On Tuesday 13 March, the European finance ministers reached a political agreement in principle on the sixth version of the directive on administrative cooperation. This version, which was proposed by the European Commission in June of last year, aims to require tax intermediaries (in the broader sense of the term) to send the tax authorities the aggressive tax planning schemes they prepare if these schemes involve two member states or one state and a third country.
The final outstanding point concerned the third marker to define what constitutes an aggressive tax planning scheme. This third marker is related to cross-border transactions. The Commission provided for data related to arrangements involving cross-border payments between two or more affiliated companies, the beneficiary of which is a tax resident in a country with no corporate taxation or a rate of 0% or less than 40% of the nominal average EU rate, to be exchanged. Some member states argue that it is not possible to label a scheme aggressive on the basis of the nominal rate. The reference to 0% stays in, but the reference to a rate below 40% of the EU nominal average has been taken out (having been reduced to 35% during the negotiations).
During the public session, some of the representatives of Denmark, Greece, Spain, Austria and Finland lamented the fact that the text had been watered down on this point, while others said that they would have supported the inclusion of a reference to a low rate. However, they all decided to accept the text as it stood, in the spirit of compromise. According to our information, the withdrawal of the reference to a rate of 35% below the average nominal EU rate does not make a great deal of difference, since an arrangement would have had to benefit from a nominal rate of between 1% and 7% in order to be included. However, this does not exist anywhere in the world.
Another change made aims to ensure consistency with previous versions of the directive, this time concerning the automatic exchange of information on tax rulings. This change provides for prior agreements on bilateral or multilateral transfer prices with third countries to be excluded from the scope of this exchange if the international fiscal agreement by virtue of which the prior agreement on transfer prices was negotiated does not allow it to be disclosed to third parties.
In its proposal, however, the Commission hoped to include these schemes. The member states deleted this provision. The delegated act which the Commission hoped to be able to propose to add markers to the appendix was also withdrawn. Instead, the Commission may re-evaluate the text every two years.
A debate behind closed doors also provided the opportunity for seven countries in hot water last week over their regimes that are vulnerable to aggressive tax planning to raise the matter with the Commissioner for Economic and Monetary affairs, Pierre Moscovici. Luxembourg said that although Commissioner Moscovici had written to them explaining that the aim of the move was not to point fingers, this was nonetheless what had happened. Minister Gramegna also said that the study in the appendix on tax planning indicators covered the period 2010-2015 and therefore excluded the period when progress started to be made. He concluded by saying that Moscovici's approach was not helpful and could send out a confused signal to the rest of the world. (Original version in French by Élodie Lamer)