Ecofin Council reaches agreement on rules for combating tax fraud

The Economic and Financial Affairs Council meeting on 7 December reached a political agreement on a draft directive aimed at strengthening administrative cooperation between the member states in the field of taxation, one of a number of savings taxation and tax governance measures aimed at preventing tax fraud. Given the greater taxpayer mobility and a growing volume of cross-border transactions, one key element of this draft Directive is to fulfil member states' growing need for mutual assistance and exchange of information in this field.

The directive will ensure that the OECD model tax convention on income and capital is implemented in the EU as regards the exchange of information on request. It will thus prevent a member state from refusing to supply information concerning a taxpayer of another member state on the sole grounds that the information is held by a bank or other financial institution.

As part of the European Union strategy against tax fraud launched in 2006, the European Commission presented in Janyary 2009 a set of two proposals, where the draft Directive aimed at strengthening administrative cooperation in the field of direct taxation provides for an overhaul of directive 77/799/EEC, on which administrative cooperation in the field of taxation has been based since 1977.

Main elements of the Directive on strengthening cooperation against tax fraud

  • Extend cooperation between member states to cover taxes of any kind
  • Establish time limits for the provision of information on request and other administrative enquiries
  • Introduce provisions on the automatic exchange of information
  • Allow officials of one member state to participate in administrative enquiries on the territory of another member state
  • Provide for feedback on the exchange of information
  • Provide that information exchange be made using standardised forms, formats and channels of communication

Exchange of information on request and automatic exchange of information on tax fraud

In order to avoid the risk of member states making imprecise requests aimed at detecting irregularities, the Council agreed to identify in the directive certain details that must be specified in requests for information, namely the identity of the person under investigation and the tax purpose for which the information is sought. These details are however less stringent than in the OECD convention, thus allowing for more scope for information exchange.

Furthermore, the Council agreed on a step-by-step approach aimed at eventually ensuring unconditional exchange of information for eight categories of income and capital. From 2015, member states will communicate automatically information for a maximum of five categories, provided that this information is readilyavailable (they will however not be required to send more information than they receive in return).

By 1 July 2017, the Commission will provide a report and, if need be, a proposal. When examining that proposal, the Council will examine the possibilities for removing the condition of availability and extending the number of categories from five to eight.