1. Anti-abuse in a changing world: what policy line for the EU?
Philip Kermode
Director
Analyses and Tax Policies
European Commission
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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
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3. A coordination initiative
COM(2007) 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
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4. 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
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5. 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)
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6. 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
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7. 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!
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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…
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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?
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