Brussels, 21/10/2010 (Agence Europe) - As briefly announced in our bulletin of 20 October (EUROPE 10239), the Economic and Financial Affairs Council (Ecofin) held on Tuesday 19 October has made substantial progress on the subject of automatic tax information exchange on the income of non-residents between national tax authorities in order to combat fraud and tax evasion. All delegations agreed on the Presidency's principle of compromise and expressed unanimous consensus regarding the resolve to move forward relentlessly on this matter. Nonetheless, objection voiced by a number of countries resulted in a possible political agreement being deferred until the next session of the Ecofin Council on 17 November. This will therefore be a decisive period and will act as a test of the member states' effective determination to reach an agreement in a sensitive area where unanimity is still the rule and which has specific symbolic and political significance in this period of crisis.
In the wording of the draft directive compromise, the Presidency suggests there should be automatic exchange between member states of “available” information regarding seven categories of non-resident revenue (professional income, attendance fees, dividends, capital gain, fees, life insurance products not covered by other Community acts concerning the exchange of information and other similar measures, pensions, ownership and income gained from real-estate) for successive taxable periods until 1 January 2014.
Fearing an overload of work for tax administrations, the Netherlands has presented an amendment to which Italy has rallied. This initially reduces to four - professional income, attendance fees, pensions and real estate income - the number of categories of revenue on which there is an obligation of automatic tax information exchange. If the Commission report on the functioning of this mechanism proves conclusive, these categories of revenue will not be extended to capital categories until 2017. The Netherlands, moreover, calls for the condition of “availability” to be withdrawn in relation to information exchanged automatically between tax authorities. This condition is restrictive and brings about an imbalance between states, in so far as some may, on the basis of this condition, provide less information than others. Denmark has taken this objection on board.
Luxembourg - one of the countries that is the most sceptical about the directive - has taken a step, expressing agreement of principle on the compromise albeit subject to two conditions. Firstly, the arrangements for information exchange, under Article 5, must specify the text including a reference to the principles established in the treaties on dual taxation which, unlike the Presidency's compromise, provide for procedure which regulates the information communication and request arrangements. This specification is intended to regulate the arrangements for automatic information exchange in order to limit intrusive requests for information (“fishing expeditions”) on the part of the other tax administrations through the new legislation. Secondly, under Article 8 concerning life-insurance products, the reference to the three relevant Community directives must be spelled out, indicating that the directives are on savings taxation. Luxembourg raises the question of why life-insurance products should be included when they are already included in directives on savings taxation.
The Dutch amendment was challenged by France, which warned against the risks inherent to the proposal. By postponing information exchange on a number of products until 2017, and especially on life insurance products, there is the “risk of opening up all sorts of exemption on taxation categories on which one does not wish to exchange information”. Together with Germany, which adopted the same position, France said it was able to tackle Luxembourg's amendments on Article 5 in a favourable light, in so much as they are temporary.
Another reluctant country, Austria, considered that the Presidency's text was a “good compromise”, although it expressed agreement with Luxembourg on the subject of Article 5. The Austrian minister, moreover, called for application of the obligation to provide information on request to be deferred from 1 January 2010 until 1 January 2011.
The United Kingdom stated its readiness to accept the Presidency compromise, saying that it was important to come closer to OECD standards in this matter as soon as possible.
Finally, Germany felt the compromise was acceptable and called on its partners not to backpedal, saying, moreover, that it was able to accept the Luxembourg and Austrian amendments.
Commenting on the debate, Commissioner Šemeta welcomed the progress made during the session, regretting, however, that an agreement had not been reached and that it had been postponed until the next session. (F.G./transl.jl)