Information Across Borders - Direct Taxation Philip Kermode Director Analysis and Tax Policies

European Commission Taxation and Customs Union

CFE Forum INFORMATION ACROSS BORDERS

in Indirect and Direct Tax15 April2010

Brussels

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Information Across Borders - Direct Taxation

Philip KermodeDirector

Analysis and Tax Policies

European Commission /Taxation and Customs Union

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• Good Governance • Savings Directive, review and amending proposal, third

countries• Development of the international standards on

information exchange• Directive on administrative cooperation • Mutual assistance in the recovery of taxes• Other issues: Facilitating withholding tax relief, Anti-

abuse, Exit taxation, CCCTB

EU Key issues in relation to information across borders


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The current role of information exchange in EU direct taxation

• Mutual assistance directive 77/799/EEC - update• Exchange of information as key element of good governance in

taxation• Recovery directive 76/308/EEC, new directive adopted on 16 March

2010 – Council doc. 5567/4/10• Savings taxation directive (EUSD), aiming at automatic exchange of

information as ultimate objective, allowing for a transitional Withholding Tax (currently applied by LUX and AT)

• Savings taxation agreements, equivalent measures to EUSD• Negotiation of TIEAs with third countries alongside anti-fraud

agreements between the EU and third countries• Existing instruments for information exchange limit possibility for

justification of restrictive measures taken by Member States (anti-abuse, exit taxation)


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• ECOFIN Council Conclusion 14 May 2008Specific provision on good governance in the tax area (i.e. transparency, exchange of information and fair tax competition) in relevant agreements with third countries

• April 2009: COM (2009) 201‘Promoting Good Governance in Tax Matters’ It identifies 18 actions:

1. Actions aimed at improving good governance within the EU (Code, Directives, etc.)

2. Actions aimed at improving good governance in relation to third countries

Future actions• Joint COM Communication DEV/TAXUD on positive synergies between

development and tax objectives (Spring 2010)• Ongoing negotiations with third countries, Savings agreements and TIEAs

Good Governance initiative(s)


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Taxation of savings in the form of interest payments

• 1 July 2005: START of parallel application by MS, their dependencies and 5 third countries

• November 2005: start of review process with tax administrations• 12 Dec. 2005: new format for information exchange (from 2008)• March 2007: start of review with market operators (Expert group)• April 2008: Working document on options for developing the scope

of the Directive• September 2008: First Commission Report• November 2008: Commission amending Proposal

Savings Taxation Directive Review


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Reporting and Exchange of Information

• Information reporting by paying agent – Article 8 EUSD– Reporting to the tax authority of the State of the paying agent:– identity and residence of beneficial owner– name and address of paying agent– account number or identification of the security– details of the interest payment (Art. 8 par. 2)

• Cross-border exchange of information - Article 9 EUSD– between competent authorities of MS (unlike qualified intermediary rules)– automatic– within 6 months following end of tax year of MS of paying agent– information is exchanged by means of a standard format agreed at

Community level


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Development of the international standards on information exchange

• Commission initiatives and proposals on good governance in the field of taxation, administrative cooperation and savings taxation are supported proactively by the European Parliament

• Continuous pressure on tax havens from the EU and numerous Member States which is also supported by Civil Society organisations such as the Tax Justice Network

• OECD standards on exchange of information, G20 developments, EU policy on good governance in taxation– G20 Global Forum Peer review mechanism

• EU-Development/Cooperation policy – Preventing the creation of new tax havens– Supporting structures for efficient collection of taxes in developing

countries– Supporting effective exchange of information with developing

countries, of which some are even discussing the possibility of applying automatic exchange of information


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Progress to date2 February 2009, Commission Proposal for a new Council Directive (COM(2009)28) to improve the recovery assistance

Main changes:• Extension of the scope to all taxes • Possibility to request recovery or precautionary measures at an early

stage• Development of a uniform instrument permitting enforcement in

other Member States (to avoid recognition and translation problems)Adopted 16 March 2010

Future actions• Entry into force of the new rules: 1 January 2012

Mutual assistance in the recovery of taxes


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• Need to adapt tax cooperation in the EU to the development of international standards as set by the OECD, giving more efficient tools to Council Directive 77/799/EEC, based on what already exists for indirect taxation to provide for the effective tax cooperation between MS - COM (2006)254

• Proposal for a new directive on administrative cooperation, COM (2009)29, adopted and discussed in the Council WPTQ

