Strasbourg, 12/04/2016 (Agence Europe) - Whilst the scope of the Commission's proposal for public country-by-country reporting, on Tuesday 12 April, disappointed civil society and several groups of the European Parliament, it has also given rise to concerns that a precedent has been set on the drafting of taxation policy without the rule of unanimity, an ultra-sensitive issue for the member states.
In the form of amendments to the directive on accounting standards, the Commission proposes requiring major groups to publish certain accounting information (such as turnover and tax paid) on a country-by-country basis for the EU and tax havens, and then aggregated data for the rest of the world. The Commission's stated aim with this proposal is to “make sure that the tax is paid where the profit is generated”, said Commissioner for Financial Services Jonathan Hill, presenting the proposal.
A Council source explained that several delegations had expressed concerns over setting a precedent in this area. Our source admits that the reporting obligations do indeed fall within the scope of company law, “but the underlying policy is taxation”.
Then, the Commission, which initially planned to work on putting together a blacklist of tax havens with the Code of Conduct group of the Council on corporate taxation, today announced that this would be done in the form of a delegated act. Whereas at the Code of Conduct group, decisions have to be made by unanimity minus one, for delegated acts, a committee, chaired by the Commission and made up of the member states, decides by qualified majority.
In the present case, the Commission explains that it will consult the experts of the Council when drafting delegated acts and that the “Parliament and Council experts will have equal access to all meetings and all documents”. On the one hand, this solution will create a more solid legal foundation for the blacklist (even though this foundation has still to be defined), but on the other, it will also avoid any political horse-trading in drafting the list in question, should certain member states wish to protect various third countries.
In the form proposed by the Commission, the accounting standards directive will also contain criteria to assess whether a third-country is non-cooperative in taxation matters. These criteria are: transparency and the exchange of information, including exchanges on request; fair tax competition; G20, OECD and other relevant standards, such as the international standards laid down by the financial task force. The blacklist will be revised on a regular basis, as it will above all be necessary to conduct dialogue with the countries in question. The Commission has commented that since its first attempt to set up a blacklist in June 2015, a number of jurisdictions have responded positively and have moved in the direction of the international standards. “In an ideal world, we would not have a list of this kind, (the jurisdictions in question) would be able to subscribe to the criteria of good governance in taxation matters; we cannot say, today, whether there will be a list or not”, another Commission source explained.
Commissioner for Taxation Pierre Moscovici also told the plenary debate on the Panama Papers that as things stand, Panama was deemed a tax haven by just eight member states. Germany has no jurisdictions on its list; Portugal has more than 80. “Let's work on getting a proper list together, let's give ourselves six months to do it”, he said.
The Commission has opted to call for aggregated data on companies' activities for the rest of the world for a number of reasons. One of these is that the states are bound by their commitment to confidential reporting to the administrations in the framework of the OECD. The United States has warned that it would cease exchanging information if this information was published by any partner. It is not yet clear whether the US will be included on the future list. Recent articles in The Economist and Bloomberg describe the country as the new biggest tax haven on earth. “It's clear that there is an issue with the US”, a European source said.
Mixed reactions at the European Parliament. Over at the Parliament, Germany's Fabio De Masi (GUE/NGL) said that the attempt to create a list in 2015 had failed miserably. “when member states jumped to the rescue of tax havens in their sphere of influence, such as the UK and the Virgin Islands” Generally speaking, the Parliament is unimpressed. Sergio Cofferati (S&D, Italy), Parliament rapporteur for the shareholders' rights directive, in which the Parliament is trying to push through reporting on a larger level, criticised the turnover threshold of €750 million. With this new proposal on reporting, the Commission said that it hopes that the negotiations on shareholders' rights would be rapidly concluded. Over at the S&D, it is felt that there will be a tactical decision to make.
On behalf of the EPP, the chair of the special TAXE II committee said that he welcomed the proposal. The co-chair of the Greens/EFA, Belgium's Philippe Lamberts, described himself as furious.
NGOs disappointed. Civil society and some sections of the European Parliament criticised the Commission's proposal, first and foremost due to the requirement for aggregated data only for the rest of the world. Aurore Chardonnet from Oxfam said that the Commission was just saving face after the Panama Papers. Elena Gaita, from Transparency International, described the measures as a “façade”. On behalf of Eurodad, Tove Maria Ryding said that businesses will still be able to transfer their profits from small tax havens to large ones “which are powerful enough to avoid being included in the EU's tax haven list”.
Negative reaction from business. In the view of Taxand, the financial advisers' organisation, businesses which are not bound by these new rules will have access to a range of sensitive information, which will give them undue advantages over their competitors, once they have this access to information about them which is not normally made public.
The director-general of BusinessEurope, for his part, said that the proposal would undermine the role of the tax administrations in the application of the legislation in this area.
On behalf of the accountancy experts, represented by ACCA, Chas Roy-Chowdhury said that the proposal was a little too prescriptive.
The Commission incidentally states that it intends to examine whether the European rules on financial advice and audit should be tightened up to present deterrent measures for financial intermediaries when clients are provided with advice which may lead to tax evasion. The subject has been included on a draft agenda of the meeting of the college of commissioners on 1 June. (Original version in French by Elodie Lamer)