Industry News

European Commission to publish tax avoidance disclosure directive this week

Monday, 19 June, 2017

It is reported that the European Commission (EC) will, on 21 June 2017, publish its draft legislation forcing financial intermediaries to reveal cross-border tax planning schemes that they have 'facilitated'.

The plan, first announced in September 2016, derives at least in part from the Mossack Fonseca data leak, which the Commission says 'made it clear that certain tax advisors and financial intermediaries have played a central role in facilitating tax evasion'. It will impose compulsory disclosure rules on those who seek to profit from the 'promotion, design or implementation of tax evasion and avoidance schemes'. Tax advisors and financial institutions will be required to automatically report all offshore schemes designed to circumvent national or international anti-avoidance measures, including the OECD Common Reporting Standard rules for automatic tax information exchange.

The EC legislation is expected to take the form of amendments to the Administrative Cooperation Directive, which already mandates automatic exchange of bank interest information between EU member states' tax authorities. The amendments could require banks to report all such payments from third countries, and all offshore schemes that bear certain 'hallmarks' of tax avoidance.

The Guardian newspaper has obtained a copy of the draft directive through its association with the 'International Consortium of Investigative Journalists'. It says that intermediaries who design and promote 'aggressive' avoidance structures will be required to declare the details to their national tax authority within five working days of beginning to promote them. The directive will probably follow the UK's current tax disclosure rules in placing the reporting obligation on intermediaries. However, if all the intermediaries in a scheme are based outside EU member states, the obligation to disclose will fall on the client.

All EU member states will circulate to each other the details of the tax schemes disclosed, via a central directory of avoidance schemes to which they will all have access.

Member states will be expected to apply the provisions from 1 January 2019.


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