On 5 July 2016, the European Commission (“Commission”) presented a Communication putting forward the priorities in their work towards a fairer, more transparent and more effective taxation system, together with a proposal to amend the Fourth Anti-Money Laundering Directive (“AMLD”).
By means of these initiatives, the Commission wants to address the remaining gaps in the tax framework (as revealed by the recent exposures on the widespread usage of secret companies and accounts to hide income and assets offshore, also known as the “Panama Papers”) in order to prevent tax abuse and illicit financial flows.
The EC’s Vice-President, Valdis Dombrovskis, stated that “Tax avoidance can cost the public purse many millions of euros each year. Understandably, people and businesses want tax to be fairer and more effective.”
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, emphasized the Commission’s determination “to inject more openness and more trust into taxation”, as “the recent leaks exposed loopholes that still allow tax evaders to hide funds offshore. These loopholes must be closed and our measures to stamp out tax abuse must be intensified”. He further acknowledged that the Commission has come a long way in this respect, and will steadfastly continue its transparency campaign.
The Commission’s key actions include:
- providing tax authorities with access to national anti-money laundering information, notably on the ultimate beneficiaries behind every company, as well as due diligence information. The proposal takes the form of an amendment to the Directive on Administrative Cooperation for Taxation;
- applying due diligence controls to existing and new accounts (potentially used for illicit activities) and introducing stricter rules for passive companies and trusts. The proposal takes the form of an amendment to the AMLD;
- increasing the cross-border transparency by means of automatic exchange of national information, especially on beneficial ownership; and
- promoting tax good governance worldwide, e.g. by third country agreements or development assistance, and tackling uncooperative jurisdictions, e.g. by establishing an EU list of third countries that do not respect tax good governance standards (a first list is planned for being ready in 2017).
As a next step, the proposal for access to information for tax authorities (an amendment to the Directive on Administrative Cooperation for Taxation) will be submitted for consultation to the European Parliament (EP) and for adoption to the Council. Furthermore, the proposed amendments to the AMLD should be adopted by the EP and the Council. In general, the Commission will take forward the measures set out in its Communication in the course of the following months and will determine the most appropriate action to take at EU level for each of the identified measures.
Read the Commission’s press release here.
Read the Commission’s Communication here.
For more insights on tax transparency and to understand the implications for your organisation, please contact Jonas Van de Gucht.