TAXE Committee final report on tax rulings etc

The final report is adopted by the European Parliament

On 25 November 2015, the European Parliament´s plenary adopted the TAXE Special Committee´s “Report on tax rulings and other measures similar in nature or effect”. The report concludes the original work of the TAXE.

A draft report was published in the summer and you can read our news item on that earlier report which also contains click-throughs to the representations made by the Big 4 accounting bodies as well as CFE and FEE European Parliament: draft report on tax rulings.

The lengthy final report addresses a wide range of tax policy issues and tries to accommodate a wide spectrum of different views: Criticising tax advisers and other professionals for designing and implementing tax avoidance schemes, it also stresses the ambivalent position of some member states complaining about base erosion while preventing better coordination of tax systems. The report remarks that all tax planning should be within the boundaries of the law and applicable treaties and that the best response to aggressive tax planning is good legislation and international coordination.

Tax rulings are recognised as a useful tool for providing legal certainty and reducing risk; recourse to legitimate tax rulings should thus not be discouraged. The MEPs deplore the compromise on exchange of tax rulings information reached in the EU Council on 6 October, which falls short of main elements of the Commission´s original proposal, such as the submission of the exchanged information to the Commission, let alone further demands by the EP: MEPs had suggested to extend the exchange to domestic rulings, with no limits to retroactivity, thus including all rulings which are still valid. Governments granting illegal state aid should be sanctioned; as MEPs point out, the obligation of recipients to pay back benefits granted illegally might even be considered a reward of member states for having taken an illegal decision.

The report encourages the EU to go further than the BEPS solutions in coordination and convergence and the avoidance of harmful tax competition. It also expresses its support for mandatory publication of country by country tax information which should also contain information on tax rulings.

As to transfer pricing, the report identifies the lack of guidance and comparable transactions as the main difficulties in the application of the arm´s length principle and points at the lack of an effective dispute resolution mechanism.

The Parliament favours a mandatory CCCTB, acknowledging the introduction of firstly a CCTB, including a interim regime for temporary cross-border loss offset, as envisaged by the Commission.

On tax advisers, the report identifies a conflict of interest for tax firms that advise both private clients and governments on tax planning opportunities, and asks the European Commission to propose a code of conduct at EU level to prevent such conflicts of interest. The report is also critical towards the presence of Big Four representatives in European Commission advisory groups like the Platform for Tax Good Governance and the Joint Transfer Pricing Forum. The CFE commented on the draft report in August 2015.

On 26 November 2015, the EP´s Conference of Presidents of political groups decided to set up a temporary committee to follow up on the work done by the TAXE Special Committee. The Press Release can be accessed here. The new committee will last six months. Its precise mandate was agreed on 2 December and is set out in the Conference of Presidents’ document.