On 28 January 2016, the European Commission unveiled a new Anti-Tax Avoidance Package. This includes two legislative proposals, addressing certain anti-base erosion and profit shifting (BEPS) issues and non-public Country-by-Country reporting (CbCR), as well as a common approach to tax good governance towards third countries and recommendations to tackle treaty abuse. The new package aims to address tax abuse, ensure sustainable revenues and foster a better business environment in the internal market.
The proposals should be seen in the context of the Commission’s Action Plan for Fair and Efficient Corporate Taxation, launched in June 2015 and the final recommendations issued by the OECD in October 2015 on their 15 BEPS Action Points.
There is clearly concern within the Commission that the outputs of the OECD’s BEPS Action Plan could be implemented by Member States in an inconsistent and divergent manner, which may not adequately tackle the problem of aggressive tax planning, leading to additional uncertainty and administrative burden for businesses.
However, as acknowledged by the Commission, the package goes much further than stewardship of the implementation of BEPS measures in the EU, both in terms of the approach and breadth of the proposals. For example, in terms of approach, there are specific proposals in relation to tackling hybrid mismatches that focus on legal characterisation of instruments and entities which do not appear to align with the OECD’s recommendations. In terms of breadth, the proposed Directive contains proposals in relation to switch-over clauses, exit taxation and a general anti-abuse rule (GAAR); in addition the EU Commissioner has stated that the Commission may go further and implement public Country-by-Country reporting following an additional impact assessment.
The legislative proposals are likely to undergo changes as the political debate develops and will need approval by all Member States before implementation. However, both Commissioner Moscovici and the new Dutch presidency have already expressed their intention to adopt the anti-BEPS directive before the end of the Dutch six-month mandate so this is expected to remain a high profile area of focus for the Commission.