Tax advisers, accountants, banks and lawyers that facilitate offshore tax avoidance schemes are the targets of a package of new rules proposed on Wednesday by the European Commission, which, it said, are intended to “further reinforce the EU’s tax transparency framework”.
The package of what the European Commission called “tough new transparency rules for intermediaries” would go after those “who design and promote tax planning schemes for their clients” by “increasing scrutiny around the previously-unseen activities of tax planners and advisers”, the EC said in a statement.
“Cross-border tax planning schemes bearing certain characteristics which can result in losses for governments will now have to be automatically reported to the tax authorities before they are used,” the statement added.
“The Commission has identified key issues, including the use of losses to reduce tax liability, the use of special beneficial tax regimes, or arrangements through countries that do not meet international good governance standards.
“The new rules are comprehensive, covering all intermediaries, all potentially harmful schemes and all Member States.”
The new rules would be introduced as an amendment to the existing Administration Cooperative Directive, and would cover all types of taxes, including inheritance tax. It’s understood that they stipulate that intermediaries disclose to their national tax authorities any cross-border tax planning schemes within five days of offering them to clients.
The crackdown has been reported to be in the works for the last few months. Over the weekend the Guardian newspaper said it had seen a leaked copy of the draft legislation, which it said envisioned the new rules coming into force in 2019, and which it said focused on “cross-border schemes that involve more than one country, so long as one of the jurisdictions involved is within Europe”.
‘Recent events’ cited
The Commission cited as the reason for introducing the new rules now “recent events such as the Panama Papers revelations”, which it said had “exposed how some intermediaries actively assist companies and individuals to escape taxation, usually through complex cross-border schemes”.
The initiative is described in the statement as being part of the European Commission’s “far-reaching agenda” under its current president, Jean-Claude Juncker, to “increase tax transparency and tackle tax avoidance and tax evasion”.
Accountants group ‘welcomes’ plan
The Association of Chartered Certified Accountants, a global organisation for practising accountants, was reported by the Reuters news agency to have welcomed the proposal as a way to curb abusive tax planning, but warned against the risk of a flood of disclosures.
“The fear of inadvertent non-compliance and the penalties that will result may drive some tax professionals to over-disclose, just to be on the safe side,” Reuters quoted Chas Roy-Chowdhury, head of taxation at ACCA, as saying, adding that an excess of information could make the fight against tax avoidance less effective.
The Reuters report also quoted EU tax commissioner Pierre Moscovici as telling a press conference on Wednesday that a number of EU countries, including Britain, had already introduced penalties for those intermediaries that promoted tax-avoidance schemes, and that this had reduced tax avoidance in the UK by “over 12 billion pounds”.
Juncker, who was prime minister of Luxembourg for 18 years, before taking up his EU post in 2014, has been seen by some media commentators as a recent convert to the cause of cracking down on tax avoidance.
As reported, the EU has been working to draw up a blacklist of tax havens since last year, and is aiming to publish its final list at the end of 2017.