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European Commissions seeks views on tackling tax avoidance advisers

The European Commission has launched a public consultation on whether concerted action is needed to tackle advisers who facilitate tax avoidance and evasion.14 Nov 2016

"Recent revelations have highlighted how certain intermediaries, such as tax advisers, helped their clients to shift profits offshore for the purposes of avoiding tax. While some complex transactions and the setting up of off-shore companies may be entirely justifiable, it is also clear that other activities may be less legitimate and in some cases illegal," the Commission said.

The Commission therefore wants to "shed more light" on the activities of such tax advisers and look at how to deter the promotion of aggressive tax planning schemes and "those who would use them", it said.

In particular, it said, the Commission is interested in how a mandatory disclosure scheme for tax advisers would be put in place.

"Such rules would oblige intermediaries to give early information on schemes which could be viewed as aggressive or abusive planning for tax purposes and would reflect the goals of the OECD's non-binding guidelines for the disclosure of aggressive tax planning strategies," it said.

Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs union said: "Complex financial schemes and opaque corporate structures do not happen by accident: some intermediaries have developed these into an art form. These experts offer their clients the opportunity to aggressively exploit loopholes or to shift their profits so as to substantially reduce their tax bill. The public consultation we're launching today will help us to work out ways to deter intermediaries from designing such schemes and to give our member states greater insight and information to enable them to put a stop to them."

The public consultation will run until 16 February.

Tax investigation expert Fiona Fernie, of Pinsent Masons, the law firm behind Out-Law.com said: "Effectively this is yet another example of clamping down hard on aggressive tax avoidance and those who enable it. The proposals would give tax authorities early warning of all aggressive tax avoidance in the hope that they can stop it sooner.  The emphasis is moving as media attention and public perception has encouraged a focus on advisers as well as taxpayers."

Tax expert Catherine Robins, also of Pinsent Masons, said: "The UK already has the DOTAS regime which requires promoters of certain types of tax avoidance schemes to disclose them to HM Revenue & Customs (HMRC). It is not clear whether the Commission's proposals would go further than the UK's existing rules."

In the UK, HMRC has run a consultation on plans for "sanctions for enablers and users of tax avoidance", which closed on 12 October. It has not yet published details of responses.

However, experts have warned that the UK proposals could capture traditionally accepted tax planning, as well as genuinely abusive arrangements.

"The UK proposals have been criticised because the definitions of ‘enabler’ and tax avoidance are too widely drawn," Robins said.

"A particular concern is that under the current proposals advisers could be penalised even if they have advised in good faith on a transaction which falls foul of a targeted anti avoidance rule or unallowable purpose rule. This is a concern because the decision as to whether or not there is an unallowable purpose can often be finely balanced," she said.

"We hope that the proposals will be amended, as in their current form they will make it very difficult for businesses to get tax advice on perfectly normal commercial arrangements," Robins said.