Tax To Go gives a snapshot of the latest political and legislative developments on taxation policy at the EU level. In this week’s issue we feature (1) Council – FTT lives on, and so does the tax transparency agenda, and (2) PANA – MEPs debate global standards on money laundering and tax evasion

François Barry
Consultant

Council – FTT lives on, and so does the tax transparency agenda

Rarely has taxation policy taken so much space in the Economic and Financial Affairs Council (ECOFIN) agenda than in the last year. Typically a 2016 ECOFIN meeting features a handful of announcements on tax transparency, a pinch of news on good governance in tax matters in third country jurisdictions, and optionally an evasive update on the state of play of negotiations on the EU financial transaction tax (FTT). This week’s ECOFIN scored the hat-trick.

Finance Ministers adopted conclusions on the most recent Commission Communication on tax avoidance (see Tax To Go #5). The Council usually uses ‘conclusions’ to set up political commitments or positions; ‘conclusions’ are not legally binding and hardly include big news. Overall Ministers supported the Commission’s plans on beneficial owners, whistleblower protection, and enablers/promoters of aggressive tax planning. On the latter, Ministers not only noted the intentions of the Commission to make a proposal on mandatory disclosure of aggressive tax planning strategies, but, interestingly enough, already encouraged the Commission to “start reflecting on the possibility for future exchange of such information between tax administrations in the EU.”

ECOFIN also formally approved an agreement with Monaco, giving tax administrations improved cross-border access to information on the financial accounts of each other’s residents. The deal was signed on 12 July already, and upgrades an agreement which dated from 2004.

Lastly, Ministers from the 10 countries negotiating the creation of an EU FTT met on the margins of ECOFIN. Ministers finally supported the political compromise prepared by Austrian Finance Minister Hans Joerg Schelling – chairing the negotiations – and on the basis of which the Commission will draft a legislative proposal to be submitted to Ministers by the end of the year. They plan to reach a final agreement on the proposal before 2017; experience shows that pre-announced FTT negotiation deadlines have never been met though. Plus it appears that the existing text (not public yet) still misses quite a few technical details. Meanwhile we must content ourselves with the most official document so far, i.e. a tweet from Tax Commissioner Pierre Moscovici. Otherwise New Europe newspaper has more.

Ministers also continued the long-standing debate on whether to grant the EU more power to prosecute VAT fraud; talks will go on today (14 October) in the Justice and Home Affairs Council.

PANA – MEPs debate global standards on money laundering and tax evasion

Busy month for the committee of inquiry into money laundering and tax avoidance/evasion (PANA). Just two weeks after PANA held a first hearing with investigative journalists, MEPs came together for a second hearing on 13 October. They debated with representatives from international/European organisations – including UN and OECD – in order to understand how international standards on money laundering and on tax evasion are set.

What to take away from the talk? – having international standards on money laundering/tax evasion is good, implementing them is better. Lots of progress has been made in implementing agreed standards around the globe over the past ten years, recalled OECD’s Caroline Malcolm. Yet “there is a massive demand for capacity building and a massive lack of resources” in many countries when it comes to implement standards on the ground. And this has an impact on Europe; “we have a very strong system in the EU, but gaps around the world will affect the ability for individual European countries to meet their obligations effectively.”

The discussion briefly touched upon public country-by-country reporting (CbCR) of tax information. According to Michael Lennard, Chief International Tax Cooperation Section at the UN, business opposition to public CbCR is not as much due to the content of the reporting but rather to their concern that it is a first step in global formulary apportionment (i.e. system whereby a multinational’s worldwide profit would be attributed to each jurisdiction where it has a taxable presence, based on factors such as the proportion of sales, assets or staff). “I think there will be more and more public disclosures of CbCR and maybe eventually we will end up with a more global public CbCR system,” he added.

A follow-up hearing with law enforcement bodies will take place on 14 October, this time to discuss how money laundering and tax evasion standards are enforced. Before that, PANA will meet on 8 November for an exchange of views with Justice Commissioner Věra Jourová.

Photo by Olga DeLawrence