ACCA welcomes the EU Commission’s proposal on taxation information amendment
More tarnsparemncy over aggressive Tax planning arrangements and Beneficial Ownership is welcome, but a balanced and consistent implementation is needed to maintain a level playing field, says ACCA
ACCA (the Association of Chartered Certified Accountants) welcomes the European Commission’s proposal to amend the existing legislation on mandatory exchange of information in the field of taxation in relation to reportable cross border arrangements.
The recent joint ACCA, IFAC and CA ANZ G20 Public Trust in Tax survey shows that the public want to see tax authorities around the world collaborating better together. ACCA thus sees the Directive a positive step, but warns it will only have its desired effect if the implementation is proportionate and consistent across Member States.
ACCA’s position has always been very clear: Ethical behaviour in the tax profession is critical, the work carried out by our members needs to be trusted by society at large as well as by clients and other stakeholders. What our members do reflects not just on themselves but on the profession as a whole*.
Chas Roy-Chowdhury, head of taxation at ACCA says: ‘We cannot deny that recent scandals such as Lux leaks and Panama Papers revealed the role played by certain intermediaries in facilitating offshore tax evasion through aggressive tax planning arrangements. The overarching aims of the Directive, which are to close certain existing loopholes and increase transparency and access to the right information at an early stage, are welcome. We agree that information which currently escapes from the scope of the existing legislation has to be captured in a way or another.
‘Placing a reporting obligation upon intermediaries – and, in the absence of intermediaries, on tax payers- on potentially aggressive tax planning arrangements to tax authorities could be a workable solution. Having access to information about these arrangements before they are implemented could indeed allow the relevant authorities to curb them and protect their tax revenues.’
ACCA warns that while the sharing of information about aggressive tax planning arrangements is positive, it is nevertheless very important to make sure that the European Commission and Member States’ tax administrations will be able to use the information effectively.
Chas Roy-Chowdhury explains: ‘The fear of inadvertent non-compliance and the penalties that will result may drive some tax professionals to over-disclose, just to be on the safe side. The volume of disclosures could mean that smaller, less well-resourced tax administrations will not benefit fully from the Directive. ACCA suggested in its response to the consultation on tax intermediaries that some form of a “summary”mechanism flagging key operative elements of each scheme, or a method for classification, would allow the tax administrations to more easily filter information.’
Given the complexity of our globalised world, ACCA agrees that trying to define the concept of aggressive tax planning is unlikely to be a successful exercise. Theoretically, we would see the inclusion of so-called specific hallmarks as a positive step, but we are calling for a balanced approach, namely regarding their interpretation and scope.
‘In our response to the consultation, ACCA emphasised that it was important to consider indicators not individually but together, and in the context of other commercial drivers. The problem with wide net is, again, that tax administrations would be flooded with information. Much of which may be irrelevant – with the result that this distracts from time which should be spent on much more harmful tax planning practices’, Chas Roy-Chowdhury notes.
Chas Roy-Chowdhury adds: ‘The Commission proposal covers all tax advice providers and not only certain professions such as accountants or lawyers. We see this as a positive development, meaning that the level playing field will be maintained. We would also urge the European Commission to propose clear definitions and criteria that will ensure certainty for taxpayers and their advisors.
‘The Commission also intends to have limited access to the information, along the lines of its access to the exchange of information on tax rulings. We think it is useful, namely to ensure that the exchange really takes place, and again ensure a certain level playing field and avoid preferential treatment.’
However, on the issue of leaving Member States discretionary powers to lay down appropriate penalties over the violation of the national rules transposing the Directive, ACCA expresses some reserves.
‘We fear that, on the one hand, this may exacerbate some tendencies that we have seen from tax authorities to apply new penalties as a standard, and, not always effective response to undesirable behaviour. On the other hand, the Member State discretion could lead to State Aid issues’, Chas Roy-Chowdhury concludes.
*ACCA ‘s guidance on Professional Conduct in Relation to Taxation states that “A member must comply with all relevant legal and regulatory obligations (…) – including consideration of anti-money laundering obligations – when dealing with a client’s tax affairs and assist his clients to do the same. A member who has reason to believe that proposed arrangements are, or may be, tax evasion must strongly advise clients not to enter into them, (…), if concerned about the activities of clients or third parties”.