Brussels, 07/10/2015 (Agence Europe) - In the view of the NGOs and several members of the European Parliament, the “tax revolution” announced at yesterday's Ecofin Council is, at best, simply an evolution. Readers may recall that the states reached a political agreement to make the exchange of information on tax rulings automatic from 2017 (see EUROPE 11404). This legislative proposal was submitted following the LuxLeaks scandal, which shed light on how certain multinationals were taking advantage of these rulings to bring down their tax bill to levels in some cases close to zero.
“This problem won't go away just because our European tax administrations get more information”, said Tove Maria Ryding, on behalf of the NGO Eurodad. “EU governments are strongly committed to what they call 'tax competition'”, which she described as falling over each other to attract multinationals through tax breaks. Ryding described this as a very dangerous race to the bottom.
Several members of the EP were equally harsh. Many feel that there was nothing revolutionary about the Commission's initial proposal and lament the fact that the state still managed to reduce its scope. “This proposal was already the absolute minimum in terms of transparency of the tax rulings”, said Elisa Ferreira (S&D, Portugal), co-rapporteur for the special committee on tax rulings (TAXE) of the EP, which was set in place after Luxleaks. The Portuguese MEP was particularly critical about the delimitation of the Commission's role in the exchange, brought into the text by the member states. The Commission will receive neither the identification of the companies involved in a ruling, nor the content of the ruling. “The ban on the Commission using the data to identify suspect cases is a mistake”, added Eva Joly (Greens/EFA, France), vice-president of the TAXE committee. Alain Lamassoure (EPP, France), president of the TAXE committee, also said that it would probably be necessary to add to the text, “in order to allow the European Commission fully to play the role of observer and, if necessary, of critic, which is needed”.
Automatic exchange neglected. “Past experience has amply demonstrated the extent to which the exchange of information must not depend solely on the goodwill of the member states: even though they have been obliged since 1977 - under EU rules - spontaneously to exchange information in the tax domain, they have virtually never done so”, Philippe Lamberts explained. During the Ecofin Council, the Commissioner for Taxation, Pierre Moscovici, explained that there would be no legal void while the new provisions were being transposed. This is due to the existing provisions which provide for an spontaneous exchange under certain conditions. The document of the 'Code of Conduct' group dated 17 September 2015, of which EUROPE has had sight, also shows that very few states spontaneously exchanged their rulings. The document shows that only Luxembourg, Austria and Finland have spontaneously exchanged any tax rulings. A number of states also recognise that they have not taken the legal provisions necessary to allow spontaneous exchange to take place. The Commission seems to feel that it would be inappropriate to open infringement proceedings to force the states to exchange information, due to the margin of discretion left up to them in the existing framework. Under the rules to enter into force in 2017, therefore, the Commission will be in a better position to judge whether a state is complying with the law and, if not, to launch infringement proceedings.
The European accountancy experts, ACCA, have expressed concern at the vagueness surrounding the scope of application of the new rules approved by Tuesday's Ecofin. Chas Roy-Chowdhury, head of taxation at ACCA, explained that there was a need for clarity on what is and is not a ruling. “What should be included is in quite a grey area”, he continued. Unlike the NGOs and the MEPs, Roy-Chowdhury welcomed the fact that the states had reduced the period of retroactivity of the exchange from 10 years to five.
Mafalda Moz Teixeira, adviser with BusinessEurope, told EUROPE that she was currently analysing the final text of the agreement. “From our point of view, the amended directive should give companies and investors safeguards that all information they have provided and which is commercially sensitive will be protected”. Without this guarantee, “the EU could lose an effective mechanism to boost investor confidence”, which could have the effect of leading to a loss of future direct investments, both domestic and foreign.
Country-by-country reporting. The agreement on the exchange of rulings provided the opportunity for MEPs and Eurodad to repeat their calls for country-by-country reporting. Reacting to the statements of Commissioner Moscovici, Roy-Chowdhury told EUROPE that he shared the view of the OECD (see EUROPE 11403) that the total transparency of this reporting would go against the agreements reached at the OECD (reporting to administrations) and would create competition problems, if the procedure was limited to EU businesses. Although this obligation is already in place for banks and the mining industry, Roy-Chowdhury warned against a “one-size-fits-all” policy, as there will be some sectors and business models that it does not fit at all well. “We agree with Commissioner Moscovici that introducing country-by-country reporting seems the next step to take. However, the measure needs to be carefully thought through”, he concluded. France announced on Wednesday that the OECD model on reporting would be included in the draft amending finance bill. Ireland has also taken a step in this direction. Both of these states took advantage of the Ecofin meeting to tell the Commission that it needed to line itself up behind the OECD model (see EUROPE 11404). The issue has not been settled, replied Pierre Moscovici. The OECD has warned the Commission that its timetable is too slow. The impact assessment it is carrying out will run until the first half of 2016. The ministers need to push it through in the framework of the revision currently underway of the shareholders' rights directive, Eurodad's Ryding therefore recommended. (Original version in French by Elodie Lamer)