Combating tax evasion: Council agrees to extend automatic exchange of information
The Council agreed last tuesday, at a meeting of the Economic and Financial Affairs Council , on a draft directive extending the scope for the mandatory automatic exchange of information between tax administrations, enabling them to better combat tax evasion and to improve the efficiency of tax collection.
The proposal brings interest, dividends and other income, as well as account balances and sales
proceeds from financial assets, within the scope of the automatic exchange of information. It thus
amends directive 2011/16/EU on administrative cooperation in the field of direct taxation.
“Today we took a major step towards greater transparency marking the end of bank secrecy in tax
matters in the European Union”, said Pier Carlo Padoan, minister of economy and finance of Italy
and president of the Council. “We decided to implement within the EU the new global standard on
automatic exchange of information developed by the OECD and endorsed by the G20. This shows
the EU is still at the forefront of the fight against cross-border tax fraud and evasion, for the benefit
of all citizens.”
Directive 2011/16/EU already provides a framework for mutual assistance between the member
states, enabling them to better assess taxes due. It sets out the details to be specified in requests
for information on taxpayers, and prevents requests from being refused on grounds of bank
secrecy. The directive provides for the mandatory automatic exchange of information on certain
categories of income held by taxpayers in member states other than their state of residence. It sets
out a step-by-step approach for extending this provision to new categories of income and capital.
In recent years, cross-border tax fraud and tax evasion have become a major focus of concern,
both within the EU and at global level. Unreported and untaxed income is considerably reducing
potential national tax revenues. An increase in the efficiency and effectiveness of tax collection is
therefore urgently needed, and the automatic exchange of information constitutes an important
instrument in this regard. The Commission presented its proposal in June 2013. Work on the text has proceeded in parallel to the development within the OECD of a single global standard for the automatic exchange of information. The OECD Council published the new global standard, the “common reporting standard”, in July 2014. It was endorsed by G20 finance ministers and central bank governors in Cairns on 20 and 21 September.
By agreeing on the new directive, the EU underscores the Importance of these international developments by adapting its internal legislation as appropriate. The new directive will be adopted at a forthcoming Council meeting without further discussion, once it has been finalised in all official languages. Based on article 115 of the Treaty on the Functioning of the EU, it needs unanimity for adoption by the Council, after consulting the European Parliament.
Main results of the Economic and Financial Affairs Council
The Council agreed on the revision of the Directive on Administrative Cooperation which extends
the scope for automatic exchange of information between tax authorities so as to enable them to
better combat tax evasion and to improve tax collection.
The Council adopted conclusions on “measures to support investment in Europe” as a key element of the EU’s response in promoting competitiveness and growth. It called on the Commission to analyse the factors that are conducive to improving the business climate in Europe, notably the key nexus between investment and implementation of structural reforms.
It welcomed the creation of a task force, co-chaired by the European Investment Bank and the
Commission with the participation of all Member States, to analyse the main barriers and
bottlenecks to investment and proposed practical solutions to overcome those impediments.
The task force will identify potentially viable investment projects to be realised in the short and
medium term. It will lay the foundation for a credible and transparent pipeline of projects to boost
EU competitiveness and growth potential in the medium to long-term.
Moreover, the Council highlighted the importance to adopt innovative financial and institutional
arrangements with a view to further enhancing the catalyzing role of the EIB and in general stressed the need to make the action of the EIB more effective. EIB and the Commission will report on those strands of work at the December Ecofin.
