The Anti-Tax Avoidance Directive was presented by the European Commission as part of its Anti-Tax Avoidance Package (ATAP) in January this year, as a key element of the EU’s commitment to clamping down on corporate tax avoidance, a move that was subsequently reinforced in the wake of the recent “Panama Papers” revelations.
ICC had previously expressed concern that the measures encompassed in these proposals went beyond international guidelines set out in the Base Erosion Profit Shifting (BEPS) plan of the Organisation for Economic Co-operation and Development (OECD) and the G20.
ICC welcomed the provision to evaluate the directive four years after its entry into force. “It is imperative to further evaluate – as has been agreed – the implementation of BEPS on a global scale and to take action if European companies should suffer from competitive disadvantages,” said Christian Kaeser, Chair of the ICC Commission on Taxation.
The complex package of measures includes legally binding minimum standards on the interest limitation rule; exit taxation; general anti-abuse rule (GAAR); controlled foreign companies (CFCs) and hybrid mismatches.
It is imperative to further evaluate – as has been agreed – the implementation of BEPS on a global scale and to take action if European companies should suffer from competitive disadvantages.
Three of the six measures derive from the OECD BEPS recommendations while the remaining two are based on EU-specific proposals. At the Economic and Financial Affairs Council meeting held 25 May member states expressed their concerns with some of the measures proposed in the directive. A number of countries were concerned that, unlike the OECD BEPS recommendations, the directive measures would be legally binding and transposed into EU law without sufficient exploration of the broader implications of the directive.
Key elements of the compromise include a wider scope for controlled foreign companies with application both inside and outside of the EU, and the burden of proof falling on tax authorities. The Council decided to maintain the provision for hybrid mismatches as initially proposed with a request for the EC to come up with proposals regarding third countries before October 2016.
We are pleased to note that one of the most controversial provisions, the switch-over clause, has been removed in view of the fact that the package as a whole is strong enough without it.
“We are pleased to note that one of the most controversial provisions, the switch-over clause, has been removed in view of the fact that the package as a whole is strong enough without it. The switch-over clause goes beyond the measures outlined in the OECD G20 mandated BEPs project. It has been stipulated that the aim of the directive is not to set minimum rates and there are, consequently, no sovereignty issues,” said Christian Kaeser, Chair of the ICC Commission on Taxation.
While ICC recognizes EU efforts to put in place a common EU approach to fight against tax evasion and ensure the proper functioning of the Single Market, ICC reiterates the importance of coherent and coordinated implementation of existing international guidelines to establish a consistent global tax system that better facilitates cross-border trade and economic growth. Any measures put in place should seek to avoid creating additional tax barriers or the risk of double taxation.
The world business organization, representing over 6.5 million members globally, echoes the view that tax reforms should be both practicable and effective in facilitating greater consistency internationally.