Brussels, 02/12/2014 (Agence Europe) - On Tuesday 2 December, the European Commission stated that the recent proposals made by Germany, Italy and France on tackling aggressive tax practices could “give substance to a broader strategy” to counter the phenomenon. The German, Italian and French finance ministers wrote a letter to this effect on 28 November, to call on the Commissioner for Taxation to present a proposed 'anti-BEPS' directive by the end of this year, along the lines of the OECD action plan to fight the erosion of tax bases and the transfer of profits.
The three ministers are also to present a series of suggestions to feed into this proposal, although absolutely no reference is made to the CCCTB (common consolidated corporate tax base) favoured by the Commission, together with an automatic exchange of information on tax rulings, to step up its fight against tax optimisation. “The Commission will look at these proposals and intends to reply within the week”, said Vanessa Mark, spokesperson to the European institution. She went on to say that the proposal on the automatic exchange of information on tax rulings would be presented in the first quarter of 2015. According to several Commission sources, the aim will probably be a revision of the directive on administrative cooperation.
In a subtle reference to the LuxLeaks scandal, which recently revealed hundreds of rulings concluded in Luxembourg and allowing multinationals to limit their tax to less than 1% of the profit, in some cases, the trio of ministers states that “the limits of permissible tax competition between member states have shifted. This development is irreversible”.
In the context of the OECD's BEPS project, the ministers call for common binding rules to be adopted by the Twenty-Eight on corporate taxation, by the end of 2015. As well as the automatic exchange of information on tax rulings, “which should also cover decisions related to transfer pricing”, some thought should also be given to “stricter conditions and rules for the issuance of such unilateral rulings”.
Additionally, “EU law could do more on trusts, shell companies and other non-transparent entities, by establishing registers or other mechanisms requiring the beneficial owners to be identified and available for tax administrations. The directive should also include disclosure requirements for companies' intra-European cross-border restructuring and other operations”.
But transparency is not enough. The three ministers are therefore calling for the anti-BEPS directive to define a general principle of effective taxation. It should also make reference to the anti-abuse clauses of the 'parent/subsidiary' and 'interest-royalties' directives, currently being negotiated at Ecofin, and to hybrid arrangements. The anti-BEPS directive should systematically ensure that tax benefits are not obtained through inappropriate arrangements. “Thus, our work on a common general anti-abuse provision has to be achieved and it must be incorporated into EU law”, the three ministers stress.
Although the tax rulings have gained a lot of media attention, work is also being done within the OECD and the Code of Conduct Group on 'patent boxes', tax systems favourable to intellectual property. On this point, “we should build on the principle defined by the OECD and the Code of Conduct Group and provide for a binding framework based on common rules”. The Code of Conduct Group is to return its conclusions on the assessments of the patent boxes at the next Ecofin Council (EUROPE 11201).
Lastly, in order to fight tax avoidance through tax havens, the anti-BEPS directive should contain “counter-measures towards jurisdictions whose behaviour fosters non-transparency and aggressive tax planning”.
“This strong initiative taken by the EU, which could be proposed by the end of 2014, would give Europe the leading place that it deserves at the international level. We will be able to take advantage of it to obtain progress in the framework of the ongoing OECD/G20 discussion”, the three ministers conclude. (EL)