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EU: European Parliament ups the ante on tax transparency and rulings

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Bob van der Made

With the fight against aggressive tax planning, tax fraud, tax avoidance and tax evasion having become a policy priority for the EU, the European Parliament is upping the ante in the heated debate on tax rulings and calls for more tax transparency. On February 12 2015, the European Parliament decided to set up a special committee on tax rulings and other measures similar in nature or effect (TAXE) "to examine practice in the application of EU state aid and taxation law in relation to tax rulings and other measures similar in nature or effect issued by member states, if such practice appears to be the act of a member state or the Commission". The special committee's mandate is therefore to analyse and examine how EU state aid rules have been applied by the Commission to tax rulings in member states since January 1 1991 (this seems inspired by the Commission's ongoing state aid investigation into Apple; otherwise this date seems arbitrary), and member states' compliance with the EU's directives on mutual assistance (1977) and on administrative cooperation in tax matters (2011), in particular with regard to the spontaneous exchange of information on tax rulings. It should be noted, however, that member states are only effectively obliged to spontaneously exchange information on cross-border tax rulings under certain circumstances under the EU Directive on administrative cooperation in tax matters since 2013. According to the Commission's statistics, member states haven't actually really done this in practice, however.

The big political groups in the European Parliament could only agree to set up a special enquiry committee, rather than a full enquiry committee, as was initially proposed by Green Members of the European Parliament (MEPs). The 45-strong special committee also looks into aggressive tax planning and exchange of information with non-EU countries and is in place for six months. The European Parliament is giving itself six months "to take a picture" of the situation in all member states (and produce a report on this) and formulate legislative recommendations for the Commission and Council. A number of committee meetings and hearings have been held already and are planned for the remainder of the committee's mandate.

In part to try to 'appease' the European Parliament on the tax rulings and transparency issue, the Commission already proposed to member states on March 18 2015 to amend the 2011 directive and move towards mandatory automatic exchange of information on advance cross-border tax rulings and advance pricing arrangements per January 1 2016 as a key part of its Tax Transparency Package. On March 25, EU Tax Commissioner Pierre Moscovici debated the Tax Transparency Package and the tax rulings proposal at the EU Parliament. MEPs welcomed this initiative but warned member states must be more transparent about their national tax rulings, because unfair tax competition distorts competition among companies and could lead to a race to the bottom.

The special committee mandate runs parallel to the Commission's formal state aid investigations into Amazon, Apple, FIAT and Starbucks, but it cannot interfere with them as the Commission's work is conducted under EU competition law rules. The EU Parliament special committee's mandate seems however politically fine-tuned with the Commission's self-imposed working deadline for its final decisions in these formal investigations, that is, by the end of the second quarter or third quarter of 2015.

Also on March 25, MEPs adopted a new resolution on the Annual Tax Report which "lays a basis for further Parliamentary work on tax", for example fact-finding by the special committee and legislative work of the European Parliament's ECON [Economic and Monetary Affairs] committee. The resolution was passed by 444 votes to 110, with 41 abstentions. Eva Kaili, the Greek MEP promoting the resolution, stated: "The fight against aggressive tax planning, tax evasion and tax avoidance is in the spotlight of public concern. This European Parliament resolution sends a strong political message, by advocating immediate action for tax transparency, taxation with social justice, and taxation policies that boost growth in a business-friendly environment."

Bob van der Made (bob.van.der.made@nl.pwc.com)

PwC Brussels

Tel: +31 88 792 3696

Website: www.pwc.com/eudtg

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