Towards a fairer and more transparent approach to taxation in the EU?

ACCA takes note of the publication of the first of two tax transparency packages promised by the EC and welcomes, in principle, the proposal to extend the automatic exchange of information on tax rulings with some reservations.

As part of its announced agenda to tackle corporate tax fraud and harmful tax competition in the EU, the European Commission unveiled today (18 March) its first set of tax transparency measures. It namely includes a proposal to introduce the automatic exchange of information between the 28 Member States on their cross border tax rulings and advance pricing arrangements from 2016, revising the existing Directive 2011/16/EU on administrative cooperation in the field of taxation, as amended by Directive 2014/107/EU.

ACCA, while acknowledging the subsidiarity principle and that Member States have competence in tax matters, shares the European Commission’s view that it is important to ensure that taxes are paid in the country where profits are generated. The global accountancy body hopes that the proposal will enable Member States to identify abusive tax practices and empower them to take the necessary preventive and/or punitive actions.

Chas Roy-Chowdhury, head of taxation at ACCA says: ACCA, albeit in principle in favour of the automatic exchange of information in the area of tax rulings, is nevertheless concerned by the volumes of complex information which are likely to be exchanged between member states. There is a potential for the whole process to become a bureaucratic nightmare for participants. We would also have concerns around the leakage of sensitive commercial information during the process.

“ACCA therefore recommends that the scope of tax rulings information to be exchanged is very tightly defined so as to ensure a streamlined process together with a standardised template for the information to be conveyed. We also urge Member States to resist the temptation of “gold plating” during the implementation phase.”

Chas Roy Chowdhury adds “Information exchange is certainly useful in certain circumstances. However, the European Commission needs to make it clear to “low tax” financial centres that if they help foster a climate where tax evasion can take place, there will then be consequences over and above any exchange of information. Going forward, it cannot be acceptable in the 21st century, when so many have suffered such financial hardship, that any jurisdiction can still carry on being a facilitator for tax evasion. We need to create in the EU – and globally- a fairer, more transparent and more predictable tax system, able to attract investment and restore citizens’ confidence.

ACCA would also in principle not be opposed to the creation by the European Commission of a secure central directory aiming to both facilitate the exchange of information and support Member States in studying and reacting to rulings exchanged between Member States.

Chas Roy Chowdhury however warns: “if this central register is in theory a good idea, we need to make sure that sufficient safeguards are in place to avoid any misuse or abuse of sensitive data”.

“We look forward to the publication of the detailed Action Plan on corporate taxation in the second tax package promised by the EU Executive before the end of June, which should, amongst others, suggest a new breath for the Common Consolidated Corporate Tax Base (CCCTB). ACCA has been a supporter of the CCCTB idea since its inception, and we are happy to collaborate with the EU institutions to help progress the file, Chas Roy-Chowdhury concludes.