The Council of EU Finance Ministers today finally decided on the obligation to report cross-border tax planning models. In the future, tax consultants, lawyers, bank advisors and financial service providers will have to inform the domestic tax office of the tax saving schemes they offer if they contain a foreign element. The financial authorities of the Member States will be obliged to exchange this data automatically.
Finance Ministers also adopted today a new EU list of tax havens in third countries. Bahrain, the Marshall Islands and Saint Lucia are removed from the blacklist and placed on the grey list of states to be observed. Instead, the Bahamas, the US Virgin Islands and Saint Kitts and Nevis are blacklisted.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“Europe creates transparency for the most opaque actors in the tax sphere. This is the right focus, because it is only with the help of banks, tax advisors, auditors or lawyers that billions can be channelled past the treasury. Also many European intermediaries are involved in such transactions at the expense of tax justice. The European Parliament’s Inquiry Committee into the Panama Papers has shown that providers’ self-regulation has regularly failed. The increased control and transparency of the complices of tax dumping is an important step towards greater tax justice and a success for the European Parliament.
It is regrettable that the Member States have postponed the start date for the reporting obligation by one and a half years and that a review of the criteria for tax saving schemes which are subject to reporting will not take place until mid-2022 at the earliest. With this delay, EU countries are doing the honest taxpayers a disservice. The new rules should be implemented sooner rather than later.
Now it depends on each member state to implement the European Directive vigorously. All member states can make the maximum use of the directive so that the duty to report should not only apply to cross-border tax savings schemes, but should be extended to domestic tax avoidance models. An end to dubious tax practices benefits all citizens.“
EU finance ministers revise black list of tax havens: Horse-trading in the dark must end
“As a tax haven of the United States, their Virgin Islands deserve their place on the EU blacklist. It is an important signal to the United States that Europe has taken this step despite the threats from Donald Trump to impose duties on imports. It would be desirable if the European governments were to make their own work more transparent. The horse-trading characterizing the EU’s blacklisting process of tax havens in third countries is similar to the opaque hustle and bustle of an oriental bazaar. In order to restore the credibility of the blacklist, all third countries’ assessments must be published. Bahamas, one of the central jurisdictions in the revelations of the Paradise Papers, is now finally on the blacklist of tax havens, but other important offshore financial centres are still missing.“
Background
The obligation to report directly affects the providers of tax saving models. Only if the provider is located outside the EU or is subject to professional secrecy, the taxpayer himself/herself has to fulfill the reporting requirement. In the negotiations, the German Federal Government had for a long time tried to exempt taxpayers completely from the obligation to report, but failed because of opposition from the other Member States. Nevertheless, the text adopted today contains several weakenings of the Commission’s proposal, in particular the postponement of the start date for the reporting obligation by one and a half years to July 2020 and the review of the characteristics of tax saving schemes subject to reporting requirements (“hallmarks”) not before mid-2022. It is important that the obligation to provide information covers all types of tax and that the hallmarks have been extended to include also transfer prices and beneficial ownership.