Explanatory Memorandum to COM(2009)29 - Administrative cooperation in the field of taxation - Main contents
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| dossier | COM(2009)29 - Administrative cooperation in the field of taxation. |
|---|---|
| source | COM(2009)29  |
| date | 02-02-2009 |
Grounds for and objectives of the proposal The Member States' need for mutual assistance in the field of taxation and especially for direct taxation is growing rapidly in a globalised era. There is a tremendous development of the mobility of taxpayers, of the number of cross border transactions and of the internationalisation of financial instruments, which makes it more and more difficult for Member States to assess taxes due properly, while they stick to national sovereignty as regards the level of taxes. This increasing difficulty in assessing taxes correctly affects the functioning of taxation systems and entails double taxation, which itself incites to tax fraud and tax evasion, while the powers of controls remain at national level. Therefore, one single Member State cannot manage its internal taxation system, especially as regards direct taxation, without information coming from other Member States. In order to overcome the negative effects of this phenomenon, it is indispensable to develop a new administrative cooperation between the Member States' tax administrations. There is a need for instruments likely to create confidence between Member States, by setting up the same rules, obligations and rights for all Member States. In this regard, it was observed in recent court cases that in practice cooperation mechanisms may not function in an efficient and satisfactory manner, but that however, Member States cannot rely on deficiencies in the cooperation between their tax authorities in order to justify restrictions on fundamental freedoms. Therefore, a completely new approach must be taken by creating an entirely new text to give Member States the powers to efficiently cooperate at international level to overcome the negative effects of an ever increasing globalisation on the internal market. As such, administrative cooperation raises upward national laws but does not replace nor approximate them.
General context The existing 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 and taxation of insurance premiums does not constitute any more the appropriate tool. Its deep weaknesses have been looked into by the high-level Council Working Party on fraud in a May 2000 report (Document 8668/00) and more recently by Commission Communications of 2004 (COM (2004)611 final) and 2006 (COM (2006)254final). They were also covered in the opinion expressed by Member States during the consultation process preceding this Proposal for a Council Directive. The Directive - even with its later amendments - was designed in a different context from the present internal market requirements. In 1977, there was no free circulation and a very weak integration. Today, Member States need to use instruments other than the Directive into the interests of international mutual assistance. This situation creates uncertainty and runs counter to transparency, equality of treatment, fair competition and the smooth functioning of the internal market. In practice, the existing Directive is no longer able to meet the present requirements of administrative cooperation. A first approach to limiting the negative taxation effects of internationalised investments is contained in Directive 2003/48/EC on taxation of savings income in the form of interest payments. However, this Directive is concerned only with a certain type of savings. But this Directive on savings also shows that when the uniformity of tools and instruments is created, Member States are able to exchange information properly and efficiently. A reinforced instrument for administrative cooperation in the taxation sector will ensure and maintain full national sovereignty over the types and level of taxes. Due to the lack of harmonisation in this field, enhanced tax administrative cooperation is the only way of assessing taxes correctly and thus preventing and combating tax fraud and tax evasion. A stronger form of tax administrative cooperation is crucial for the interests of Member States and the EU, the main aim being to protect Member States' financial interests more effectively and to avoid market distortion.
Existing provisions in the area of the proposal From 1979 until 1992, VAT was part of the scope of Directive 77/799/ECC. Excise duties were also part of the scope of that Directive from 1992 to 2004. However, due to the conclusions of the high-level Council Working Party on fraud in May 2000 report, which identified the incapacity of this Directive to fulfil its objectives, the Commission presented two separated draft Regulations aiming at creating an entirely new environment for administrative cooperation for VAT and excise duties. These Regulations were adopted respectively on 7 October 2003 for VAT (Regulation 1798/2003) and on 16 November 2004 for excise duties (Regulation 2073/2004). VAT and excise duties were therefore withdrawn from the scope of Directive 77/799/EEC. A similar approach is followed with the current proposal. The new reinforced Directive provides for an organisation chart, common rules of procedures, common forms, formats and channels for exchanging information. It also provides for a committee procedure, to deal with technical measures and the sharing of information, and to create tools and instruments to minimise the obstacles to the efficient exchange of information. In addition, the scope of Directive 77/799/EEC is limited to direct taxes and insurance premiums, whereas the current proposal covers all indirect taxes that are not yet dealt with in a European Community act, i.e. indirect taxes other than VAT and Excise duties. As such, it creates for the first time a set of rules for a series of taxes that were not covered by any of the existing Community legal framework.
