PURPOSE: to further extend the scope of the mandatory
exchange of information in the field of taxation in the
EU.
PROPOSED ACT: Council Directive.
ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts
the act after consulting the European Parliament but without being
obliged to follow its opinion.
BACKGROUND: as Multi National Enterprise (MNE) Groups
are active in different countries, they have the possibility of
engaging in aggressive tax planning practices that are not
available for domestic companies. When MNEs do so, purely domestic
companies, normally small and medium-sized enterprises (SMEs)
may be particularly affected as their tax burden is higher than
that of MNE Groups. On the other hand, all Member States may suffer
revenue losses and there is the risk of competition
to attract MNE Groups by offering them further tax benefits. There
is therefore a problem for the proper functioning of the Internal
Market.
In recent years, the challenge posed by tax fraud and
tax evasion has increased considerably and has become a major focus
of concern within the Union and at global level. The automatic
exchange of information constitutes an important tool in this
regard and the Commission in its Communication
of 6 December 2012 containing an Action plan to strengthen
the fight against tax fraud and tax evasion highlighted the
need to promote vigorously the automatic exchange of information as
the future European and international standard for transparency and
exchange of information in tax matters.
The European Council Conclusions of 18 December 2014 cite "an urgent need
to advance efforts in the fight against tax avoidance and
aggressive tax planning, both at the global and EU levels". Since
December 2014, the Commission has quickly launched the first steps
towards an EU approach. In the meanwhile the Organisation for
Economic Cooperation and Development (OECD) has finalized its
work in defining the global rules and standards to these
ends.
This Directive amending Council Directive 2011/16/EU as part of the Commission's Anti- Tax Avoidance
Package, addresses the political priority of fighting against
tax avoidance and aggressive tax planning. It also responds to the
demands from the European Parliament outlined in its resolution
of 21 May 2013.
IMPACT ASSESSMENT: no impact assessment was carried
out for this proposal given that the proposal is in line with
international developments at the level of the OECD and its work on
Base Erosion and Profit Shifting (BEPS) where most EU Member States
participate.
To provide up-to-date analysis and evidence, a
separate Staff Working Document accompanying the proposal
provides an extensive overview of existing academic work and
economic evidence in the field of base erosion and profit
shifting.
CONTENT: in order to tackle tax fraud and evasion and
aggressive tax planning, the proposal seeks to amend Directive
2011/16/EU on administrative cooperation in the field of
taxation, as amended by Directive
2014/107/EU and by Council
Directive EU 2015/2376 by introducing a specific requirement
for the AEOI on country-by-country report.
The main amendments introduced by the proposal are as
follows:
Mandatory automatic exchange of information on
country-by-country report:
- the Directive requires MNE Groups to provide annually
and for each tax jurisdiction in which they do business certain
information including the amount of revenue, the profit before
income tax, the income tax paid and accrued, the number of
employees, the stated capital, the retained earnings and the
tangible assets. This information will enable the tax authorities
to react to harmful tax practices through changes in the
legislation or adequate risk assessments and tax audits. Increased
transparency should also incentivize MNE Groups to pay their fair
share of tax in the country where profits are made
- in order to ensure an appropriate balancing of
reporting burden and benefit to tax administrations, only MNE
Groups with total consolidated group revenue equal or higher
than EUR 750 000 000, will be obliged to file the
country-by-country report;
- the Directive requires Member States, once they have
received the country-by-country report, to share the information
with the Member States in which, on the basis of the information in
the report, companies of the MNE Group are either resident for tax
purposes, or are subject to tax with respect to the business
carried out through a permanent establishment.
- Standard form and practical
arrangements:
- the automatic exchange of information on
country-by-country report shall be carried out using the standard
form provided in the Annex to the Directive. The Commission shall,
by means of implementing acts, adopt the linguistic
arrangements for that exchange by 31 December 2016;
- information communicated shall be provided by
electronic means using the common communication network (CCN)
developed by the Union. The Commission shall, by means of
implementing acts, adopt the necessary practical arrangements for
the upgrading of the CCN network.
Penalties: Member States
shall lay down the rules on penalties applicable to infringements
of national provisions adopted pursuant to this Directive and shall
take all measures necessary to ensure that they are
implemented.
BUDGETARY IMPLICATIONS: the impact on expenditure
(including human resources) is estimated at EUR 3.79 billion of the
proposal on the EU Budget is presented in the financial statement
accompanying the proposal, and will be met within available
resources.
The costs of the additional IT tools to facilitate the
communication of information between Member States would be funded
out of the FISCALIS
2020 programme.