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MEPs express disappointment in tax ruling directive

Members of the European Parliament's Economic and Monetary Affairs Committee have described last week's agreement on a directive for the automatic exchange of information on tax rulings as a "missed opportunity". 14 Oct 2015

The European Commission said last week that the Economics and Financial Affairs Council of the European Union (ECOFIN) had reached agreement on the directive, which requires EU member states to exchange information automatically on advance cross-border tax rulings and pricing arrangements. This will remove the current discretion given to member states on what information they share, when and with whom, the Commission said at the time.

However, Parliament rapporteur Markus Ferber said in a statement that "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," he said.

"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?" Ferber said.

The Economic and Monetary Affairs Committee's purpose in meeting this week was to vote on a report by Ferber which looked at the Commission's original proposal. However, by the time they came to do so, the ECOFIN deal had been announced, "which watered down the Commission proposal even further", the statement said.

The Economic and Monetary Affairs Committee 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. ECOFIN made the directive’s scope cross-border only, the statement said.

"[ECOFIN] also ensured that the European Commission is explicitly not allowed to do anything with the information - to which the Commission only has very limited access - other than overseeing that it conforms to the directive, and that the directive is properly applied," it said.

Committee members would like to see the mandatory exchange mechanism apply to all rulings that are still valid when the directive comes into force, rather than the ten year limit in the agreement, the statement said.

The committee would also prefer the exchange to begin as soon as possible, rather than waiting until the start of 2017, it said.

Finally, the committee said that information should be exchanged "promptly after the ruling or price arrangement is issued". Under the ECOFIN agreement, the information should be provided "within three months following the end of the half of the calendar year during which the ruling was issued. This means that if a ruling is issued in January, the mandatory exchange of information can take place until 30 September," the Parliament committee said.

The committee went ahead with its vote on the Ferber report, which was approved by 49 votes in favour, with none against and six abstentions.

The report will now be passed to Parliament to be voted on. Once that has been agreed, the directive will be adopted at a forthcoming European Council meeting, after it has been finalised in all official languages.

The new rules will apply from 1 January 2017. Until then, existing obligations to exchange information between member states will remain in place.