Explanatory Memorandum to COM(2013)348 - Amendment of Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation - Main contents
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| dossier | COM(2013)348 - Amendment of Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation. |
|---|---|
| source | COM(2013)348  |
| date | 12-06-2013 |
1. 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 European Union and worldwide. Billions of euros are being lost. By reducing fraud and evasion Member States could increase tax revenues which would also provide them with added scope to restructure their tax systems in a way that better promotes growth as outlined in the 2013 Annual Growth Survey. In addition, given the order of magnitude of the challenge, stepping up the fight against tax fraud and evasion is not only an issue of revenue, but also of fairness. Particularly in these difficult economic times, honest taxpayers should not suffer additional tax increases to compensate for revenue losses incurred due to tax fraudsters and evaders.
2. For years, the European Union (EU) has been working actively on these problems, in particular by adopting specific legal instruments to implement automatic exchange of information ("AEOI") within the Union. The EU Savings Directive (the 'EUSD') ensures AEOI on interest income and a proposal to enlarge its scope is under discussion in the Council. The Directive on Administrative Cooperation (the 'DAC') ensures that, from 2015, Member States will exchange information automatically upon availability on five categories of income and capital: employment, directors' fees, life insurance products not covered by other Directives, pensions and ownership of and income from immovable property.
3. Member States have now expressed a clear wish to go beyond current levels of cooperation. The European Council of 2 March 2012 invited the Council and the Commission to develop rapidly concrete ways to improve the fight against tax fraud. On 6 December 2012, the Commission presented an Action plan to strengthen the fight against tax fraud and tax evasion[1]. The Action Plan highlights the need to promote AEOI as the European and international standard of transparency and exchange of information in tax matters. On 14 May 2013, the ECOFIN Council adopted conclusions welcoming the work by the Commission on developing measures to combat tax fraud, tax evasion and aggressive tax planning and recognising the useful role the Commission Action Plan can play in this regard[2].
4. The European Council on 22 May 2013 went even further, requesting the extension of AEOI at EU and global levels with a view to fighting against tax fraud, tax evasion and aggressive tax planning. On that occasion, the Commission committed itself to proposing amendments to the DAC in June 2013 in order to expand the scope of AEOI, in anticipation of the revision of the DAC already foreseen for 2017.
5. The objective of the present proposal is, therefore, to expand the scope of AEOI in the EU beyond that provided for in existing EU automatic information exchange arrangements. It would bring the following other items within the scope of the AEOI: dividends, capital gains, other financial income and account balances. The provision for a review and expansion of the DAC in 2017 would remain. However, in line with the objective of enhancing AEOI the removal of the condition of availability would now be considered at that time in respect of all five existing categories together so that the DAC would cover the full range of income. Furthermore, the categories to be considered for inclusion at that time would be amended in the light of the present proposal (see below). Extending the scope of the AEOI would also contribute to ensuring equality of treatment between different types of assets and to avoiding undesirable reallocation of portfolios.
6. The Commission proposes to remove the reference in Article 8(3) of the Directive to a threshold below which a Member State may not wish to receive information from other Member States. Discussions have revealed that such a threshold is not practical for the Member States that are required to report. However, a Member State could continue to opt not to receive any information on a particular category of income.
7. An EU initiative is needed both from an internal market perspective and in terms of efficiency and effectiveness:
– An EU initiative ensures a coherent, consistent and comprehensive EU-wide approach to AEOI in the internal market. It would mean a single reporting approach across Member States which would lead to costs savings both for tax administrations and economic operators (see also point 11 below).
– An EU legal instrument would also ensure certainty for tax administrations and economic operators within the EU.
– An EU legal instrument would contribute to the development of the international standard of AEOI.
– An EU legal instrument based on the DAC would involve the use of the IT arrangements already in place or under development to facilitate information reporting under the EUSD and the DAC. Under those Directives, EU Member States share information in specific formats using a specific communication channel (the CCN/CSI system). These formats could easily be extended so as to be usable also for the additional items now proposed for inclusion. As Member States have invested considerable time and money in developing these formats, there would be economies of scale if Member States also exchanged information on the new items using these formats.
– Furthermore, the Council already committed itself, in Article 8(5) of the DAC, to consider in due course whether automatic information exchange should be extended, on the basis of an EU-wide legal instrument, to cover other categories of income such as dividends and capital gains. The present proposal is, therefore, merely accelerating work in line with this commitment.
8. The agreements that many governments have concluded or will conclude with the US as regards the US Foreign Account Tax Compliance Act (FATCA)[3] have given further impetus to AEOI as a way of combating tax fraud and evasion.
9. On 9 April 2013, France, Germany, the United Kingdom, Italy and Spain announced plans for a pilot action on AEOI using the FATCA model agreed with the US as a basis. These Member States also called on Europe to take a lead in promoting AEOI in the world and expressed the wish to discuss how progress could be made within the EU on improving tax information exchange between all Member States.
10. Article 19 of the DAC states that a Member State that provides wider cooperation to a third country may not refuse to provide such wider cooperation to any other Member State wishing to enter into such mutual wider cooperation with that Member State. The fact that Member States have concluded or will conclude agreements with the US as regards FATCA means that they provide for a wider cooperation within the meaning of that provision.
