Council deal on automatic exchange of tax rulings is a “missed opportunity”

28 Oct 2015 12:15 PM

The EU member states’ deal on plans for them to exchange details of their tax rulings for multinationals automatically was a “missed opportunity” to take a big step forward in fighting aggressive tax planning and unfair tax competition, says Parliament in an opinion voted on Tuesday. MEPs are unhappy that the 6 October deal unduly restricts both the scope of the draft “automatic exchange” directive and the European Commission’s access to this information.

The Economic and Finance (ECOFIN) Council deal watered down the Commission's proposal for more transparency and exchange of information, on 6 October, before Parliament's Economic and Monetary Affairs Committee voted its position, on 13 October.

"Disappointed"

Commenting on the Council deal, Parliament’s rapporteur Markus Ferber (EPP, DE) said: "If this is the final text, member states will have missed a great opportunity to create more transparency in taxation. National budgets will continue to suffer. We need an EU-wide systematic and mandatory procedure. For the moment, member states' tax authorities would not realise that tax ruling deals forged in other member states are undermining their own tax bases. Tax authorities should be obliged to exchange information on tax rulings and make them available to a central database at the European Commission”.

What MEPs suggest, compared to what the Council agreed

• Limited scope - MEPs would prefer the directive to apply to all tax rulings, not just "cross border rulings and advance pricing arrangements", given that purely national transactions can also have cross-border effects. The Council made the directive’s scope "cross-border only".
• Commission sidelined - The Council ensured that the Commission is explicitly not allowed to do anything with the information - to which the Commission only has very limited access - other than overseeing that the directive is properly applied.
• No retroactive effect - The Council agreed that the directive would apply only to rulings, amendments or renewals of rulings after 31 December 2016, with some exceptions for those issued, amended or renewed between 2012 and 2016.

Fiat and Starbucks prove need for transparency

Commenting on the Commission’s 21 October state aid decisions on tax rulings by Luxembourg (Fiat Finance) and the Netherlands (Starbucks), Mr Ferber added: “There is also a competition side to tax rulings. This is why the Commission must be empowered to access and use the data to investigate tax avoidance and dumping practices and to assess whether they are in line with state-aid rules. Why are member states clearly denying the Commission access to these data? Are they hiding something? The Commission's state aid verdicts on Starbucks and Fiat Finance show that it should be able to play its role”.

The resolution was passed by 572 votes to 90, with 30 abstentions.

Next steps

The draft Council directive is to be approved at a forthcoming Council meeting, following yesterday's opinion by the European Parliament..

The new rules are to apply from 1 January 2017. Until then, any existing obligations to exchange information among member states will stay in place.