(1)

The challenge posed by cross-border tax avoidance, aggressive tax planning and harmful tax competition has increased considerably and has become a major focus of concern within the Union and at global level. Tax base erosion is considerably reducing national tax revenues, which hinders Member States in applying growth-friendly tax policies. In particular , rulings concerning tax-driven structures lead to a low level of taxation of artificially high amounts of income in the country giving the advance ruling and may leave artificially low amounts of income to be taxed in any other countries involved. An increase in transparency is therefore urgently required. The tools and mechanisms established by Council Directive 2011/16/EU (13) need to be enhanced in order to achieve this.

(1)

The challenge posed by cross-border tax avoidance, aggressive tax planning and harmful tax competition has increased considerably and has become a major focus of concern within the Union and at global level. Tax base erosion is considerably reducing national tax revenues, which hinders Member States in applying growth-friendly tax policies , causes distortions of competition to the detriment of undertakings — particularly SMEs — which pay the correct amounts of tax and shifts taxation towards less mobile factors such as labour and consumption . However, in specific cases , rulings concerning tax-driven structures have led to a low level of taxation of artificially high amounts of income in the country giving the advance ruling and have left artificially low amounts of income to be taxed in any other countries involved , thereby reducing the tax base in those Member States . An increase in targeted transparency and exchange of information is therefore urgently required at least in accordance with OECD standards . The tools and mechanisms established by Council Directive 2011/16/EU (13) need to be enhanced in order to achieve this.

(1a)

Following the LuxLeaks scandal and by means of this report, the European Parliament expresses its strong determination not to tolerate tax fraud and tax avoidance as well as to advocate for a fair distribution of the tax burden between citizens and companies.

(2)

The European Council, in its conclusions of 18 December 2014, underlined the urgent need to advance efforts in the fight against tax avoidance and aggressive tax planning, both at the global and Union levels. Stressing the importance of transparency, the European Council welcomed the Commission’s intention to submit a proposal on the automatic exchange of information on tax rulings in the Union.

(2)

The European Council, in its conclusions of 18 December 2014, underlined the urgent need to advance efforts in the fight against tax avoidance and aggressive tax planning, both at the global and European levels. Stressing the importance of transparency and corresponding information exchange , the European Council welcomed the Commission’s intention to submit a proposal on the automatic exchange of information on tax rulings in the Union.

(4)

However, the efficient spontaneous exchange of information in respect of advance cross-border rulings and advance pricing arrangements is hindered by several important practical difficulties such as the discretion permitted to the issuing Member State to decide which other Member States should be informed.

(4)

However, the efficient spontaneous exchange of information in respect of advance cross-border rulings and advance pricing arrangements is hindered by several important practical difficulties such as the discretion permitted to the issuing Member State to decide which other Member States should be informed and the weak monitoring system which makes it difficult for the Commission to identify any violation of the requirement to exchange information.

(4a)

An efficient exchange and processing of tax information and the resulting peer pressure would have a strong deterrent effect against the introduction of harmful tax practices and would allow Member States and the Commission to have all the relevant information at their disposal in order to take action against such practices.

(5)

The possibility that the provision of information may be refused where it would lead to the disclosure of a commercial, industrial or professional secret or of a commercial process, or of information whose disclosure would be contrary to public policy should not apply to provisions of mandatory automatic exchange of information on advance cross-border rulings and advance pricing arrangements in order not to reduce the effectiveness of these exchanges. The limited nature of the information that is required to be shared with all Member States should ensure sufficient protection of those commercial interests.

(5)

The possibility that the provision of information may be refused where it would lead to the disclosure of a commercial, industrial or professional secret or of a commercial process, or of information whose disclosure would be contrary to public policy must not apply to provisions of mandatory automatic exchange of information on advance rulings and advance pricing arrangements in order not to reduce the effectiveness of these exchanges. The limited nature of the information that is required to be shared with all Member States ensures sufficient protection of those commercial interests.

(5a)

Advance tax rulings and price arrangements can have a cross-border dimension even though they relate to purely national transactions. That is particularly true of cascade transactions, where the advance tax ruling or price arrangement concerns the first national transactions, without taking into consideration the next (cross-border) transactions.