• Application of banking secrecy rules is no longer possible in cooperation between Member States issues

• Including the most favoured nation clause• Reinforcing the automatic exchange of information, extending scope • October 2009, discussions finalised in Council

Future actions• Political agreement on the new directive on administrative

cooperation to be reached under the ES presidency• Main issue automatic exchange of information, link with other

taxation files and agreements with third countries

Directive on administrative cooperation


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EUSD - amending proposal Enlarging the scope of savings taxation – level playing field for all

relevant finance products Introducing the look through approach Refining the definition of the paying agent upon receipt, identification

of beneficial owners and the establishment of their residence

Progress to date• September 2008, first report on the Savings Directive: the system

has proved to be effective but too limited scope provokes loopholes• November 2008, Commission proposal aimed at closing existing

loopholes in the Savings Directive• Technical discussions substantially completed during SE

Presidency, but no political agreement reached at the 2 December 2009 and 19 January 2010 ECOFIN

Future actions• Under the ES Presidency, political agreement on the compromise

text for amending the Savings Directive • Mandate to the Commission for negotiating amendments updating

the existing agreements with non-EU countries


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EUSD - Review and amending proposal• Level playing field for financial businesses concerning transparency and

good governance in taxation

• The difference between automatic exchange of information and WHT under the EUSD, end of the transitional period, external conditionality

• EU - internal discussion of withholding taxes as alternative to automatic information exchange?

• Criticisms of EUSD– Claiming that automatic information exchange is inefficient– Referring to experience collected with Member States and third

countries– Claimed advantages of withholding tax against automatic exchange of

information – Intermediate budgetary interest against a sustainable development of

tax transparency

• However: only a system of automatic exchange of information provides for transparency in taxation, deterrent effects of automatic exchange of information on tax evaders


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Savings taxation agreements (STAs)

• Review of the existing EU-STAs, consultations started in autumn 2009

• Necessary adaptations of bilateral STAs, changes to the territories, further developments– Unilateral steps already taken / or intentions declared by

jurisdictions, such as the Isle of Man, Bermuda concerning the application of the automatic exchange of information

• Relation to third countries – European STAs countries, in particular Switzerland:– Swiss Rubik proposal of a final withholding tax agreed

bilaterally with Member States– Would a white money policy applied in Switzerland achieve

the same results as automatic, Rubik proposal, Administrative cooperation proposal


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Savings taxation agreements (STAs)

• Working on an equitable international level playing fieldExploratory talks with other third countries such as

Singapore, Hong Kong, Macao• Further developments of the STAs network

after adoption of the amending EUSD proposal (Norway)


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Other issues of information exchange - facilitating withholding tax relief

• Automatic exchange of information as a means for facilitating tax relief for cross-border investors

• Commission recommendation of 19/10/2009 on withholding tax relief procedures, C (2009)7924

• Member States invited to implement new, non-burdensome channels of information exchange aimed at providing both the source Member States and the residence Member States with investor-specific information (following model of EUSD)

• OECD paper on improving procedure for tax relief for cross-border investors of 12/01/2010


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Other issues – Exit tax, Anti-abuse

• "Exit tax" Communication, COM (2006)825 – coordination of Member States national exit tax rules in view of

freedom of establishment and avoiding double taxation – Limitations for exit taxation rules, Member States can rely on

information exchange, automatic information exchange might also be an option to be examined. Difference between Member States and EEA countries as the latter are not subject to EU Directives on Mutual Assistance and Recovery

• Anti Abuse Communication, COM(2007)785– Improved coordination of Member States anti-abuse measures

against international tax avoidance schemes in relation to third countries through administrative co-operation (e.g. exchange of information and sharing of best practices) and enhancing administrative co-operation of Member States with non-EU partners


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Challenge• Abolishing specific tax obstacles suffered by EU groups

(cross border loss offsetting; transfer pricing; reducing compliance costs)

• Introduction of consolidation and a sharing mechanism through a high degree of coordination and cooperation between tax administrations, concept of a 'principal taxpayer' and a 'principal tax administration'

Progress to date2004-2008 CCCTB Working Group 2008- further technical work by the Commission Services

At the cross roads• Commissioner Šemeta plans to have a fresh look at the CCCTB• The aim should be to submit a proposal in the coming 12 months• Commission Services preparing a ‘road map’ for the proposal and the

Impact Assessment

Other issues - CCCTB

Information Across Borders - Direct Taxation Philip Kermode Director Analysis and Tax Policies

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