Tax intermediaries to get tough regulation
Panama Papers exposed the complex cross-border schemes
23 June, 2017
The Commission proposed last Wednesday tough new transparency rules for intermediaries - such as tax advisors, accountants, banks and lawyers - who design and promote tax planning schemes for their clients. Recent media leaks such as the Panama Papers have exposed how some intermediaries actively assist companies and individuals to escape taxation, usually through complex cross-border schemes. Last Wednesday proposal aims to tackle such aggressive tax planning by increasing scrutiny around the previously-unseen activities of tax planners and advisers.
New EU rules to block artificial tax arrangements, as well as new transparency requirements for financial accounts, tax rulings and multinationals' activities have already been agreed and are progressively entering into force. Proposals for stronger Anti-Money Laundering legislation, public Country-by-Country reporting requirements and tougher good governance rules for EU funds are currently being negotiated. In addition, a new EU list of non-cooperative tax jurisdictions should be ready before the end of the year.
The proposal will further reinforce the EU's tax transparency framework, by shedding new light on the activities of intermediaries and the tax planning arrangements being used. It will also ensure a harmonised EU approach to implementing the recommended mandatory disclosure provisions in the OECD's Base Erosion and Profit Shifting (BEPS) project, as endorsed by the G20.
“The EU has become the frontrunner when it comes to bringing more transparency to the world of aggressive tax planning. This work is already reaping results,” Commission VP Valdis Dombrovskis said. Member States will automatically exchange the information that they receive on the tax planning schemes through a centralised database, giving them early warning on new risks of avoidance and enabling them to take measures to block harmful arrangements.
Cross-border tax planning schemes bearing certain characteristics or 'hallmarks' which can result in losses for governments will now have to be automatically reported to the tax authorities before they are used. The Commission has identified key hallmarks, including the use of losses to reduce tax liability, the use of special beneficial tax regimes, or arrangements through countries that do not meet international good governance standards.
The proposal, which takes the form of an amendment to the Directive for Administration Cooperation (DAC), will be submitted to the European Parliament for consultation and to the Council for adoption.