Consistency with the other policies and objectives of the Union Not applicable.
Consultation of interested parties
Consultation methods, main sectors targeted and general profile of respondents The consultations took place in Working Groups and by means of a questionnaire on suggestions for improving the existing situation.
Summary of responses and how they have been taken into account The general opinion of Member States is that the current Directive needs to be entirely strengthened. The point was underlined that the Directive in its present form cannot establish a common level of obligation that would serve its intended aims. Precise opinions have also been expressed on the content of the new instrument. The Commission has taken into account the opinions of the Member States, and the result is a proposal for a Council Directive.
There was no need for external expertise.
Impact assessment No impact assessment has been made for this proposal. The other option considered was to amend the existing Directive. However, for the reasons described before, this was not considered appropriate.
Contents
Summary of the proposed action The Commission proposes to the Council to adopt a new Directive on administrative cooperation in the field of taxation. The aim is to create a legal instrument of high quality for enhancing administrative cooperation in the field of taxation, in order to allow a smooth functioning of the internal market by circumventing the negative effects of harmful tax practices. Such an approach will have to effect to bring this cooperation into line with the existing provisions in the field of VAT and excise duties administrative cooperation.
Legal basis Articles 93 and 94 of the EC Treaty.
Subsidiarity principle The subsidiarity principle applies insofar as the proposal does not fall under the exclusive competence of the Community.
The objectives of the proposal cannot be sufficiently achieved by the Member States for the following reason(s).
The competence of national tax authorities is traditionally limited to their territory. The fight against tax fraud - as confirmed by many Commission documents - requires action at EU level.
Administrative cooperation between these authorities could be based on bilateral or multilateral agreements. Such provisions are normally incorporated in double taxation agreements, the scope of which is generally limited to income taxes. However, correct assessment of taxes and transnational tax fraud and tax evasion can only be tackled by common measures at EU level.
Community action will better achieve the objectives of the proposal for the following reason(s).
Member States themselves have expressed the need for a global set of more binding EU rules, applying to all kinds of taxes not yet provided for in European Union legislation. Applying the same conditions, the same methods and the same practices for administrative cooperation with regard to all these taxes should facilitate the work of the authorities and increase the volume, improve the quality of the information exchanged. Adopting a more detailed, enforced directive will help to achieve this objective.
Tax fraud, of which the non-payment of taxes is an essential element, is at a very high level in the European Union. Combating it requires unified efforts which can be better achieved through a stronger Community instrument featuring common rules of procedure and provisions on common methods, forms, formats and communication channels.
The Commission estimates that the types of administrative cooperation will increase in number after adoption of the new directive (more requests for information, spontaneous information, automatic exchanges, simultaneous checks, auditors in another Member State's offices, and sharing of information).
The nature of the subject requires a common approach to conditions and rules of procedures, principles and tools that can only be achieved by a common legal act.
The proposal therefore complies with the subsidiarity principle.
Proportionality principle The proposal complies with the proportionality principle for the following reason(s).
The proposed action only sets out common rules of procedures and instruments to facilitate day-to-day administrative cooperation between Member States, which therefore remain entirely responsible for their internal organisation and allocation of resources, for which cases are covered by international administrative cooperation and for what use is made of the results.
The proposed action will not mean any additional financial and administrative burden for the Community, national governments, regional and local authorities, economic operators and citizens, but should on the contrary rationalise human and financial costs by creating a common approach to international administrative cooperation.
Proposed instruments: directive.
Other means would not be adequate for the following reason(s). This proposal's aim is to reinforce, strengthen and modernise the provisions of the existing Directive in order to achieve a better functioning of the internal market and a more effective administrative cooperation. For this reason it is necessary to replace the Directive's rules in force. The appropriate legal instrument in this case is the directive.
The proposal has no implication for the Community budget.
Simplification
The proposal provides for simplification of legislation, simplification of administrative procedures for public authorities (EU or national), simplification of administrative procedures for private parties.
The legislation is simplified as it comprises common measures which are easy to interpret and apply.
Public authorities will be able to use common tools and instruments in a pre-defined organisational framework. This set of measures will simplify recourse to international administrative cooperation. Extending the scope of EU legislation will mean that administrative authorities will not have to have recourse to different sets of legislation, each with their own rules and conditions, depending on the type of claim for which they are requesting cooperation.
