Explanatory Memorandum to COM(2008)839-2 - Conclusion onbehalf of the EC, of the Cooperation Agreement with Liechtenstein to combat fraud and any other illegal activity to the detriment of their financial interests - Main contents
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| dossier | COM(2008)839-2 - Conclusion onbehalf of the EC, of the Cooperation Agreement with Liechtenstein to combat fraud and any other illegal ... |
|---|---|
| source | COM(2008)839  |
| date | 10-12-2008 |
In the context of the negotiations with the Principality of Liechtenstein concerning its association with the implementation, application and development of the Schengen acquis,[1] it became apparent that specific comprehensive anti-fraud negotiations with Liechtenstein could address the fact that according to the Liechtenstein domestic law, legal assistance is excluded for certain specific offences regarding taxes, customs or infringements of foreign trade provisions. The Commission therefore submitted a proposal for a negotiating mandate for an Agreement between the European Community and its Member States, of the one part, and the Principality of Liechtenstein, of the other, to combat fraud and all other illegal activity to the detriment of their financial interests. i
The negotiations were conducted by the Commission following the authorization given by the Council on 7 November 2006.
The Commission respected fully the negotiating directives attached to the Council decision by taking into account, in particular, the position of Liechtenstein as a financial centre, its integration in the EEA, the current Community acquis and foreseeable future developments in the area of co-operation, covering all financial interests, especially in the field of taxation.
The comprehensive approach of the negotiations is reflected in Articles 7 and 25 of the Agreement where it is stated that more favourable provisions of bilateral or multilateral Agreements between the Parties are not affected by the provisions contained in the Agreement, in particular with regard to the Agreement between the European Community and the Principality of Liechtenstein providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments i (the Liechtenstein Savings Tax Agreement).
Administrative cooperation is shaped in accordance with the standards of the Convention on mutual assistance and cooperation between customs administrations i (the Naples II Convention) and on Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation . i The provisions on recovery are inspired by Council Directive 76/308/EEC of 15 March 1976 on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund, and of the agricultural levies and customs duties . i
The provisions on judicial cooperation are inspired from the Convention Implementing the Schengen Agreement i (the SIC), the Convention on Mutual Assistance in Criminal Matters between the Member States of the European Union i (the EU Mutual Assistance Convention) and the Protocol to the EU Mutual Assistance Convention.[9].
The negotiations were concluded on 27 June 2008. The Commission is therefore submitting to the Council the attached draft decisions on the signing and on the conclusion of the Agreement on behalf of the European Community.
Contents
- 2. RESULTS OF THE NEGOTIATIONS
- 2.1. Illegal activities in connection with the trade of goods and services
- 2.2. Fraudulent activities affecting direct taxes
- 3. PROVISIONS OF THE AGREEMENT
- 3.1. General Provisions
- 3.2. Administrative assistance
- 3.3. Mutual legal assistance
- 3.4. Final Provisions
- Proposal for a
- Sole Article
- For the Council
The prime aim of the Agreement is to complement the envisaged association of Liechtenstein to the Schengen area, with those provisions in the field of administrative and judicial assistance of the Community acquis, which are at present neither covered by the EEA nor the Schengen acquis, but which are necessary to grant each other full assistance on fraud and all other illegal activities, including customs and indirect tax offences in connection with the trade of goods and services. In that respect, the Agreement between the European Community and its Member States and the Swiss Confederation to counter fraud and all other illegal activities affecting their financial interests i (the Swiss Anti-Fraud Agreement) has served as model. This objective was fulfilled, especially since the negotiated Agreement allows for:
- administrative assistance and assistance in recovery, including for illegal activities affecting grants and public procurement, which at the present are not covered by the EEA-Agreement,[11]
- judicial co-operation, including the evasion of value-added tax, in particular allowing for searches and seizure and access to bank information, which as such is not foreseen by Liechtenstein’s association to the Schengen area, given that Liechtenstein declared explicitly that tax offences being investigated by the Liechtenstein authorities may not give rise to an appeal before a court competent inter alia to hear criminal matters.
Liechtenstein’s participation in the EEA and its envisaged adherence to the Schengen acquis has justified tackling also illegal activities affecting all forms of taxation, including direct taxes, from the start of the negotiations. However, there still remains a difference in the treatment of direct taxes in relation to other trade-related levies, such as customs and indirect taxes. This difference is due to the less advanced state of integration of Community legislation and European Union law in the field of direct taxes.
