Brussels, 12/02/2016 (Agence Europe) - Several national delegations were in favour at the Economic and Monetary Affairs Council (ECOFIN) on Friday 12 February of splitting the European Commission's draft directive on tackling tax evasion.
Initially, agreement would need to be reached on measures arising directly from the OECD's plan to tackle the erosion of tax bases and the transfer of profits (BEPS) (limiting the deduction of interest rules on controlled foreign companies and measures on hybrid arrangements). The measures that the European Commission withdrew from the initial proposal for a common consolidated tax base for corporate taxation (CCCTB) would be discussed later, since they don't come from BEPS. The idea of a split was mooted by German finance minister Wolfgang Schäuble and backed by a number of countries for different reasons. One recurring reason is that it makes sense to be cautious and not do anything more than necessary in this domain.
As if he wanted to respond to countries that would rush through the breach he'd opened, Schäuble said at the end of the debate that he'd simply suggested a “realistic approach to implement switftly” what had already been decided as part of BEPS. He said that during the debate, he'd understood that discussions would take time. A second stage, he said, would “improve” the battle against aggressive tax evasion. He was directly backed by the United Kingdom, Luxembourg, Lithuania, Slovenia and Latvia. Other countries said that agreeing on the draft legislation under the Dutch Presidency would be very ambitious, if unlikely.
Commissioner Moscovici defended the logic of an overview because if one stuck to BEPS, then one would not protect the integrity of the single market or allow companies to make the most of the freedoms provided by the treaty to transfer profits or untaxed assets to countries outside the EU that do not have these freedoms. He pointed out that the measures that were part of ATAD (the general anti-tax abuse rule, exit taxation and the switchover clause) rather than BEPS reflected elements that were needed and had already been discussed by the Council in connection with the common consolidated tax base for company tax (CCCTB). He said they should be more ambitious or at least more comprehensive than the OECD.
The Ecofin chair, Dutch finance minister Jeroen Dijsselbloem said it was too early to decide whether to split the directive and recommended trying to do as much as possible as fast as possible and decide at a later date whether a split was necessary.
Several member states regretted that no impact studies had been done on the package, such as Finland, Sweden, Hungary, Belgium and Malta, which said they would be calling for such a study internally. Croatia, which is not a member of the OECD, said it should have been more involved with preparing the draft proposals. Luxembourg said the other draft proposal on country-by-country reporting to tax offices via amendments to the directives on administrative cooperation would probably be easy to implement, but one would have to take a close look at the rest of the package and its impact on competitiveness.
The Commissioner said that although there wasn't any impact study, what the Commission proposed was based on solid, comprehensive and documented foundations and promised technical assistance to countries that are not members of the OECD.
On specific proposals, Austria said that the rules on foreign-controlled companies and the restrictions on the deduction of interest on loans seem complicated to implement. Sweden wants an in-depth analysis of the impact of the rules on foreign-controlled companies and the switch over clause. The Polish minister said that the switch over clause could interfere with various bilateral tax agreements and a solution would have to be worked on this in this connection. He cast doubt on the implementation timeline for the administrative cooperation directive for country-by-country reporting.
The recommendations drafted by the Commission on the amendments member states will need to make to their bilateral agreements were raised by the Swedish minister. Since they are bilateral treaties, she explained that they did not necessarily lend themselves to coordination. The Croatian minister considered combining a number of instruments, such as a minimum effective taxation clause in the interest and dividends directive, along with exchange of information.
British chancellor of the exchequer George Osborne called for a little more in the way of ambition and less in the way of rules on transfer prices and country-by-country reporting: “We shoud be moving to more public CBCR, it's something we'll seek to promote internationally.” Within the British Conservatives, however, people say they back confidential reporting if it were only applied in the EU.
NGO ONE made the same appeal in a letter sent to the twenty-eight finance ministers ahead of the Ecofin Council. The NGO's director, Tamira Gunzburg, said the devil was in the detail. The Commission is clearly examining a number of scenarios, including some that would make information about tax information compulsory, but not information about turnover or staff numbers. To avoid any confusion, Gunzburg told this newsletter about the model she felt was necessary: “The EU should require all large undertakings with a turnover higher than €40 million that are incorporated, operate, or trade in the EU to publish in open data format a country-by-country breakdown of all their taxes, pre-tax profit, turnover, number of employees, earnings, assets, subsidiaries and other data that would allow citizens in developing countries to follow the money and ensure revenues due are collected and spent on development,” she explained. The tax base will therefore be the key issue.
Spontaneous exchange of information. Commissioner Moscovici took advantage of attending the Ecofin meeting to point out that half of the member states have not yet implemented the spontaneous exchange of information rules for tax rulings. He urged these countries to do so immediately because rules on the spontaneous exchange of information on tax rulings are due to come into force in 2017. (Original version in French by Elodie Lamer)