Brussels, 18/02/2016 (Agence Europe) - On Wednesday 17 February, the European Commissioner for Taxation, Pierre Moscovici, promised the members of the European Parliament improvements to the measures to fight aggressive tax planning if it should prove that certain phenomena are not covered by the rules already proposed or being negotiated, at a debate at a joint meeting of the committee on economic and financial affairs (ECON) and of the committee on tax rulings (TAXE) of the EP. This debate succeeded in avoiding needless duplication of work, despite many recent exchanges with the Commissioner.
Moscovici explained that the Commission was finalising its response to the resolutions of the two committees and pledged to respond to the recommendations of the EP. One recommendation in particular is missing at this stage, the MEPs noted. Jeppe Kofod (S&D, Denmark), who was expected to be appointed co-rapporteur of the TAXE committee alongside Michael Theurer (ALDE, Germany), for instance, asked when the Commission was going to propose a legislative framework with sufficient sanctions covering the tax advisory industry. French MEP Emmanuel Maurel (S&D), who will be following changes to the administrative cooperation directive for the EP (opinion), made a similar comment. “There are already audit rules, they were modified in 2014. We are going to be looking at the impact on businesses and tax advisers before making any further proposals”, Moscovici replied.
On the specific provisions of the anti-tax avoidance directive, the UK member Ashley Fox of the ECR group expressed surprise that the Commission's rules on hybrid mismatches are not as tight as the OECD's, referring to the fact that situations with third countries would not be covered. Moscovici referred to Court of Justice case-law to explain this.
However, the British MEP went on to criticise the fact that on certain points, the Commission has shown a more voluntarist attitude. Fox said that it would appear that the exit tax rules and the switch-over clause were likely to reduce movements of capital within the EU. These rules come from the CCCTB and are not covered by the OECD's BEPS project. The “implementation of BEPS is not enough (…). The fact that we have a single market, with its own rules, case-law, may create opportunities for additional fraud that we have to tackle even beyond BEPS”, Moscovici replied. The switch-provisions, for instance, “respond to a specific European issue”, as they allow the States to “deny the benefit of tax exonerations to dividends, capital gains or profits from permanent establishments which are taxed little or not at all in the state of origin”, the Commission explained.
Sweden's Gunnar Hökmark (EPP) said that it is important that the Commission keeps its promises to support growth and investments. “Going further than the BEPS recommendations” could compromise this, the Swedish MEP argued. The EU has a heavier tax burden than other regions, Hökmark explained, warning against the temptation to “do things our own way”. “Competitiveness is also based on SMEs”, Moscovici replied, reiterating that the tax burden on these companies was 30% higher than on international companies.
In response to a question from Spain's Pablo Zalba Bidegain (EPP) on the Council's level of ambition, Moscovici said that he had found the first discussion with the ministers positive overall, but warned of the “risk that the package will unravel. It would be a mistake to look at limiting the ambition to adopting the BEPS elements”, he said, with Germany taking the view that it would be better to divide up the anti-tax evasion directive by starting work on the elements of the OECD's BEPS project and leaving aside the elements which have been added by the European Commission, but not covered by BEPS.
The MEP Elisa Ferreira (S&D, Portugal) reminded him of the recommendation of the TAXE I report that the Commission should not hesitate to make use of article 116 of the treaty to overcome the unanimity issue. This article, which provides for qualified majority and co-decision to be used in the event of distortions on the single market, “has never been used. The Commission is prepared to look into all possibilities but, traditionally, we take the view that tax decisions should be made unanimously”, the Commissioner replied. Although he said that he was optimistic about the discussions at the Council, he nonetheless pledged that if it were necessary to “turn up the heat”, he would do so.
Addressing the economic committee of the EP on Thursday, Jeroen Dijsselbloem, the Dutch Minister who holds the presidency of the Ecofin Council for the first half of this year, explained the importance of trying to keep the ATAD package intact. “I take my colleagues seriously, but I am even more serious that we really need progress. This is a question of credibility”. “I am not prepared to postpone elements”of this directive, he stressed.
He told Cora van Nieuwenhuizen (ALDE, Netherlands), who asked Mr Moscovici to clarify various definitions related to the general anti-abuse clause (GAAR), such as the notion of 'economic reality', that this general rule would make it possible to identify situations of abuse when no specific anti-abuse rule was in place. The GAAR “needs to be general and broad in order to be effective”. He also pointed out that an anti-abuse rule had been included in the 'parent/subsidiaries' directive, that the Council was discussing this in the 'interest and royalties' directive and that the Commission will do likewise when it tackles the 'mergers' directive.
In response to Eva Joly (Greens/EFA, France), who asked him to confirm that the proposals on the table would not be enough for a full response to the Ikea case, Moscovici explained that after an “initial examination”, which will be followed up in greater detail, “the Ikea case seems to be based on a combined use of exoneration at source offered by the 'interest and royalties' directive, a preferential 'patent box' regime (in favour of intellectual property: Ed), the use of opaque structures and making use of third countries. This is a complex structure for which a range of instruments would be available”. Amongst other things, he referred to the modification of the directive on interest and royalties, in which the states are trying to include a minimum effective taxation clause. On Tuesday, a meeting at expert level between the states highlighted the scale of the differences of opinion over this issue. EUROPE will return to this.
“If it became apparent that certain phenomena (in the fight against aggressive tax planning) were not fully covered, it would be our responsibility to lay down ways of improving the instruments further”, the Commissioner explained. He also said that it did indeed appear “that the anti-abuse framework for the Belgian national interest (should) be reinforced to prevent companies from abusing this system”. However, he did not really say whether the Code of Conduct group would be examining the system.
On the revision of the directive on administrative cooperation, to introduce the OECD's model on country-by country reporting, Moscovici was asked by Miguel Viegas (GUE/NGL, Portugal) to justify the selection of the threshold of €750 million turnover in order to identify the companies to be covered by the reporting requirements. This figure covers just 10% to 15% of international businesses. €750 million is “the figure quoted by the OECD”. It should make it possible to “determine the multinationals which have the resources to carry out aggressive tax planning”. “The Commission will submit a proposal in April on whether this reporting should be public or not”, he said. Rumours suggest that the Commission's impact assessment has found no negative effects on the competitiveness of businesses. The NGO Transparency International is expected to publish findings along similar lines, with its own study in March. The Commissioner also said that the impact assessment was based “mainly on internal studies”. PricewaterhouseCoopers carried out the impact assessment when the question was raised with regard to the banks.
Regarding the letter from the American Secretary of the Treasury, Jack Lew, the Commissioner went no further than to repeat the line adopted by the Commission last week (see EUROPE 11489). However, he explained that he would have the opportunity to talk to Lew next week in the framework of the Finance G20 in Shanghai. More generally, he reiterated that the United States had been the originator of the process to fight tax optimisation, firstly by calling for transparency between tax administrations with the FATCA agreements, and secondly with its support for BEPS. Alain Lamassoure explained that he would invite the American representatives to hold joint hearings with the multinationals, having noted the very different responses these gave to the same questions when asked firstly by the Europeans and then by the Americans in separate hearings.
“The Commission is currently looking at these criteria to define non-cooperative third countries and we believe that we will be presenting the results of our analysis this summer”, the Commissioner said. He went on to say that he would be in Monaco on Monday 22 February to sign an agreement on the exchange of information on bank accounts. (Original version in French by Elodie Lamer)