As of 1 January 2017, Member States are obliged to automatically exchange information on all new cross-border tax rulings that they issue. This will be done through a central depository, accessible to all EU countries.

Every six months national tax authorities will send a report to the depository, listing all the cross-border tax rulings that they have issued. Other Member States will then be able to check those lists and to ask the issuing Member State for more detailed information on a particular ruling. This first exchange should take place by 1 September 2017 at the latest.

By 1 January 2018, Member States will also have to provide the same information for all cross-border rulings issued since the beginning of 2012.

Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Custom, describes the progress and the challenges of the new transparency rules for taxing rulings, in an interview given for Europunkt to Vladimir Adrian Costea.

Pierre Moscovici

Citeşte varianta în limba română aici.

Vladimir Adrian Costea: What is the evolution of the level of transparency on the issue of cross-border tax rulings registered in the Member States of the European Union in recent years?

Pierre Moscovici: The landscape today is simply unrecognisable to when I took office in 2014: the era of tax secrecy is now thankfully over. At that time, our Member States didn’t have to share information on any of the tax deals made with multinational companies. Tax rulings were shrouded in mystery. Governments had no idea what was going on in other Member States or how multinational companies were being treated for tax purposes elsewhere in the Union. When the lid was lifted on this state of affairs, it was clear that only action at the EU level could make the changes that were needed.

New EU-wide rules which came into force this January will be a game-changer. Information on special tax deals given to multinationals in one Member State will now have to be passed on to the other 27 countries on a regular basis, making it easier for tax authorities to build up a picture of the tax arrangements of big companies in other countries. It means that where they see unfair tax practices, or a tax deal that does not look quite right, appropriate action can be taken.

What are the challenges that you will find on EU Member States to cooperate effectively to implement uniform these new transparency rules for tax rulings?

Our first priority is to make sure that the systems needed for the exchange to take place are up and running in time for the first operations to take place in September. When that first exchange occurs, I am confident that Member States will carry out to the letter all the rules they have agreed. It is in their interest to do so because they stand to benefit from potential tax revenues that have previously been hidden. For them, the most important element is to be able to trust that each is pulling their weight. Again, I’m confident that with close cooperation, Member States will come to value the positive effect that such transparency will have for their economies and in offering a sustainable and effective tax environment. For our part, the Commission will be monitoring the situation and taking action where we see that those promises are not being fulfilled.

What is the progress that the European Union has achieved on increasing transparency in corporate taxation?

We have seen unprecedented success. Member States have reached consensus on new rules for taxation with a speed never before witnessed. With the new automatic exchange rules for tax rulings, as well as the obligation for Member States to share information on the actual tax paid by multinationals in their jurisdictions, it’s becoming more and more difficult for large businesses to keep their tax affairs hidden.

Of course more work needs to be done. We’ll continue to put pressure on Member States to enhance transparency around the decisions they take on tax. It’s only right that a fair share is paid when a company is operating in a number of different locations. We’re also working to ensure that previously hidden tax information can be made public. It is also important to recognise the tax transparency deals we’ve put in place with non-EU countries like Switzerland and Liechtenstein, so that transfers of profits or funds to those countries can’t go undetected.

Taken together, we’re putting in place a European toolbox to deal with those who refuse to play fair.

What are the new mechanisms available to Member States and to national tax agencies to combat abusive tax practices?

Tax transparency represents only one strand of our work. The EU has also taken giant strides to deal with corporate tax avoidance at its very root. To name just one recent success, Member States have agreed to landmark rules to block the most common tax avoidance loopholes within and outside the EU.

Our approach to dealing with countries around the world is also paying dividends. By the end of this year, we will have published the first ever common EU blacklist of global tax havens. We must be realistic – those jurisdictions that continuously facilitate large-scale tax dodging need to be called out publicly if any changes are to be made. Screening of countries has already started and Member States also need to agree on countermeasures which could be applied to those who find themselves on the final blacklist.

Finally, while not a new phenomenon, the Commission has also been looking into tax rulings under EU state aid rules. My colleague Margrethe Vestager has done excellent work and has taken decisions on tax rulings in relation to companies like Starbucks in the Netherlands, Fiat in Luxemburg and Apple in Ireland. Three in-depth state aid investigations are still under way and work continues on reviewing more than a thousand tax rulings from all EU countries that make active use of them.

What are the benefits for the internal market as a result of implementing new transparency rules for tax rulings?

Until now, the lack of tax transparency has created the right conditions for those who wanted to avoid paying their fair share of tax. In these times of severe budgetary constraints, people are understandably frustrated by the tax avoidance practices of certain companies or individuals. There is a widespread feeling that those able to pay tax have managed to avoid doing so whereas those experiencing economic and financial difficulties have had to shoulder the burden.

With that in mind, the benefits of our proposals for fair taxation are clear and substantial. For example, our proposals for EU-wide corporate tax reform (the so-called Common Consolidated Corporate Tax Base, or CCCTB) would yield an enormous and positive change. Companies would enjoy a simplified tax rulebook, and much more tax and legal certainty than today. Member States would benefit by being able to recoup tax revenues that are currently going astray. We as Europeans could rest safe in the knowledge that the tax system is no longer skewed to protecting those who really can afford to pay their taxes. It’s a real win-win-win situation! Our estimates show that with such a system in place, overall EU investment could jump by up to 3.4%. I’m convinced that such good tax policy can give a significant boost to the engine of the Single Market.

 

 

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