Another aim of the Agreement is thus to ensure that Liechtenstein will grant administrative and judicial assistance on fraud affecting direct taxes beyond and besides of what is foreseen in the Liechtenstein Savings Tax Agreement. In this regard, the Agreement is innovative insofar as Liechtenstein up to now denied any assistance for fraudulent activities affecting direct taxation and as the Agreement is the first one negotiated on a European level to cover all forms of taxes. The Agreement is broader in scope in relation to the model of the Swiss Anti-Fraud Agreement, since it leads to aligning Liechtenstein's providing for assistance on fraud affecting direct taxation with the European standards. It allows for:
- administrative assistance for (document related) fraudulent conduct affecting direct taxes, under the same conditions as granted amongst the Member States under Community legislation, allowing for integrating future reforms and enhancements of the assistance level within the European Community into the Agreement via the Joint Committee,
- recovery assistance for (document related) fraudulent conduct affecting direct taxes as is granted amongst the Member States under Community legislation,
- judicial co-operation for (document related) fraudulent conduct affecting direct taxes, including searches and seizure and access to bank information, which at present would not be covered by Liechtenstein’s association to Schengen.
As regards assistance with respect to foundations and other forms of investment which are controlled by a fiduciary and where the founder and the beneficial owner of the foundation are not publicly registered, the contracting parties need to employ all their information and control powers in order to respond to a request for assistance in the form of information exchange. Pursuant to Article 11 i, the fact that the information is held by a fiduciary does not affect the admissibility of a request for assistance with the consequence, that the tax authorities of the requested contracting party will in case of a need obtain the necessary information from the fiduciary who as an economic operator will be obliged to cooperate as set out in Article 19.
- Articles 1 and 2 – 'Objective' and 'General Scope':
These Articles define the subject matter and scope of the Agreement, covering administrative assistance and judicial cooperation for the protection of the Communities' financial interests and the financial interests of the Member States.
Within the scope of the Agreement, Article 2(1)(a) covers all fraud and other illegal activity extending to all indirect taxes (VAT and excise duties) and customs offences, including smuggling, corruption, bribery and laundering of the proceeds of the activities subject to Article 2 i. Procedures for the award of contracts are considered to be those leading to the conclusion of 'public contracts' as set out in Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.[12]
Article 2(1)(b) further covers fraud and other fraudulent conduct affecting all direct taxes (taxes on income and capital). Article 2(1)(c) finally allows for assistance in recovery for amounts lost due to the activities listed in Article 2(1)(a) and (b).
Assistance for money laundering, as set out in Article 2 i, is inspired from Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing i and refers also to Liechtenstein's obligations under the EEA to take-over the Community acquis in this respect.
The main definitions of relevance for the scope of the Agreement are laid down in Article 2 i. This is particularly important for the definition of direct taxes in Article 2(4)(e), covering private and business income, as well as of fraudulent conduct affecting direct taxes in Article 2(4)(f), which not only lists in an exemplary way some of the possible conducts amounting to tax fraud, but also defines the submission of incomplete tax returns as a fraudulent conduct.
- Article 3 – 'Minor cases':
This Article intends to avoid being faced with an excessively high number of assistance requests relating to minor points.
- Article 4 – 'Ordre public':
This Article includes the relevant grounds of public order in accordance with Article 2(b) of the European Convention on Mutual assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959).
- Article 5 – 'Transmission of information':
This Article is inspired by the Liechtenstein Savings Tax Agreement . Article 5 i makes a differentiated approach between information concerning illegal activities in connection with the trade of goods and service (point a) and fraudulent activities affecting direct taxes (point b) so as to respect the different advancement of the Community acquis in these subjects. It should be noted that Article 5(2)(b) does not require the explicit agreement of the competent authority supplying the initial information but the explicit opposition of that authority.
- Article 6 - “Confidentiality”
This Article refers to the confidentiality requirements applying to the handling of assistance requests by the requested Party.
- Article 7 - “Relationships with other Agreements”
The Agreement does not repeal the EEA-Agreement's Protocol 11 on mutual assistance in customs matters,[14] which can continue to apply, especially for customs aspects outside the scope of the anti-fraud Agreement, and the Liechtenstein Savings Tax Agreement.
