Dear friends and all those who are interested,
Especially in the Corona crisis, more and more sales transactions are taking place via digital platforms such as Amazon or EBAY. But digital platforms lead to mass tax evasion and unfair competition. This is precisely where the EU is now taking remedial action. In future, tax information on digital platforms is to flow directly to the tax authorities. Tax losses worth billions will then be a thing of the past. The European Parliament is working on an opinion regarding the extension of the so called directive on administrative co-operation in the field of taxation, for which I have now submitted my draft report as rapporteur. For only through effective and automatic cooperation between tax authorities across borders can we close tax havens and restore tax justice in the globalised economy. With my report, I seek to advance this goal.
Now, MEPs from all political groups as well as myself can introduce amendments before we jointly adopt the final report in Parliament. In this respect, I welcome any concrete (!) feedback and suggestions. Here you will find the most important proposals of my report.
Online providers should pay taxes in the same way as locally present companies. This is simply a question of tax justice and fair competition. To ensure a level playing field, the tax authorities need information because consistent and comprehensive exchange of information is the key to fair taxation in Europe and worldwide. The last Global Forum of the OECD also called for more tax transparency – with its 161 member states, the Global Forum is the most important international institution in the fight against tax evasion and aggressive tax avoidance. This is an important signal which will hopefully lead to concrete action in the near future.
The revision of the Directive on Administrative Cooperation in the field of taxation (with the nice acronym DAC), which is currently being discussed in the Parliament and the Council, goes back to a proposal by the EU Commission in July this year. This directive has long regulated the exchange between member states of information related to taxation. For example, the tax office in Germany learns which capital gains German citizens earn in Luxembourg and vice versa. Before the revision of the EU rules can come into force, the European Parliament must be consulted.
An extension of the existing directive to new types of income is urgently needed. The new proposal includes important additions to effectively tax providers on platforms such as Amamzon, EBAY, Airbnb or Uber. Under the revised directive, such platform companies will have to send tax-relevant information about their users, in this case sellers of goods, landlords or drivers, to the tax office. This information will then also be exchanged between the European member states. Including providers on online platforms in the information which has to be reported to tax authorities should ensure that companies which offer their services via platforms pay taxes in the same way as traditional companies. The proposal put forward by the Commission is an important step in the right direction. However, it does not affect the taxation of the profits of the platform companies themselves. To this end, the EU Commission proposed a European digital tax years ago, which continues to be blocked by the member states in the Council. In the deliberations of the Parliament and the Council of Ministers, it is now a question of the concrete design of individual provisions for the taxation of the users of such platforms. My draft report contains the following proposals:
- Less unnecessary bureaucracy: We need a definition of the relevant activities and reportable platform operators in order to reduce the bureaucratic burden for small platforms and to remove non-remunerated activities from the scope! Because it is not about reporting voluntary neighbourhood help. The focus must be on ensuring that commercial providers are measured with the same yardstick – whether local or digital.
- Effective sanctions: If platforms do not comply with their reporting obligation, Member States should impose penalties. The revised directive should establish a catalogue of penalties to ensure uniform sanctions across Europe. This is the only way to ensure the effective and uniform implementation of the reporting obligation for platform companies throughout the EU.
- Mandate to expand the directive: Furthermore, a review clause should be inserted that mandates the EU Commission to comprehensively review and expand the directive. Such a review clause is urgently needed, because we see time and again that EU rules in the fight against financial crime and tax avoidance are circumvented or only inadequately implemented. This must change, because the toughest rules are worth little if they are not effectively implemented. If necessary, the establishment of a European supervisory authority should be considered in order to be able to identify and remedy deficits in the enforcement of the directive as quickly as possible. More fundamentally, we will continue to work towards a comprehensive reform of European transparency rules to ensure that wealth in all its forms is captured by tax authorities. Indeed, currently only financial assets have to be reported – real estate, shares in companies up to a certain threshold, art etc. are not or not always covered.