Private parties subject to international administrative cooperation will be treated on an equal footing, with simplified procedures.
Repeal of existing legislation The adoption of the proposal will lead to the repeal of existing legislation.
Detailed explanation of the proposal Chapter I deals with general questions. Article 1 defines the aim of the directive and the way in which Member States are to cooperate with each other. Article 2 concerns the scope of the directive, which extends cooperation between Member States to cover taxes of any kind. This Article takes its lead from the Joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters. The scope extends to indirect taxes not yet covered by European Union legislation on administrative cooperation. It means that apart from VAT and excise duties, the Directive applies to all the other indirect taxes (together with direct taxes) to make cooperation more effective. Article 3 deals with definitions which are not in the existing provisions at all. Article 4 is based on the organisation of tasks as provided for in the existing VAT Regulation on administrative cooperation, with the necessary adaptations. In Chapter II, devoted to exchange of information, Article 5 and 6 are concerned with the exchange of information on request and administrative enquiries. Article 7 regulates the time limits for the provision of information. Article 7 paragraphs 5 and 6 are inspired by the 2002 OECD Model agreement on exchange of information in tax matters. Article 8 deals with the automatic exchange of information. The proposal prescribes the automatic exchange of information for a number of income types to be defined under the comitology procedure. For other types of income, it allows Member States to conclude supplementary agreements. Article 9 covers the spontaneous exchange of information. Chapter III deals with other forms of administrative cooperation. Section I regulates the presence of officials in other Member States' administrative offices and their participation in administrative procedures. Officials of the requesting Member State are allowed to exercise the powers of inspection conferred on officials of the requested Member State. In section II, devoted to simultaneous controls, Article 11 keeps the wording of the existing Article 8b of the Directive which had been adopted in 2004. In section III, Article 12 on administrative notification is also a relatively new provision in the existing Directive and has therefore been retained. In section IV, Article 13 strengthens the feedback obligation due to the Member States' wish to introduce a stricter provision. Feedback motivates officials in the field to make better use of the various forms of information exchange. Article 14 in Section V regulates the Member States' obligation to share their experience. The Article extends the role of the Committee referred in Article 24 as a consultative committee. In Chapter IV, Article 15 deals with the disclosure of information and documents. The proposal uses a broad approach, the aim being to protect the Member State and taxpayers' interests. Article 16 introduces the disproportionate administrative burden and exhaustiveness principles and provides for grounds for refusal to cooperate. Article 17 deals with the limits to these obligations. The first paragraph excludes own tax purposes and domestic interest as bases for refusal and is based on Article 26 paragraph 4 of the OECD Model Tax Convention, while the second paragraph - based on Article 26 paragraph 5 of the OECD Model Tax Convention - is to ensure that the limitations in Article 16 paragraphs 2 and 4 cannot be used to refuse to provide information solely because the information is held by banks and other financial institutions, when this information concerns a person resident for tax purposes in the requesting Member State. Article 18 introduces the most favoured nation principle, according to which a Member State has to provide cooperation to other Member State under the same conditions as to a third country. Article 19 deals with common forms and computerised formats for the exchange of information. Common forms are already under construction and in use in a pilot scheme. The automatic exchange of information form will be based on the format used for the automatic exchange of information under Article 9 of the Directive 2003/48/EC (taxation of savings). Article 20 mirrors the Member States' wishes as regards the threshold and language regime. The use of the CCN/CSI network is common in Member States and meets with the Commission's intentions to get all tax systems using the same channels. Article 21 contains specific obligations on tax administrative cooperation within and between Member States. Article 22 in Chapter V determines the relationship between the Commission and the Member States. The Member States have the responsibility to communicate all relevant information on the functioning of the Directive. Article 23 in Chapter VI regulates relations with third countries. The proposal prescribes the compulsory sharing of information from outside the EU and reflects the recent fraud cases where an EU Member State and a third country were involved. Article 24 in Chapter VII sets up a Committee on Administrative Cooperation for Taxation to monitor the functioning of the Directive. It can also acts as a consultative committee. Article 25 makes it obligatory to evaluate functioning of this Directive, in this case after five years of entering into force. Article 26 serves to repeal the existing provisions, while Article 27 relates to the transposition of the Directive by the Member States and Article 28 prescribes the entry into force and the application of this Directive as of 1 January 2010.