European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation OCT-EU...

5 September 2006 EU-OCT tax cooperation

European Commission /

Taxation and Customs Union

OCT-EU cooperation in the tax areaState of play and perspectives

OCT-EU Forum4 to 8 September 2006

Nuuk, Greenland

Philippe CattoirDG TAXUDAnalyses and Tax

policies

5 September 2006 EU-OCT tax cooperation 2



Structure of this contribution

1. International context: issues related to « financial, tax and judicial governance »

2. Responses in the tax areaEU initiatives

OECD initiatives

3. Implications for the OCTs




International contextfinancial, tax and judicial governance




International context

Issue: opportunities and limits of globalisation

Globalisation brings numerous benefits…

…but it also opens up new opportunities for abuses:

Money laundering (2-5% of the global GDP) Corporate fraud. Enron ($67bn), Parmalat (€14bn) Terrorist financing Tax abuses

Tax avoidance estimated at between £25bn and £85bn by UK authorities1/4 of serious tax fraud cases in UK involved offshore / bank secrecy transactionsOxfam identify a revenue loss of $50 billion to developing countriesUS IRS estimates it has lost $ 35 billion in tax shelters

These malpractices or illegal activities thrive in a climate of secrecy, non-transparency and non-cooperation




International context

Response: numerous international initiatives

Financial Action Task Force (FATF)

Financial Stability Forum (FSF)

EU initiatives (money laundering Directives, Savings

taxation Directive, Code of conduct for business taxation,

etc.)

OECD Forum on Harmful Tax Practices, etc.

NB: Common features (transparency, cooperation…)




Responses in the tax area




Responses in the tax area

In the EU

1. Code of Conduct for business taxation2. Savings Directive and related agreements3. Administrative cooperation and mutual assistance

Directives

In the OECD

1. Harmful tax regimes in OECD countries2. Tax havens3. Non OECD Economies OECD Global Forum on Taxation




Responses in the tax area (EU)

1. EU Code of Conduct for business taxation

96 harmful tax regimes identified in 25 EU Member States + OCTs

Most eliminated ("rollback")

Ongoing monitoring ("standstill")

Principles recently endorsed by UKR, MOL, TUN, ISR, JOR, MOR





2. EU Savings Directive

All Member States except BE, LU and AU apply automatic exchange of information since 1/7/2005. BE, LU, AU apply a withholding tax, with increasing rate (15%-35%) during a transitional period.

Equivalent measures by Switzerland, Andorra, Liechtenstein, Monaco, San Marino.

Same measures in 10 dependent or associated territories: automatic exchange of information in Anguilla, Aruba, Cayman Islands and Montserrat, and withholding in BVI, TCI and Netherland Antilles.





3. Administrative co-operation, Mutual assistance

Directive for mutual assistance in direct taxation (1977, 2004).

Regulation on administrative cooperation for VAT (2003) and excise duties (2004).

Directive for mutual assistance for recovery of customs, VAT, excise duties, taxes on income and capital (1976, 2002).





EU Initiatives Countries directly concerned

Code of Conduct for Business taxation

EU-25Associated and dependent territoriesEU neighbourhood countries

Directive for Savings taxation

EU-25Associated and dependent territoriesKey third countries

Administrative cooperation and mutual assistance

EU-25





Despite difficulties due to unanimous decision-taking, the EU has achieved remarkable progress in the past years.

Many partners of the EU and its Member States (associated and dependent territories, neighbour countries, competitors in the financial area) cooperate with the EU Member States in the tax area.




Responses in the tax area (OECD)

From the OECD Forum on harmful tax practices…

1. OECD member countries. 47 potentially harmful tax measures in 21 OECD countries. Most have been eliminated or amended;

2. Tax havens / Participating partners: 33 jurisdictions committed to transparency and effective exchange of information. List of 5 “uncooperative tax havens”;

3. Non OECD economies: contact with major financial centres.

… to the OECD Global Forum on Taxation.





OECD Global Forum on Taxation

33 jurisdictions committed to transparency and effective exchange of information for tax purposes

Aruba Cyprus Nether. Antilles Turks & Caicos IslandsAntigua Dominica Niue US Virgin IslandsAnguilla Guernsey Nauru VanuatuBahamas Grenada PanamaBahrain Gibraltar SamoaBelize Isle of Man San MarinoBermuda Jersey SeychellesBritish Virgin Isl. Malta St. Kitts & Nevis Cayman Islands Mauritius St. VincentCooks Is Montserrat St. Lucia

They cooperate with the OECD countries and key financial centres to develop global standards and achieve a global level playing field.





Standards developed within the OECD Global Forum

Transparency = reliable books and records, beneficial ownership information, access to bank information

Exchange of information = EOI upon request. Based on Model Agreement. (confidentiality, taxpayers’ rights…)

NB: Link between transparency and exchange of information.





Recent survey of 82 countries on transparency and EOI practices:

A majority have mechanisms for EOI on criminal and civil tax matters ;

A majority can get access to bank information for criminal and civil tax matters.

A vast majority have beneficial ownership information.

Progress is being made towards a level playing field However, further work is necessary.





The issue of public recognition:

« … changes to improve transparency and to establish effective exchange of information are not always easy...

... International bodies may wish to consider providing tangible forms of positive recognition… to countries that implement [these] principles ».

(OECD Global Forum – Melbourne report)




Implications for the OCTs(taxation and beyond)




Implications for OCTs

The Commission’s policy:

Responsibility of governments to accept a common cooperation in order to exchange information effectively.

Transparency and effective exchange of information are part of the good governance that the EU wishes to promote.

Economic and technical assistance, economic partnership agreements and other relevant agreements should reflect the concerns of the EU.

NB: this is not only true for taxation.





Let's be clear:

The Commission indicated that it is willing to grant support to efforts linked to good governance. This is not a one-way street.

In the 10th EDF funds will be available for support to good governance in the financial, tax and judicial areas, in particular with regard to transparency and effective exchange of information for tax purpose.





Proposal for discussion

Additional funding (= on top of the initial territorial allocation)…

… commensurate to additional efforts (= a real incentive, to be spend e.g. in focal sector) ...

… assessed on the basis of roadmaps (= specific objectives and clear timing).




Conclusion




Thank you for your attention !

European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation OCT-EU...

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