The French Presidency is going to ask the Council of the European Union to approve—on Friday, 17 June, in Luxembourg—draft conclusions on the latest biannual report from the Code of Conduct Group, which aims to combat harmful competition where business taxation is concerned (see EUROPE 12913/25).
According to draft conclusions procured by EUROPE, the EU Council welcomes the group’s progress, in particular on standstill and rollback notifications of certain measures as well as the revision of the EU list of non-cooperative countries and territories in February 2022 (see EUROPE 12898/25). It has asked the group to continue to follow up on these matters.
The group of national experts has been encouraged to pursue its work on the revision of the Code of Conduct in preparation for reforming it (see EUROPE 12913/25). It will need to maintain an effective dialogue with the least cooperative countries and territories so that they continue to fulfil their commitments and comply with the EU listing criteria.
The group recently dialogued with countries engaged in reforming their foreign source income exemption regimes, those that levy little or no tax, and those concerned by the implementation of the anti-BEPS (base erosion and profit shifting) minimum standard on country-by-country reporting.
According to the French Presidency’s draft conclusions, the Council of the EU also welcomes the progress made by a number of jurisdictions in implementing the OECD’s Common Reporting Standard, which aims to enable financial account information to be exchanged automatically.
The Ecofin Council is expected to be pleased with the positive effect that the group’s work has had on reducing harmful tax practices and preferential tax regimes—both at the EU and international levels. It will ask the group to continue this work and report back to the EU Council on further progress made in these areas.
The Code of Conduct Group will update the EU’s ‘blacklist’ of non-cooperative countries and territories for tax purposes in October 2022. With the public country-by-country reporting directive (CBCRD), ten non-EU countries—including Russia—were, in February, put on the EU’s ‘grey’ list of jurisdictions that made commitments regarding good tax governance (see EUROPE 12887/13).
By October, the group will take into account the progress made by the jurisdictions concerned—an exception being made due to the specific timing-related circumstances of this first year of monitoring. The group also decided that, from 2023 onwards, it will take into account the conclusions reached by the OECD’s Forum on Harmful Tax Practices (FHTP) in the last quarter of the previous year.
Two other criteria will be applied to the EU lists: peer review by the Global Forum on tax transparency and the exchange of information on beneficial owners.
In its report, the Code of Conduct Group believes that it must learn from media revelations such as the ‘Suisse secrets’ (see EUROPE 12918/17) and the ‘Pandora papers’ (see EUROPE 12806/14). It wants to analyse and put an end to practices that do not comply with national legislation. The discussion will continue so as to identify and resolve problems related to the list that persist despite the application of its criteria to the jurisdictions concerned.
The group also wishes to pursue its technical work to evaluate the potential impact that implementing Pillar II of the OECD agreement on minimum corporate taxation—which is currently blocked in the Council of the EU—may have on the EU listing criteria (see EUROPE 12959/10). In this, it includes criteria relating to income tax and schemes that facilitate the creation of offshore structures or that are designed to attract profits that do not reflect real economic activity in the jurisdiction concerned.
Finally, the French draft conclusions invite the group of experts to continue to evaluate Member States’ application of defensive measures towards non-cooperative countries and territories in the field of taxation.
To read the Code of Conduct Group’s report to the EU Council: https://aeur.eu/f/20n
To read the EU Council’s note (in French): https://aeur.eu/f/20o (Original version in French by Anne Damiani)