11. Expanded AEOI on the basis of an EU-wide legislative instrument would remove the need and incentive for Member States to invoke Article 19 of the DAC, with a view to concluding bilateral or multilateral agreements that may be considered appropriate on the same subject in the absence of relevant Union legislation. The scenario of various agreements concluded under that provision would, in fact, present a number of disadvantages, compared to a solution brought about by EU action:
– The level playing field between the Member States might be put at risk if Member States agreed to cooperate on increased AEOI in different ways. This could lead to distortions and artificial flows of capital within the internal market.
– If the agreements between Member States were not identical, this could also create difficulties for economic operators that are active in several Member States as they could then face different compliance requirements in different Member States.
– It might also mean that Member States would not be able to utilise the IT reporting systems that have been developed within the EU (see above).
12. Timely adoption and implementation are crucial so as to reap the benefits as quickly as possible. In order to ensure consistency with the deadline for the application of AEOI to the categories of income and capital already covered by the DAC, the time limits proposed for transposition and application of the new rules are 31 December 2014 and 1 January 2015, respectively.
Contents
- RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
- LEGAL ELEMENTS OF THE PROPOSAL
- BUDGETARY IMPLICATION
- 7. An EU initiative is needed both from an internal market perspective and in terms of efficiency and effectiveness:
- Regarding paragraph 5 of Article 8, the following changes are proposed:
In addition to the discussions held in the Council of Ministers since April 2013 (see above under item 1), the Commission held a technical meeting with Member States on 21 May 2013 to confirm the need for a legislative proposal and to discuss its practical modalities and content.
The discussions revealed that Member States generally supported the need for enhancing automatic information exchange and for accelerating the extension of the scope of Article 8 of the DAC as already envisaged in Article 8(5).
Most Member States wish to take speedy action to increase AEOI but uncoordinated action by Member States on this matter could lead to potentially lasting fragmentation in the internal market. It has, therefore, become exceptionally urgent to provide for a consistent and coherent EU legal framework; for this reason, no impact assessment has been prepared.
The European Parliament adopted a resolution on 21 May 2013 i, whereby it welcomes the Commission Action Plan and its Recommendations, urges Member States to follow up their commitments and embrace the Commission's action plan, as well as emphasises that the EU should take a leading role in discussions on the fight against tax fraud, tax avoidance and tax havens and, in particular, in relation to the promotion of automatic exchange of information.
The European Economic and Social Committee also adopted an opinion on 17 April 2013[5]. The Committee endorses the Commission's Action Plan and supports its efforts to find practical solutions as regards reducing tax fraud and tax evasion. In particular, it supports in points 4.6 and 4.7 the Commission's initiatives as regards the improvements in relation to the AEOI.
The proposal aims at modifying Article 8 of the current DAC. The modifications are contained in Article 1 of the proposal.
The first modification concerns paragraph 3 of Article 8. The proposal is to remove the reference to a threshold below which a Member State may not wish to receive information from other Member States. Discussions with Member States revealed that such a threshold is not practically manageable. In addition, it is proposed to insert the expression 'one or several of' before the term 'the categories'; this would prevent misunderstandings in a case where a Member State indicates that it does not wish to receive information on one or several categories of income and capital referred to in paragraph 1 even if it does want to receive information on others.
It is proposed to introduce, by way of a new paragraph 3a of Article 8, automatic exchange of information for dividends, capital gains, any other income generated with respect to the assets held in a financial account, any amount with respect to which the financial institution is the obligor (i.e. is legally or contractually obliged to pay) or the debtor, including any redemption payments, and account balances. These additional items relate to income paid directly or indirectly to beneficial owners who are natural persons, as defined by Article 3(11)(a) of Directive 2011/16/EU, or capital held directly or indirectly by such persons. It is not proposed to extend to the new items the existing condition provided for in Article 8(1) in respect of income currently included in the Directive, which is that the information only has to be exchanged if it is 'available'. Information about those new items will certainly be available as financial intermediaries will be required to report it to tax administrations under the agreements that Member States have concluded or will conclude with the US as regards FATCA.
– In the first subparagraph, a reference is made to the new paragraph 3a and the review of the condition of availability will concern all five categories listed in paragraph 1 (instead of only three of them);
– In point (b) of the second subparagraph, the reference to 'dividends and capital gains' as matters to be considered for future addition to the Directive is removed as these categories are now added in the new paragraph 3a; 'other categories and items, including royalties' (royalties is already quoted in the existing text) is substituted so as to leave more open the scope of a new proposal in 2017.
Article 2 contains the usual provision compelling Member States to transpose the Directive. The time limits proposed for transposition and application of the new rules are 31 December 2014 and 1 January 2015 respectively, in order to align them with the dates applicable in respect of the categories of income and capital included in Article 8.1 of the existing Directive.
The proposal does not entail budgetary implications. This applies in particular in regard to the use of IT tools, since the tools under development will also be used for the implementation of this Directive.