- Article 8 - “Extent of Administrative Assistance”
This Article corresponds to the Naples II Convention, as administrative assistance corresponds to the standards of the Naples II Convention as far as appropriate. This includes the use of information for the purposes of the Agreement. The anti-fraud agreement's scope goes beyond the exclusively customs-related scope of the Naples II Convention.
- Article 9 - “Statute of limitations”
This Article is inspired by a similar provision foreseen in Article 10 i of the Liechtenstein Savings Tax Agreement.
- Article 10 - “Powers”
This Article corresponds to the Naples II Convention, as the provisions of the Agreement will apply within the limits of the powers conferred by national law on each authority concerned in the framework of national proceedings, and do not amend or extend these powers.
- Article 11 - “Limits to exchange of information”
Article 11 i is inspired by Article 8 of Directive 77/799/EEC and therefore limited to fraudulent activities affecting direct taxes.
While still respecting the standards of the Naples II Convention in the field of administrative assistance, Article 11 i excludes that the banking secrecy or an ownership interest in a legal person (or other structure which can be qualified as a person) can be opposed to a request for assistance in form of exchange ofinformation. Respective conflicting provisions, for instance under domestic Liechtenstein law, would not be applicable for the purposes of the implementation of the anti-fraud agreement. The provisions under Article 11 i prevail.
The provision also allows for forwarding of information, which a requested authority already possesses as foreseen similarly in Article 7 of Protocol 11 to the EEA-Agreement.
The term 'bank' used throughout the Agreement – alone, in connection with 'other financial institution' or even with specific issues such as 'information' or 'accounts' – is considered to cover 'credit institutions' and 'financial institutions' as defined in Article 4 i and i of Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institution.[15]
- Article 12 - “Proportionality”.
This Article reflects the concern already contained in Article 3 but within the limits of the administrative assistance.
- Article 13 - “Central Departments”
This Article is in line with the content of Article 5 of the Naples II Convention and reflects the negotiating brief's requirement for clear identification of the relevant authorities at central level. The central departments empowered to process the requests for administrative assistance are designated by each Party.
- Article 14 - “Request for information”-, Article 15 - “Request for surveillance”- and Article 16 -“Notification and transmission by post”
These Articles of the Agreement are in line with the content of Articles 10, 11 and 13 of the Naples II Convention.
Article 14 i is an innovation, insofar as it will allow introducing delays for answering requests in assistance as soon as appropriate Community legislation foreseeing such delays amongst the Member States will come into force.
Article 15 concerns the trade in goods. It is therefore limited in subject matter to illegal activities in connection with the trade of goods and service.
Article 16 i takes into account the standards set out in Directive 77/799/EC on mutual assistance in the field of direct taxation. Article 16 i aims to ensure that grant recipients and contractors for the Communities residing in Liechtenstein may be contacted directly by the awarding institution and may respond to requests for documents and information directed to them by the latter in connection with the grants and contracts concerned.
- Article 17 - “Request for investigations”- and Article 18- “Presence of authorised staff of the authority of the requesting contracting Party”
These Articles are in line with the content of Article 12 of the Naples II Convention. Two joint declarations, similar to declarations on corresponding articles in the Swiss Anti-Fraud Agreement, will ensure an application towards Liechtenstein at the same level as towards the Swiss confederation.
Article 18 covers the possibility of authorised staff to be present during the execution of the request for assistance and to consult the documents, to propose questions and suggest measures of investigation in order to contribute to the efficiency of mutual assistance and, where appropriate, to have access to the same premises and documents and information as the staff of the requested authority.
- Article 19 - “Duty to cooperate”
This Article is a corollary of Articles 17 and 18 and reflects similar obligations on traders in the Member States in respect of investigations conducted by their authorities. The second sentence is inspired by the principles of Directive 77/799/EC.
- Article 20 – “Form and content of the request for assistance”
This Article is in line with the content of Article 9 of the Naples II Convention.
- Article 21 - “Use of information”
This Article is similar to Article 11 of Protocol 11 to the EEA-Agreement and it reflects a speciality rule. The use of information will remain confined to the protection of the Parties' financial interests as defined in Article 2.
