Brussels, 21/04/2015 (Agence Europe) - The European finance ministers, who are to meet informally in Riga on Friday 24 and Saturday 25 April, will hold a political discussion on tackling base erosion and profit shifting (BEPS), but will not decide on any concrete actions until later.
The basis for the discussions will not be the proposal on the automatic exchange of information on tax rulings, but a Presidency note on the state of play with general talks. In this note, the Presidency states that it intends to focus on the short-term issues. Amongst other things, it has tried to move forward the discussions on the 'Interest and royalties' directive. Most of the member states are in favour of splitting the proposal, as was done for the 'parent/subsidiary' directive. A political agreement on an anti-abuse clause is anticipated for the May Ecofin. That said, some of the member states are opposed to a division of this directive unless they are given assurances that discussions on a minimum tax rate will continue.
Other short-term issues include the proposal on the exchange of information on the rulings and the current status of the common consolidated corporate tax base (CCCTB). However, this matter is not formally on the agenda in Riga and nor, at this stage, is it included on the agenda for the May Ecofin. The Presidency also notes that the member states agree on the need to ensure the maximum efficiency of the 'code of conduct' group, but opinions differ on how to achieve this. In June, the Commission will propose reinforcing the group.
“However, questions such as country-by-country reporting on transfer price agreements”, actual ownership of non-transparent entities and outgoing payments will be for the medium term, the Presidency writes.
The drafting of rules for the issuance of rulings, or defining the rules on an effective taxation level and residency will require more talks at the Council. The Presidency will put several questions to the ministers: “which general considerations should be taken into account with dealing with the challenges from the BEPS issue?”, “What are your first reactions to the recent proposals put forward by the Commission?”, “Do you have suggestions for further handling of BEPS issues at EU level in the Council (including specific files already under discussion such as the Interest and royalties directive and the code of conduct)?”.
The discussions are likely to be a source of disappointment to the NGOs, which on Monday began calling on the ministers for action at the Riga Ecofin. “They should commit to passing legislation that makes large EU multinationals report transparently on their taxes and profits in each country, so that citizens in developing countries can follow the money and ensure their governments aren't losing out on much-needed funds for fighting poverty”, said Valentina Barbagallo, from the NGO ONE, on Tuesday. She went on to add that at the Ecofin, the member states should urge the Commission to include in its June tax package a legislative proposal to introduce public country-by-country reporting. Counter Balance and Re: Common made a similar appeal on the same day, publishing a report showing that EIB funds are still transiting through tax havens. The Commission has not yet decided whether it will follow the recommendations of the OECD (reporting to the tax administrations) or go further, requiring these to be made public. It is currently carrying out an impact assessment.
The Greens/EFA group at the European Parliament made the same appeal. On 21 April, Eva Joly (France) said that the Commission had “choked” with its proposal on the rulings. The Commissioner for Taxation, Pierre Moscovici, has “a broad political road ahead of him”, Joly told a press lunch. In the June package, she hopes to see a proposal on the CCCTB and measures to tackle shell companies, as well as an initiative to limit the tax-deductibility of interests within major groups. The Parliament intends to keep up the political pressure on the Commission via the special TAXE committee recently set in place. However, its work does not go far enough, said Eva Joly, who accused the Parliament of having some kind of political dwarf complex. She explained that the TAXE committee had decided not to request a hearing of Jean-Claude Juncker or of the finance ministers. “If we don't get what we want, we will resume our work to get a committee of enquiry”, she added, going on to say that the list of hearings was still under discussion.
Joly was attending the presentation of the report by the Alternatives économiques journalist Christian Chavagneux, on fighting tax havens. Chavagneux's recommendations include a sort of rating scheme, like the sovereign ratings, for audit cabinets which put together tax plans for multinationals, so that they can be sanctioned. For his part, Moscovici has so far said that he considers the transparency can go as far as to cover financial advisers. The Ecofin will also discuss structural reforms, investments in the capital markets union. EUROPE will return to this. (Elodie Lamer)