The position on the proposal for Directive of the European Council laying down rules against tax avoidance practices that directly affect the functioning of the internal market
For quite some time now, the European Council has been stating there is an urgent need to prevent tax avoidance and aggressive tax planning, both at the international and EU level. At the same time, the Council has emphasised that the Organisation for Economic Co-operation and Development (OECD) has completed work on global standards and rules in this regard. The proposal for Directive of the European Council laying down rules against tax avoidance practices that directly affect the functioning of the internal market COM(2016) 26 (hereinafter the Directive) failed to be accordingly and accurately agreed upon by the representatives of the Member States.
Although the Directive is based on OECD reports which include recommendations on preventing practices of tax avoidance and profit shifting (“BEPS”), its provisions go beyond the OECD recommendations.
The European Commission assumes that OECD countries who adopted the above mentioned report shall also adopt the proposal for the Directive without any objections, even though such assumption is ill-formed. The provisions of the Directive should be discussed in detail by i.a. State Treasury units and Permanent State Representatives, and, as far as possible, by business organisations whose members would be most affected thereby. Failure to hold detailed consultations impedes the proper assessment of the proposed regulation’s impact.
Seeking uniform implementation of BEPS solutions throughout the EU shall be deemed eminently reasonable and righteous. Should such provisions be implemented, it will result in reducing administrative burden and decreasing the risk of double taxation. Nevertheless, uniform implementation of BEPS solutions calls for consistent implementation of minimal standards and best practices on preventing the tax avoidance adopted internationally. e.g. standardising Country-by-Contry reporting based on OECD recommendations and introducing Principal Purpose Test or up-todate definitions of taxable permanent establishment, or renegotiating new agreements on avoiding double taxation.
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