EU must tackle aggressive methods of tax advisors and lawyers

The European Commission will today present its proposal to create an obligation on intermediaries to systematically report to tax authorities any cross-border schemes with potentially aggressive tax planning elements they offer to their clients. A report from the Greens/EFA group in January 2017 showed the extent of the role of intermediaries in tax evasion and tax avoidance to the detriment of tax justice (1). The Commission proposal is designed to address the role played by intermediaries (such as banks, tax advisors, accountants and lawyers) in helping clients create offshore structures for tax evasion and tax avoidance. The Parliament has heard time and again through the Panama Papers inquiry that the self-supervision of these intermediaries is also insufficient with regard to money laundering.

EU Member States need to urgently approve these proposals, says Greens/EFA economic and finance spokesperson Sven Giegold:

"The European Commission’s proposal will create a fairer tax system in the European Union. Greater transparency and control of the facilitators of tax dumping is urgently needed. Tax authorities need to know when banks, tax advisors, lawyers and accountants offer their clients aggressive tax arrangements. The Commission has stepped up a gear in the fight against tax dumping in the EU.

"It is a great success that the directive includes not only banks but the entire range of middlemen. The governments of EU Member States must implement these rules as soon as possible and should think about extending the reporting obligation to purely domestic tax arrangements. Putting an end to doubtful tax practices will be to the benefit of all EU citizens.”

Greens/EFA MEP Molly Scott Cato adds:

“With the possibility of a soft Brexit now back on the table, the UK is still likely to need to comply with the proposals for transparency with regard to tax intermediaries. As the country that hosts more intermediaries than any other in the EU, and with responsibility for some of the world's leading tax havens in its overseas territories, we cannot afford to allow it to avoid disclosure. As for EU Member States this will meaning reversing recent cuts to HMRC to ensure its tax administration has the people and the budget needed to win the fight against tax dodging."

Background

The Commission’s proposal creates an obligation for intermediaries to disclose potentially aggressive tax planning arrangements with a cross-border dimension to the tax authorities of their country of residence (if they are located within the EU). As the proposal falls under the scope of the Directive on Administrative Cooperation (DAC), it is then coupled with automatic exchange of this information between EU countries.

(1) See our report on the role of intermediaries in tax evasion and tax avoidance: https://www.greens-efa.eu/files/doc/docs/d6bd745c6d08df3856eb6d49ebd9fe58.pdf