- Duty of cooperation for member states: Today, the authorities of a member state only automatically pass on information to other EU member states which is readily available to them. In future, information that a member state can provide with reasonable effort should also be passed on. This is particularly a matter of carefully recording types of income that are insufficiently taxed in the member states themselves. Likewise, taxpayers sometimes hide behind letterbox companies whose real owners are never effectively identified.
- Use tax information in the fight against other financial crimes: member states should generally be free to use the information they receive for non-tax purposes. So far, the directive stipulates that such use requires authorisation by the competent authority of the transmitting state. This is a disproportionately high hurdle, because it is precisely for combating financial crime and money laundering that such information is very valuable. In my report for the Greens/EFA Group, I noted the need for action here: the competent authority receiving the information should be able to use it to the extent that this is permissible under the local rules of the receiving member state.
- Comprehensive exchange of tax rulings: All relevant cross-border tax rulings and agreements on tax-saving offsetting of profits within a multinational company should be exchanged in future. To ensure that all relevant tax rulings are exchanged, the duty to exchange information must be extended to informal agreements with tax offices as well as domestic tax rulings. This would constitute an effective way to prevent unfair competition in Europe.
- Transparency in European tax cooperation: We need more information on how well the cooperation of national tax authorities works and where we still need to create better conditions for a smooth exchange of information. The member states already have to send assessments and analyses on the implementation and effects of the automatic exchange of information to the Commission at regular intervals – it’s just that these analyses have not been publicly available so far. As long as this information cannot be attributed to individual taxpayers, the public has a legitimate interest in this information and must be given access to it. In this context, the Commission should also publish once a year anonymised summaries of the statistical data it has received from the member states. In terms of transparency, this should really not be too much to ask from the national tax authorities!
We already have the results of the Council of Ministers’ deliberations. Unfortunately, the Council wants to postpone the implementation of the improvements by one year – the extended directive will thus probably not be implemented until January 2023. In addition, the government representatives have significantly limited the possibility of requesting cross-border tax audits: the Commission had correctly suggested that individuals may also request such an audit – the Council has deleted this in its preliminary decision. Furthermore, the Council of Ministers wants to exempt companies such as hotel chains and tour operators from the reporting obligation, by not requiring providers with a high number of rental properties in a building to be reported. We are already dealing with many loopholes in the exchange of tax information that undermine the effectiveness of the rules. Parliament will certainly call for improvements here. The goal must be to improve the cooperation of national tax authorities in such a way that a fair taxation of all economic actors is possible.
The Commission’s proposal will bring us a good deal closer to this goal. Now it is important to find a compromise that is as strong as possible. Because one thing is clear: states need tax revenues to be able to cope well with challenges like this pandemic. I will work to ensure that the Council takes Parliament’s position seriously. Unfortunately, the Council is not obliged to take up Parliament’s amendments. However, as rapporteur, I will seek dialogue in order to lend weight to our demands as soon as Parliament’s line has been worked out. The next revision of the directive is already in the making with the objective to include crypto assets. This may well provide a new opportunity to include views of the Parliament.
The revision of the existing rules is an important step towards greater tax transparency. There is also movement beyond Europe on the cross-border exchange of tax-relevant information: I have compiled in this Green Action Plan what possibilities there are to strengthen the global exchange of information beyond Europe. I very much hope that the US will once again lead the way with the new administration, because this has been the key to ambitious reforms on the part of the OECD and the EU in the past. So there is still a lot to do. But nevertheless: things are moving forward with important tax transparency rules at EU level and worldwide!
With European greetings
Sven Giegold
P.S. Petition: Digital Tax Now! – Local shops close while Amazon & Co make huge profits: the digital tax must come now! Gemeinsam haben wir die Chance, die Blockade bei der Digitalsteuer endlich zu überwinden: Please sign our petition here and share it with your contacts! Together we now have the chance to finally break the deadlock on the digital tax: https://www.change.org/digitaltax-now
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You can find the details of the legislation here: https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2020/0148(CNS)&l=en
My draft report is available here: https://www.europarl.europa.eu/doceo/document/ECON-PR-658793_EN.html?redirect