the US – 20 September
The European Commission has replied to a question asked by the MEP Julia Pitera (EPP/POL) with regard to the exchange of tax information with the US. In her question, Ms. Pitera expresses concern that the exchange of tax information between the EU and the US is unilateral, and the US does not provide European authorities with relevant information. She asks the Commission whether this is true, and which US states on top of Delaware is refusing to exchange information. In his reply, Commissioner Moscovici states that the degree of reciprocity varies across bilateral agreements. Moreover, such bilateral agreements in general do not fall under the competence of the European Commission. The Commission is, however, working in international fora in order to ensure that the automatic exchange of financial account information meets the highest transparency standards and is fully reciprocal.
On tax rulings and other measures similar in nature – 21 September
The European Commission has replied to a question asked by the MEP Edward Czesak (ECR/POL) with regard to tax rulings and other measures similar in nature. In his question, Mr. Czesak asks the Commission when it will start work to introduce a mandatory disclosure requirement for tax advisors and other intermediaries that enable tax evasion and tax fraud, and when it will carry out screening and monitoring of derivatives and securities financing transactions with the aim of identifying transactions structured to potentially produce significant tax benefits. In his reply, Commissioner Moscovici confirms that the Commission is already examining the role of tax advisors and how best to dis-incentivise the promotion of “aggressive tax planning”. According to the Commissioner, this would involve making a clear distinction between advice leading to tax evasion and tax avoidance, and advice for legitimate tax purposes. The Commission will launch a public consultation in autumn 2016 (probably October) to gather feedback on the most appropriate approach. At international level the Commission supports the work of the OECD for its BEPS project Action 12 Mandatory Disclosure Rules related to advice to set up aggressive or abusive tax planning schemes. Regarding the monitoring of derivatives and securities financing transactions, Commissioner Moscovici states that the purpose of the relevant EU Regulations is not to monitor the tax consequences of cross-border financial transactions. Only a limited list of entities (such as relevant authorities and central banks) which the Commission is not part of have access to the data.
Andorra taxation agreement approved by EU – 20 September
The Council has approved the conclusion of a tax agreement with Andorra which aspires to improve tax compliance by private savers. The agreement would oblige the EU and Andorra to exchange relevant information automatically, giving their tax administrations improved access to each other’s residents’ financial accounts information.
“Australia warns companies against trying to avoid its ‘Google tax’” – 15 September
According to the Financial Times (article only available to subscribers), the Australian Taxation Office (ATO) has warned the Big Four not to help taxpayers avoid its new set of tax rules aiming to tackle tax avoidance by multinationals. According to ATO, certain accountancy firms have told their clients that they could protect them from the new tax schemes, modelled according to the UK Google tax. ATO fears that this will translate into a new “creative attempt to undermine the policy intent” of anti-avoidance legislation.
“US Treasury Restricts US Foreign Tax Credits” – 19 September
According to Tax News, the US Treasury has announced restrictions to the application of foreign tax credits as a reaction to the Commission’s Apple Ireland decision. The aim would be to prevent US multinationals that have faced a tax adjustment (such as retroactive recovery of tax state aid) from using foreign tax credits without repatriating the associated income. According to the Treasury Secretary Jack Lew, the Commission’s tax state aid rulings threaten to weaken the US corporate tax base.
“New ‘Google’ tax targets 100 multinationals” – 21 September
According to the Financial Times (article only available to subscribers), the UK’s so-called diverted profits tax or ‘Google tax’ that was introduced in 2015 has impacted over 100 companies that fall under its scope. HMRC has stated that as a result the number of tax disputes is likely to increase.
Bahama leaks emerge – 21 September
A new set of leaked documents have emerged that provide the names of politicians and other individuals linked to more than 175,000 Bahamian companies registered between 1990 and 2016. The most immediate and visible impact of these so-called Bahama leaks has been the implication of the ex-Commissioner Neelie Kroes (competition 2004-2010, digital agenda 2010-2014), who is listed as the director of the Bahamian company Mint Holdings Ltd during at least some of her time at the Commission. On top of the appearance of the name of an ex-Commissioner, the tangible political impact of the new leaks is difficult to assess. PANA Committee of the European Parliament has already announced its intention to include the Bahama leaks in its investigative work. At the very least, the new set of leaks will strengthen the political momentum around the EU’s ongoing tax agenda. A number of initiatives are expected in the upcoming weeks, including a consultation on tax advisors, a proposal on a tax dispute settlement mechanism, the re-launch of the Common Consolidated Corporate Tax Base (CCCTB) which the Commission has re-branded as an anti-avoidance proposal, and an amendment to the Anti-Tax Avoidance Directive (ATAD) in order to cover hybrid mismatches with non-EU countries.