The Agreement does not contain provisions on spontaneous administrative assistance or on seconded officers. This omission is due to the reduced Liechtenstein administrative capacities.
- Article 22 – 'Joint Operations' and Article 23 – “Joint special investigation teams”
These Articles are in line with the content of similar measures covered in the Naples II Convention. They are drafted in such a way as to leave the application of the measures to the discretion of the Parties' authorities.
Article 22 i was inserted with regard to fraudulent activities affecting direct taxes and is specifically inspired by Article 8b of Directive 77/799/EC.
Articles 23 i to i are taken from the corresponding provision on Joint special investigation teams in the Naples II Convention.
- Article 24 - “Recovery”
This Article takes over the essence of Articles 6, 7, 9, 10, and 13 of Directive 76/308/EEC. The explicit reference to the German term 'Vollstreckungstitel' in Article 24 i allows avoiding any doubt on the quality of the acts that may be enforced by assistance on recovery.
With regard to fraudulent activities affecting direct taxes, a joint declaration clarifies that recovery assistance is only granted within the scope of the Agreement set out in Article 2 and that thus the requesting authority should not omit to provide the requested authority with the necessary information to allow the latter to verify whether assistance must be provided under the Agreement.
- Article 25 - “Relationship with other Agreements”
This Article is based on the same rationale of the complementarity of international instruments as Article 1 of the EU Mutual Assistance Convention.
- Article 26 - “Procedures in which assistance is given”
This Article is in line with the content of Article 49 of the SIC and Article 3 of the EU Mutual Assistance Convention. This Article is now focused on the proceedings where judicial assistance is afforded including as regards those facts or offences for which a legal person could be liable. Article 26 i has been maintained with the aim of extending the measures laid down in the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime of the Council of Europe (Strasbourg 8.11.1990) to offences covered by the anti-fraud Agreement.
- Article 27 - “Transmission of requests”
The direct transmission of requests is in line with Article 6 of the EU Mutual Assistance Convention.
- Article 28 - “Service by post”
This Article is in line with the content of Article 52 of the SIC and Article 5 of the EU Mutual Assistance Convention.
- Article 29 - “Provisional measures”
This Article corresponds to Article 24 of the Second Additional Protocol of 8 November 2001 to the European Convention on Mutual Assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959). Paragraph 2 corresponds to Article 11 of the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (Strasbourg 8.11.1990).
- Article 30 - “Presence of the authorities of the requesting Contracting Party”
This Article is in line with Article 4 of the European Convention on Mutual Assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959). Due to the small size of Liechtenstein, the requests for presence of foreign authorities may be exceptionally refused in line with what is foreseen in Article 2 of the Second Additional Protocol to the European Convention on Mutual Assistance in Criminal Matters of the Council of Europe (Strasbourg 20.4.1959). It is also inspired on Article 12 i of the Naples II Convention.
- Article 31 - “Search and seizures”
Judicial cooperation, including search and seizures, will be granted alike for illegal activities in connection with the trade of goods and service and, additionally fraudulent activities affecting direct taxes. Article 31(1)(a) reproduces the wording of Article 51(a) of the SIC. Due to specificities in the Liechtenstein law, Article 31 i is different from the Swiss Anti-Fraud Agreement. Whereas Article 31(1)(a) covers the administrative fiscal offences concerning customs and excise duties which are subject to appeal to the Swiss Federal Criminal Court under the terms of the customs union between Switzerland and Liechtenstein, Article 31 i is a commitment by Liechtenstein to provide assistance for searches and seizure even for the evasion of value-added tax, which is a purely administrative offence under Liechtenstein law and which as a tax offence being investigated by the Liechtenstein authorities may not give rise to an appeal before a court competent inter alia to hear criminal matters. This provision does not create an obligation for the other contracting parties.
Article 31 i corresponds to the Community anti-laundering standards under Directive 2005/60/EC.
- Article 32 - “Request for banking and financial information”
Requests for information on bank accounts, on banking transactions and requests for the monitoring of banking transactions can refer also to fraudulent activities affecting direct taxes covered by the Agreement and will be treated in compliance with the standards laid down in the Protocol to the EU Mutual Assistance Convention,[16] including, if necessary, the non-disclosure to the person concerned of investigative measures.
