Anti-abuse in a changing world: what policy line for the EU? Philip Kermode Director Analyses and Tax Policies European Commission Présentation Powerpoint

Présentation Powerpoint The changing world The financial crisis - Revenue shortfalls in Member States - Budget deficits - Where will the revenue needed come from? - Protectionist reflexes Good governance issues (Commission Communication COM(2009) 201) - G20 - New mutual assistance proposals - Coordination of tax policy Présentation Powerpoint

A coordination initiative COM(2007)785 - 10 December 2007 A coordination initiative – Framework “Coordination Communication” COM(2006)823 – 19 December 2006 Development of the ECJ case law -- a need to strike a proper balance between the public interest of combating abuse and the need to avoid disproportionate restrictions on cross-border activity within the EU for improved coordination in relation to third countries Présentation Powerpoint

Purpose of the Communication To prompt a more general debate on appropriate responses to the challenges faced by Member States To provide a framework for further discussion with Member States and stakeholders to explore the practical application of case law principles beyond the particular circumstances in which they have arisen; and the scope for possible coordinated solutions in this area Présentation Powerpoint

Key principles flowing from the case law Prevention of tax avoidance or abuse can constitute a justification for a restriction on EC Treaty freedoms Anti-abuse rules must however be suitable (i.e. capable of preventing avoidance/abuse) accurately targeted at wholly artificial arrangements (i.e. not too broad brush) proportional to the aim sought (e.g. opportunity to produce evidence of commercial motives, and; to make subject to independent judicial review) Présentation Powerpoint

Constructive remedies Regrettable if measures designed to curb cross-border tax avoidance were simply extended to purely domestic situations (where no risk of abuse exists) Need for constructive solutions to the challenges faced by Member States Présentation Powerpoint

Application of anti-abuse rules in relation to third countries Application of anti-abuse rules beyond the geographical limits of the EU generally less restricted by the EC Treaty (as only free movement of capital applies). To protect their tax bases Member States should seek to improve the coordination of anti-abuse measures in relation to third countries. Any chain is only as strong as its weakest link! Présentation Powerpoint

Présentation Powerpoint Where to go from here (1)? ECJ case law development warrants a general review by Member States of their anti-abuse rules Scope to explore application of case law principles - beyond particular facts of cases Coordination is a flexible approach: (e.g. common definitions, admin co-operation, sharing of best practices, and better coordination re third countries) Application of anti-abuse rules within the EU is an area where common solutions embraced by all 27 Member States may prove hard to find… Présentation Powerpoint

Présentation Powerpoint Where to go from here (2)? Member States’ response Discussions between interested Member States Code of Conduct Group (for business taxation) Council working party Resolution? Business response Support? Suggestions? Présentation Powerpoint