Germany announces new measures against tax havens and offshore companies – 22 September
Germany has announced new measures to fight against tax havens and letterbox companies as a reaction to the Panama Papers. The announced measures include additional cooperation requirements for taxpayers, new tax reporting requirements for banks, as well as strengthening the investigative powers of tax authorities.
“Belgium tries to fix one of Europe’s most skewed tax systems” – 29 September
According to the Financial Times (article only available to subscribers), Belgium is planning a tax shift policy to put an end to the “unbalanced tax system” in the country. The current Belgian tax system is characterised, for example, by significant inheritance tax exemptions as well as low capital gains taxes. The Financial Times describes the new tax code as “fiendishly complex”, but states that the overall aim is to support low and medium income citizens by easing their tax and social security contribution burdens. This will be compensated, for example, by increasing capital taxes.
Tax policy reforms driven by focus on boosting growth – 22 September
The OECD has published a new report on tax policy reforms which demonstrate that corporate income taxes (CITs) are on a down-ward trend. Five OECD countries implemented CIT reductions during 2015, and four others have announced CIT cuts for the upcoming years. Moreover, the increase of standard VAT rates that gained momentum in the post-crisis years seems to have toned down, but a number of countries expanded the use of reduced VAT rates. Finally, the report identifies a prospective overall reduction on the tax burden on labour.
First regional meeting of the Inclusive Framework on BEPS for Latin America and the Caribbean – 23 September
The recently established Inclusive Framework on BEPS (see FEE Tax Policy Update from 8 July for further details) has held its first regional meeting for Latin America and the Caribbean regions. The meeting brought together 57 delegates from 10 countries and 8 organisations in Montevideo, Uruguay. The attendees discussed latest developments on the implementation work on BEPS, and were updated on the progress of the work on the toolkits aimed at addressing the specific needs of developing countries in implementing the BEPS measures. According to the OECD, the discussion provided an opportune framework to obtain input into the work and on the priorities of the participating countries as well as their needs in relation to capacity building and training.
Public comments received on the discussion draft on Branch Mismatch Structures under Action 2 of the BEPS action plan – 23 September
The OECD has published the comments it received as part of its discussion draft on branch mismatch structures under BEPS Action 2 (hybrid mismatch arrangements). A total of 17 contributions were received from a range of concerned stakeholders such as PwC, the Federation of German Industries, British Bankers Association (BBA) as well as the Association for Financial Markets in Europe (AFME).
Switzerland ratifies the Convention on Mutual Administrative Assistance in Tax Matters – 26 September
Switzerland has formalised its commitment to tax transparency by ratifying the Convention on Mutual Administrative Assistance in Tax Matters (the Convention) – joining 103 other countries that have already ratified the agreement. The Convention will enter into force in Switzerland on 1 January 2017. As the name implies, it provides for “all possible forms” of administrative co-operation between countries in the assessment and collection of taxes, and in particular with a view to combating tax avoidance and evasion.
“OECD official says EU Apple ruling not precedent for future tax cases” – 27 September
As reported notably by Reuters, OECD’s Tax Director Pascal Saint-Amans has argued that the Commission’s Apple Ireland decision does not constitute a precedent for future tax cases. He maintains that since the case is primarily a question of state aid rather than taxation, it is not a transfer pricing issue and as such has no direct implications to international tax ‘jurisprudence’. Mr. Saint-Amans moreover stated that in pure transfer pricing terms, most of the profit would belong to the US.
“Brussels must fight and beat McDonald’s in the battle for tax justice” – 25 September
As reported notably by the Guardian, the European Commission is expected to soon announce its verdict on the state aid investigation into McDonald’s Luxembourg (see FEE Tax Policy Update from 4 December for further details). Allegedly, tax rulings struck between McDonald’s and Luxembourgish authorities has enabled the company to avoid paying taxes from up to €1 billion of its European turnover.
EESC opinion on public CBCR – 14 September
The European Economic and Social Committee (EESC) has issued its opinion on public Country by Country Reporting (CBCR). EESC “welcomes and endorses” the Commission proposal from 12 April, and maintains that the disclosure requirements must be in line with those from BEPS Action 13 (CBCR between tax administrations). Member States ought to create public registers for the CBCR data, and the Commission should reduce the currently proposed threshold of €750 million. EESC is a consultative body of the EU that consists of representatives of employers, workers and other “various interests” from all across Europe. Its purpose is to ensure that EU policies are better linked to economic, and social circumstances “on the ground”.