- Article 33 - “Controlled deliveries”.
This Article is modelled on Article 12 of the EU Mutual Assistance Convention, but since it concerns the trade in goods, it is limited in subject matter to illegal activities in connection with the trade of goods and service.
- Article 34 - “Handing over for confiscation or return”
This Article is inspired by Article 8 of the EU Mutual Assistance Convention.
- Article 35 – “Speeding up mutual assistance”
This Article aims at avoiding excessively long cooperation procedures. The text is in full compliance with Article 4 i, i and i of the EU Mutual Assistance Convention.
- Article 36 - “Use of evidence”
This Article is in accordance with Article 23 of the EU Mutual Assistance Convention.
- Article 37 - “Spontaneous transmission of evidence”
This Article is based on Article 7 of the EU Mutual Assistance Convention. The additional reference in the Agreement to spontaneous transmission of evidence does not presuppose any substantive change compared with existing rules since the evidential value will of course be determined by criminal procedural law in the country of prosecution. The difference in criminal procedural law between Liechtenstein and Switzerland justified not foreseeing in this Agreement a provision on civil claims as in the Swiss Anti-Fraud Agreement, since that provision was only inserted to redress a specific situation under Swiss case law.
- Article 38 - “Joint Committee” and Article 39 - 'Dispute settlement'
This Article sets up a Joint Committee for managing the Agreement, whose competencies are mainly to allow future developments in the technical standards of mutual assistance between the Member States, be it where already foreseeable as concerns delays for answering requests (Article 14 (4)), be it where a reform of the Community and European Union law should be agreed, in particular the envisaged reform of Directive 77/799/EEC (Article 38 (5)). Due to the possible impact of these powers on the sovereignty of the Parties, Article 38 i contains a constitutional reserve.
Insofar as these adaptations may not be sufficient to obtain future new Community standards of mutual assistance, the Joint Committee is called upon to make recommendations on revising the Agreement as a whole (Article 38 (6)).
The Joint Committee has also a role to play in the implementation of provisions where the practice may determine the good functioning of the co-operation (Joint Declarations to Article 2(4)(f) and Article 24), including settling disputes (Article 39).
- Article 40 -“Territorial scope”
This Article is in line with the standard provisions on the matter.
- Article 41 - “Entry into force”
This Agreement stipulates that the Secretary-General of the European Union will act as the depository.
- Article 42 -“Denunciation”
This Article contains the possibilities of denouncing the Agreement.
- Article 43 -“Temporal application”
This Article contains differentiated provisions for the application of the Agreement to requests concerning illegal activities committed after the signature of the Agreement but before its entry into force.
Whereas temporal application for illegal activities in connection with the trade of goods and service (point a) is regulated in the same way as the corresponding provision in the Swiss Anti-fraud Agreement, the new element of assistance for fraudulent activities affecting direct taxes (point b) requires a longer transition period. This longer transition period has been requested by Liechtenstein for better ensuring legal certainty in the direct tax field.
- Article 44 - “Extension of the Agreement to the new Members of the EU”
This Article is designed to make it easier to extend the Agreement to the new Member States.
COUNCIL DECISION
on the signing, on behalf of the European Community, of the Cooperation Agreement between the European Community and its Member States, of the one part, and the Principality of Liechtenstein, of the other part, to combat fraud and any other illegal activity to the detriment of their financial interests
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and in particular Article 280 in conjunction with the first sentence of the first subparagraph of Article 300 i thereof,
Having regard to the proposal from the Commission i,
Whereas:
Following the authorisation by the Council on 7 November 2006 the Commission has negotiated, on behalf of the Community and its Member States, with the Principality of Liechtenstein an Agreement to counter fraud and all other illegal activities to the detriment of public financial interests, including the resources and expenditures, in particular grants and taxes.
Subject to its conclusion at a later date, it is desirable to sign the Agreement that was initialled on .
HAS DECIDED AS FOLLOWS:
Subject to its conclusion at a later date, the President of the Council is hereby authorized to designate the person (s) empowered to sign, on behalf of the European Community, the Cooperation Agreement between the European Community and its Member States, of the one part, and the Principality of Liechtenstein, of the other part, to combat fraud and any other illegal activity to the detriment of their financial interests.
Done at Brussels,
The President