Under the plans, cross-border tax planning schemes bearing certain characteristics or ‘hallmarks’ will have to be automatically reported to the tax authorities before they are used.
Member states will automatically exchange information that they receive on tax planning schemes through a centralised database, with the aim of giving them early warning of avoidance and allowing them to take measures to block harmful arrangements.
The commission has identified key hallmarks, including the use of losses to reduce tax liability, the use of special beneficial tax regimes, or arrangements through countries that do not meet international good governance standards.
The obligation to report a cross-border scheme bearing one or more of these hallmarks will be borne by the intermediary who supplied the cross-border scheme for implementation and use by a company or an individual; the individual or company receiving the advice, when the intermediary providing the cross-border scheme is not based in the EU, or where the intermediary is bound by professional privilege or secrecy rules and; the individual or company implementing the cross-border scheme when it is developed by in-house tax consultants or lawyers.
Scandals such as the Panama Papers have involved intermediaries actively assisting companies and individuals to escape taxation, usually through complex cross-border schemes.
In a hearing in May 2017, EU chief Jean-Claude Juncker was forced to defend his position over Luxembourg sweetheart tax deals with multinationals during his time as finance minister in the 1990s, denying any involvement in the arrangements during his time in government.
In the May hearing, one MEP questioned how Juncker had turned ‘from Saul to Paul on the road to Damascus’, in terms of his current acceptance of the principle of tax competition, saying that ‘people want a clear statement on what you did in the past’.
On this latest project, the Juncker Commission claims it ‘has made great strides in boosting tax transparency and tackling tax evasion and avoidance’. It cited ‘EU rules to block artificial tax arrangements’, as well as ‘new transparency requirements for financial accounts.’
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: ‘We are continuing to ramp up our tax transparency agenda. Today, we are setting our sights on the professionals who promote tax abuse.
‘Tax administrations should have the information they need to thwart aggressive tax planning schemes. Our proposal will provide more certainty for those intermediaries who respect the spirit and the letter of our laws and make life very difficult for those that do not. Our work for fairer taxation throughout Europe continues to advance.’
News source: CCH Daily