Strasbourg, 13/04/2016 (Agence Europe) - Two member states of the EU are reported to have taken the opportunity of a meeting of the high-level working group on taxation issues, on Wednesday 13 April, to criticise the Commission's decision to draw up a list of tax havens via a delegated act to its proposed modification of the directive on accounting standards. These changes aim to bring in country-by-country taxation transparency requirements for large multinationals.
According to a source close to the discussions, Denmark began the attack, followed by Germany, which led to the Dutch Presidency at the Council of the EU cutting the debate short. More states are reported to have concerns about this possibility of a delegated act, several sources confirmed, one of them stating that it was no longer certain that the act would see the light of day.
There is, however, greater consensus on the principle of the European list, but mainly in its broad outlines laid down by the Commission initially in January of this year, in other words with the involvement of the code of conduct on corporate taxation group and with neither qualified majority nor co-decision. Readers may recall that the accounting directive does not fall within the remit of the taxation experts or even of the Ecofin Council, but is the responsibility of the Competitiveness Council.
Wednesday morning's discussions also focused on the draft anti-tax avoidance directive. A new Presidency compromise text has been prepared ahead of a technical meeting on 15 April. This text, of which EUROPE has had sight, toughens up the rules on controlled foreign companies (CFC).
These rules reallocate the income of a low-taxed subsidiary to its parent company. In this scenario, the parent company must therefore pay tax on this income in the state in which it has its headquarters, usually a high-taxation country. The Commission had laid down that this right to tax the income of the subsidiary would be possible if this revenue was taxed, in the country of the subsidiary, at less than 40% of the applicable rate of the member state of the parent company. The Presidency's proposal increases this figure to 50%. However, certain types of income have disappeared from the scope of the proposal, such as financial leasing income. In its notes, the Presidency explained that it reduced the list on the basis of the recommendations of the OECD. Then, the British approach to these CFC rules, whereby the member state may only include in its tax base the non-distributed income of the CFC “arising from non-genuine arrangements set in place essentially with the aim of obtaining a tax advantage” (see EUROPE 11528), has been placed in brackets, after several delegations criticised this approach. A combination of these two approaches could also be possible, whereas up to now, the member states were free to choose.
As regards the limitation on the tax deduction of loan interest, the proposal excludes from the scope of application existing loans taken out with third parties. Infrastructure projects of public interest are still excluded since the compromise of 6 April, but the text on this point has been simplified.
The Presidency's text also brings the general anti-abuse rule closer to the wording of the specific anti-abuse clause of the 'parent/subsidiary' directive. (Original version in French by Elodie Lamer)