(5b)

In order to avoid arbitrary distinctions between tax arrangements that arise in the context of different national administrative practices, the definitions of advance rulings and advance pricing arrangements should cover tax arrangements regardless of the formal or informal manner in which they were issued, and irrespective of their binding or non-binding nature.

(5c)

Advance tax rulings facilitate the consistent and transparent application of the law.

(5d)

Transparent tax rules provide legal certainty for taxpayers and businesses and generate investment.

(6)

In order to reap the benefits of the mandatory automatic exchange of advance cross-border rulings and advance pricing arrangements, the information should be communicated promptly after they are issued and therefore regular intervals for the communication of the information should be established .

(6)

In order to reap the benefits of the mandatory automatic exchange of advance rulings and advance pricing arrangements, the information concerning them should be communicated immediately after they are issued. Efficient and effective penalties can be developed in cases of non-compliance.

(7)

The mandatory automatic exchange of advance cross-border rulings and advance pricing arrangements should in each case include communication of a defined set of basic information to all Member States. The Commission should adopt any measures necessary to standardise the communication of such information under the procedure laid down in Directive 2011/16/EU for establishing a standard form to be used for the exchange of information. That procedure should also be used in the adoption of any necessary measures and practical arrangements for the implementation of the information exchange.

(7)

The mandatory automatic exchange of advance rulings and advance pricing arrangements should in each case include communication of a defined set of basic information to all Member States. The Commission should adopt any measures necessary to standardise the communication of such information under the procedure laid down in Directive 2011/16/EU for establishing a standard form to be used for the exchange of information. That procedure should also be used in the adoption of any necessary measures and practical arrangements for the implementation of the information exchange.

(8)

Member States should exchange the basic information to be communicated also with the Commission. This would enable the Commission at any point in time to monitor and evaluate the effective application of the automatic exchange of information on advance cross-border rulings and advance pricing arrangements. Such communication will not discharge a Member State from its obligations to notify any state aid to the Commission.

(8)

Member States should exchange the basic information to be communicated also with the Commission , since the Commission should be able to assess independently if such information is relevant for detecting illegal state aid . This basic information should enable the Commission at any point in time to efficiently monitor and evaluate the effective application of the automatic exchange of information on advance rulings and advance pricing arrangements and to ensure that rulings do not have a negative impact on the internal market . Such communication will not discharge a Member State from its obligations to notify any state aid to the Commission.

(8a)

Before 1 October 2018 Member States should provide the Commission with an ex-post analysis of the effectiveness of this Directive.

(9)

Feedback by the receiving Member State to the Member State sending the information is a necessary element of the operation of an effective system of automatic information exchange. It is therefore appropriate to provide for measures enabling the provision of feedback in cases where the information has been used and where no feedback can be provided under other provisions of Directive 2011/16/EU.

(9)

Feedback by the receiving Member State to the Member State sending the information is a necessary element of the operation of an effective system of automatic information exchange , as it encourages administrative cooperation between Member States . It is therefore appropriate to provide for measures enabling the provision of feedback in cases where the information has been used and where no feedback can be provided under other provisions of Directive 2011/16/EU. That would make it more difficult to circumvent the information for purposes of fraud.

(10)

A Member State should be able to rely on Article 5 of Directive 2011/16/EU as regards the exchange of information on request to obtain additional information, including the full text of advance cross-border rulings or advance pricing arrangements, from the Member State having issued such rulings or arrangements.

(10)

A Member State should be able to rely on Article 5 of Directive 2011/16/EU as regards the exchange of information on request to obtain additional information, including the full text of advance rulings or advance pricing arrangements, from the Member State having issued such rulings or arrangements and any texts which effect subsequent changes .

(10a)

The expression ‘information that is foreseeably relevant’ as referred to in Article 1(1) of Directive 2011/16/EU should be clarified in order to prevent interpretations whose purpose is tax avoidance.

(11)

Member States should take all measures necessary to remove any obstacle that might hinder the effective and widest possible mandatory automatic exchange of information on advance cross-border rulings and advance pricing arrangements.

