The European Commission took a further step in fighting cross-border tax evasion on Wednesday (21 June) by proposing tougher new rules for financial intermediaries who design and promote tax planning schemes for their clients.
“Today we are proposing to hold responsible the go-betweens who create and sell tax avoidance schemes. Ultimately, this will result in greater tax revenues for member states,” Commission Vice-President Valdis Dombrovskis said.
Under the proposal, all cross-border tax plans that can result in financial losses for EU governments will have to be automatically reported to the tax authorities before they are used, the Commission said in a press release.
According to the Economic and Financial Affairs Commissioner, Pierre Moscovici, the legislation took aim at “the professionals who promote tax abuse”.
The key features that should set off the tax authorities’ alarm bells include “the use of losses to reduce tax liability and the use of special beneficial tax regimes or arrangements through countries that do not meet international good governance standards”.
In an effort to avoid loopholes, the proposal requires all those taking part in tax scheming – the intermediaries, those who use their advice and those who implement them – to report the scheme to the authorities.
A centralised database will help member states exchange information on suspicious schemes, which they will have to do every three months.
The proposal has yet to be debated in Parliament and the new reporting requirements are due to take effect on 1 January 2019.
Background
The Juncker Commission has made great strides in boosting tax transparency and tackling tax evasion and avoidance. 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.