Brussels, 06/04/2016 (Agence Europe) - It would appear that the Panama Papers scandal has convinced the President of the European Commission, Jean-Claude Juncker, to beef up the imminent proposed directive on country-by-country reporting on accountancy matters.
Erik Nooteboom, head of unit at the Commission's Financial Services department, is reported to have made an announcement to this effect on Wednesday 6 April, at a conference of the Federation of European Accountants (known by its French acronym, FEE), according to several people who attended the conference.
Earlier that day, sources close to Juncker reported that assessments were underway into the positions of the various stakeholders. “We will adapt the text if we feel that this is necessary”, one source told us. However, Valdis Dombrovskis' closest circles are reported to be a little more circumspect.
Speaking to a small group of journalist on Wednesday 6 April, however, Pierre Moscovici, the European Commissioner for Taxation, made it clear that the Commission was up to the challenge thrown into sharp relief by the scale of the phenomenon of hiding tax assets by means of offshore finance, as revealed by the Panama Papers (see EUROPE 11524).
According to a draft version of the legislative text, the Commission will present a proposed directive on Tuesday 12 April, requiring multinational companies (with a turnover of €750 million on more) to divulge certain accounting information on a country-by-country basis for their activities in the EU and aggregated data for their activities outside the EU (see EUROPE 11516). This approach attracted scathing criticism from civil society, which felt that the proposal would prompt companies to hide their profits outside the EU.
When asked about the possible changes to the forthcoming proposal in the light of Panama Papers, Moscovici replied that he was working with his opposite number for Financial Services with responsibility for the dossier, Jonathan Hill, “to make sure that the proposal fully responds to the challenges”. “The Commission can't ignore what's going on”, he acknowledged.
No clarifications have been forthcoming as to how the proposal will be modified, but the Commission may well show greater ambition on the scope. Against the current backdrop, however, allowing companies' activities in third countries to remain under shadow would be an untenable position, according to observers in favour of total transparency of accounting data (EUROPE 11525).
Sources close to Moscovici stressed that the tax administrations will have access to all of this information in the framework of the OECD model of reporting to the public administrations, as it is believed to be its international commitments that are giving the EU pause. The United States has repeated its threats to its partners that all exchanges of information will cease if these were to be made public. The OECD has itself called on the EU not to jeopardise the agreement reached after two laborious years of negotiations. There are also apparently fears that dual-taxation disputes between countries could increase in number. All the Commission need do is devise a solid arbitration system, civil society argues. The European institution is working on this. However, certain member states are reported to oppose any involvement of the Court of Justice of the EU.
Moscovici also pointed out that the Commission had been the first to flag up non-cooperative jurisdictions in taxation matters, by creating a pan- European list, and that it had earned itself severe criticism for its pains. “This list was not perfect, it was harshly criticised, but it was a first step and it had the merit of existing. This forced some good reactions”, he explained. He went on to say that the “member states need to show an unequivocal commitment to moving forward with a new listing process”. Following the adoption of specific conclusions by the Council in June, this list could be finalised within six months. The possibility of sanctions needs to be looked into, the Commissioner added. He would be favourable to closer links between taxation issues and trade agreements.
However, this initiative to list non-cooperative jurisdictions will never work if the member states are working behind the scenes to undermine it, a Commission source explained. The United Kingdom, for instance, is reported to have lobbied for Jersey and Guernsey to be left off the list.
The Commissioner has furthermore called upon the member states to maintain the ambition of the proposed anti-tax avoidance directive. “I would tell the ministers who are reluctant that being careful is not an option”, he said. The third draft compromise of the Dutch Presidency of the Council of the EU on this directive completely overhauls the provisions on hybrid mismatches. EUROPE will return to this. The Dutch Presidency is reported to have its sights set on a political agreement in June introducing the three provisions of the OECD's 'BEPS' action plan into EU law, before handing over to the forthcoming Slovakian Presidency to continue the work. This means that the directive will not be technically split into two. (Original version in French by Elodie Lamer)