(11)

Member States should take all measures necessary to remove any obstacle that might hinder the effective and widest possible mandatory automatic exchange of information on advance rulings and advance pricing arrangements.

(12a)

In order to enhance transparency for citizens, the Commission should publish a summary of the main tax rulings agreed in the previous year, based on information contained in the secure central directory. That report should include at least a description of the issues addressed in the tax ruling, a description of the criteria used to determine an advance pricing arrangement and identify the Member State(s) most likely to be affected. In doing so, the Commission should comply with the confidentiality provisions laid down in this Directive.

(12b)

It is desirable that the Member States ask their competent authorities to allocate human resources from among their existing staff to gather and analyse such information.

(12c)

By 26 June 2017, a Union-wide register for beneficial ownership should be operational, which will aid in tracking down possible tax avoidance and profit shifting. The creation of a central register for automatic exchange of advance tax rulings or price arrangements between Member States, which would be accessible to tax authorities and responsible administrations in the Member States and the Commission would be significant.

(15)

The existing provisions regarding confidentiality should be amended to reflect the extension of mandatory automatic exchange of information to advance cross-border rulings and advance pricing arrangements.

(15)

The existing provisions regarding confidentiality should be amended to reflect the extension of mandatory automatic exchange of information to advance rulings and advance pricing arrangements.

(15a)

It is essential that the fundamental principle of the Member States’ sovereignty in tax matters is upheld where direct taxes are concerned and that the current proposal does not jeopardise the subsidiarity principle.

(16)

This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. In particular, this Directive seeks to ensure full respect for the right to the protection of personal data and the freedom to conduct a business.

(16)

This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. In particular, this Directive seeks to ensure full respect for the right to the protection of personal data and the freedom to conduct a business. The personal data should be processed for specific, explicit and legitimate purposes and only if adequate, relevant and not excessive in relation to the purposes. Any restriction of those rights should only be imposed provided that the conditions set out in the Charter of Fundamental Rights are complied with. Subject to the principle of proportionality, restrictions may be imposed provided that they comply with the necessary and true objectives of general interest recognised by the law, or satisfy the need to protect the rights and liberties of others.

(17)

Since the objective of this Directive, namely the efficient administrative cooperation between Member States under conditions compatible with the proper functioning of the Internal Market, cannot be sufficiently achieved by the Member States but can rather, by reason of the uniformity and effectiveness required, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

(17)

Since the objective of this Directive, namely the efficient administrative cooperation between Member States under conditions compatible with the proper functioning of the Internal Market, cannot be sufficiently achieved by the Member States but can rather, by reason of the uniformity and effectiveness required, be better achieved at European level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

(a)

for the purposes of Article 8(1) and Article 8a, the systematic communication of predefined information to another Member State, without prior request, at pre-established regular intervals. For the purposes of Article 8(1), reference to available information relates to information in the tax files of the Member State communicating the information, which is retrievable in accordance with the procedures for gathering and processing information in that Member State.

(a)

for the purposes of Article 8(1) and Article 8a, the systematic communication of predefined information to another Member State, without prior request, which, in respect of Article 8(1), takes place at pre-established regular intervals. For the purposes of Article 8(1), reference to available information relates to information in the tax files of the Member State communicating the information, which is retrievable in accordance with the procedures for gathering and processing information in that Member State.

14.

‘advance cross-border ruling’ means any agreement, communication, or any other instrument or action with similar effects, including one issued in the context of a tax audit, which:

14.

‘advance ruling’ means any agreement, communication, or any other instrument or action with similar effects, including one issued in the context of a tax audit and irrespective of its formal, informal, legally binding or non-binding nature , which:

(a)

is given by, or on behalf of, the government or the tax authority of a Member State, or any territorial or administrative subdivisions thereof, to any person;

(a)

is given or published by, or on behalf of, the government or the tax authority of a Member State, or any territorial or administrative subdivisions thereof, on which one or more persons can rely ;

(c)

relates to a cross-border transaction or to the question of whether or not activities carried on by a legal person in the other Member State create a permanent establishment, and;

(c)

relates to a transaction or to the question of whether or not activities carried on by a legal person in the other Member State create a permanent establishment, and;

15.

