On 28 January 2016, the European Commission presented a seven-part draft Anti-Tax Avoidance Package (ATAP). Following the European Commission’s strong support for the BEPS (Base Erosion and Profit Shifting) Final Recommendations, published in October 2015, the ATAP seeks to co-ordinate the response by EU Member States to corporate tax avoidance so as to usher in an era of fair taxation. Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, stated:
“Europeans and businesses that play fair end up paying higher taxes as a result. This is unacceptable and we are acting to tackle it. Today we are taking a major step towards creating a level-playing field for all our businesses, for fair and effective taxation for all Europeans.”
The ATAP is based on three core pillars: (1) Ensuring effective taxation in the EU; (2) Increasing tax transparency; and (3) Securing a level playing field.
To that end, the ATAP includes a number of wide-ranging proposals and recommendations. These include:
(i) The introduction of an Anti-Tax Avoidance Directive (ATAD) – The ATAD aims to address tax planning by introducing six legally-binding rules, namely a CFC rule, a switchover rule (to address double non-taxation), rules pertaining to exit taxation, interest limitation and hybrids and a general anti-abuse rule. The Commission aims to have the ATAD adopted within six months so that it may come into effect from 1 January 2017.
(ii) A Commission Recommendation on Tax Treaties which advises EU Member States to protect their tax base from treaty abuse while complying with EU law. The recommendation draws in part from the Final Recommendation of BEPS Action 6 namely the principal purpose test.
(iii) The revision of the Administrative Cooperation Directive – The proposed revised rules, which give effect to BEPS Action 13, will see national authorities exchange tax-related information on the activities of multinational companies on a country-by-country basis (CbC reporting). The Commission hopes to have the new rules in effect from 1 January 2017.
(iv) The re-launch of the Common Consolidated Corporate Tax Base (CCCTB) proposal – The Commission considers the CCCTB as a key tool to address BEPS concerns. As such, it hopes to adopt a revised CCCTB proposal by autumn 2016.
(v) A Communication on an EU External Strategy for Effective Taxation – This non-binding instrument sets out the Commission’s views on achieving a harmonised approach by EU Member States for tackling base erosion threats from outside of the EU. The Communication calls for various measures such as “tax good governance clauses” in trade agreements between Member States and third countries.
The two legislative proposals [(i) and (iii) above] will be presented to the European Parliament for consultation and to the Council for adoption. It is expected that the Council and Parliament will endorse the Recommendation (ii) and that Member States will apply its principles when revising their tax treaties. Finally, the Commission calls upon Member States to endorse the new External Strategy and give “high political priority to their implementation.”
As a whole, the ATAP represents a monumental shift in the landscape of European tax law. We shall continue to monitor the progress of these new proposals and keep you up to date of the potential impact of these measures.
This article appears in the JHA February 2016 Tax Newsletter, which also features:
