The EU tax committee has presented the report on tax avoidance and evasion. The report, which was drafted on November 14, contains numerous proposals and recommendations to EU Member States and the European Commission to help them face the challenges linked to tax fraud and financial crime such as money laundering.
The report reiterates that since an exit tax was adopted by the EU in ATAD I, Member States should tax the economic value of capital gain created in its territory even when that gain has not yet been realized at the time of exit. The principle of taxing profits made in Member States before they leave the Union should be strengthened, by coordinating withholding taxes on interests and royalties.
Moreover, the report also urges Member States to support a reform of both the mandate and the functioning of the OECD Inclusive Framework to ensure that remaining tax loopholes and unsolved tax questions such as the allocation of taxing rights among countries are covered by the current international framework to combat BEPS practices.
Besides implementing the BEPS and ATAD measures, Member States are also expected to invest in and modernize the tools available to tax authorities, and to provide adequate human resources to improve surveillance and ensure better information sharing. The report also calls on the Commission to propose a European framework for cross-border tax investigations, the setting up of a EU Financial Intelligence Unit, and an early warning mechanism.
From the CumEx-files to Danske Bank, cases that were investigated by the Committee have shown that cooperation between Member States’ authorities remains shockingly inadequate. As a response to the finding, therefore the report presents the following concrete ways to address the slow, lacking and outright dysfunctional cooperation between Member States.
The report will be open for amendments in the Committee, the deadline for which is set at 17 December 2018. The Committee will vote on the report on 27 February 2019.
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