‘advance pricing arrangement’ means any agreement, communication or any other instrument or action with similar effects, including one issued in the context of a tax audit, given by, or on behalf of, the government or the tax authority of one or more Member States, including any territorial or administrative subdivision thereof, to any person that determines in advance of cross-border transactions between associated enterprises, an appropriate set of criteria for the determination of the transfer pricing for those transactions or determines the attribution of profits to a permanent establishment.

15.

‘advance pricing arrangement’ means any agreement, communication or any other instrument or action with similar effects, including one issued in the context of a tax audit, given or published by, or on behalf of, the government or the tax authority of one or more Member States, including any territorial or administrative subdivision thereof, on which one or more persons can rely, that determines in advance of transactions between associated enterprises, an appropriate set of criteria for the determination of the transfer pricing for those transactions or determines the attribution of profits to a permanent establishment.

16.

For the purpose of point 15 ‘cross-border transaction’ means a transaction or series of transactions involving associated enterprises which are not all resident for tax purposes in the territory of a single Member State.

(a)

in respect of the information exchanged pursuant to paragraph 1: within one month following the end of the quarter during which the advance cross-border rulings or advance pricing arrangements have been issued or amended.

(a)

in respect of the information exchanged pursuant to paragraph 1: immediately and at the latest one month after the advance rulings or advance pricing arrangements have been issued or amended.

(b)

in respect of the information exchanged pursuant to paragraph 2: before 31 December 2016;

(b)

in respect of the information exchanged pursuant to paragraph 2: within three months following the entry into force;

(b)

the content of the advance cross-border ruling or advance pricing arrangement, including a description of the relevant business activities or transactions or series of transactions;

(b)

the content of the advance ruling or advance pricing arrangement, including a description of the relevant business activities or transactions or series of transactions;

(ba)

the criteria used to determine the advance ruling or the advance pricing arrangement, as well as the limitation in time thereof, if any, or the circumstances under which the decision can be revoked;

(d)

the identification of the other Member States likely to be directly or indirectly concerned by the advance cross-border ruling or advance pricing arrangement;

(d)

the identification of the other Member States likely to be directly or indirectly concerned by the advance ruling or advance pricing arrangement;

(e)

the identification of any person, other than a natural person, in the other Member States likely to be directly or indirectly affected by the advance cross-border ruling or advance pricing arrangement (indicating to which Member State the affected persons are linked).

(e)

the identification of any person, other than a natural person, in the other Member States likely to be directly or indirectly affected by the advance ruling or advance pricing arrangement (indicating to which Member State the affected persons are linked).

(ea)

as soon as it is available, the European Tax Identification Number (TIN) as outlined in the Commission's Action Plan on the fight against tax fraud and tax evasion of 2012;

(eb)

a description of the set of criteria used and of the arrangements applicable where, by means of a de jure or de facto mechanism, the taxpayer's taxable base is reduced by derogation from the standard rules of the Member State issuing the opinion, involving, for example, authorisation for a faster rate of amortisation than is customary or deduction of costs not directly incurred or not actually incurred by the taxpayer;

(ec)

a description of the set of criteria used and of the arrangements applicable where a taxpayer is granted a rate of taxation which is lower than the standard rate in the Member State issuing the opinion;

(ed)

a description of the set of criteria used and of the mechanism applied where a party to that mechanism is established in a third country in which taxation is either non-existent or much more favourable.

(8a)

‘Article 23b

Penalties

The Commission shall examine all penalties to be established in the event of refusal or omission of information exchange.’

(9a)

‘Article 25a

OECD developments

This Directive shall be compatible with OECD developments and shall take into consideration the OECD comprehensive set of rules contained in the Standard for Automatic Exchange of Financial Account.’

(9b)

‘Article 25b

Further action of Member States

This Directive shall not preclude Member States from taking further action to develop domestic or agreement-based provisions for the prevention of tax avoidance.’

(9c)

‘Article 27

Reporting

Every three years after the entry into force of this Directive, the Commission shall submit a report on the application of this Directive to the European Parliament and to the Council.’