17 Taxation
| (30419)
6035/09
COM(09) 29
| Draft Council Directive on administrative cooperation in the field of taxation
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| Legal base | Articles 93 and 94 EC; consultation; unanimity
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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 9 November 2009
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| Previous Committee Report | HC 19-ix (2008-09), chapter 5 (4 March 2009)
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| To be discussed in Council | Possibly 2 December 2009
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
17.1 Since 1977 there has been a Directive, the Mutual Assistance
Directive, 77/799/EEC, as amended, providing for cooperation between
Member States in relation to the administration of taxation.
17.2 This draft Directive would replace the present
Mutual Assistance Directive in order to extend the scope and improve
the effectiveness of exchange of information and mutual assistance,
as part of the Community drive to tackle cross-border tax evasion
and other forms of non-compliance or avoidance. The new Directive
would:
- unlike the existing Directive,
which is limited to direct taxes and taxes on insurance premiums,
extend to all types of taxes, other than VAT and excises, which
are covered by separate legislation, and social security (national
insurance) contributions;
- provide for exchange of information between Member
States, on request, for tax assessment or compliance purposes
and for procedures for such exchanges, including time limits for
meeting requests;
- provide for spontaneous exchange of information;
- allow automatic exchanges of information between
all Member States on specific categories of income and capital
to be established through a comitology procedure;[61]
- set out, more fully than at present, arrangements
for the presence and participation of officials of one Member
State in enquiries in another Member State and provide for simultaneous
enquiries and checks and service of documents;
- require feedback on cases and strengthen provisions
on sharing best practice;
- introduce OECD standards of access to bank information
and abolish the ability of Member States to refuse information
requests on the grounds of bank secrecy;
- introduce standard forms and formats for information
exchange, so as to improve efficiency and effectiveness;
- enable all Member States to benefit equally from
information received or obtainable from third countries; and
- extend the present disclosure rules to allow
sharing of information received with other authorities within
the Member State, in so far as national law permits.
17.3 When we considered this proposal, in March 2009,
we heard that the Government:
- welcomed the draft Directive,
given that it would be expanding the scope of the Mutual Assistance
Directive, which supported Government objectives in tackling tax
evasion and avoidance;
- thought the proposed Directive should enhance
cooperation between Member States and strengthen the Community's
contribution to tackling this global problem;
- particularly welcomed the inclusion of OECD standards
of transparency and access to bank information;
- wished to consider some aspects of the proposal
further, such as the role of the Commission and the comitology
procedure, to ensure that the Directive would achieve its objective
of improved cooperation while protecting national sovereignty
in tax matters; and
- wished to explore carefully the proposed extension
of automatic exchange of information in order to understand whether
this would introduce new reporting burdens on industry.
We commented that this proposed Directive appeared
to offer improved intra-Community cooperation against tax evasion
and avoidance and we noted the Government's welcome for it. However,
before considering the document further, we wanted to hear the
outcome of the Government's examination of aspects of the draft
Directive to which our attention had been drawn. Meanwhile the
document remained under scrutiny.
The Minister's letter
17.4 The Financial Secretary to the Treasury (Mr
Stephen Timms) writes now to tell us that the Government has secured
significant improvements in the draft text in Working Group discussions
and, consequently, is ready to support the adoption of the Directive
by the Council at an early date — provided that certain
conditions are met. He says that the most important development
relates to the question of the impact on industry and the implications
of leaving decisions on automatic exchange of information to a
comitology procedure.
17.5 The Minister explains that:
- under the Commission proposal
the impact on industry would depend very much on the scope of
automatic exchange of information — if automatic exchange
were confined to information within the possession of tax authorities,
which the tax authority collected as part of its normal domestic
reporting arrangements, then there would be no significant impact
on industry;
- if, on the other hand, automatic exchange of
information were extended to categories of income or capital that
are not currently subject to routine reporting by industry, then
the impact could be considerable in terms of the costs of setting
up new reporting systems and the associated information technology;
- in leaving decisions on these matters to a comitology
procedure, under which decisions would not require unanimity,
there would be a risk that compulsory automatic exchange of information
would be introduced for categories of income and capital that
were not currently reported on by banks or other sectors of industry
in respect of their customers or shareholders, such as dividends
or capital gains (which in the UK are subject to self-assessment
rather than third party reporting);
- this is something that the Government has pointed
out in working group discussions and it is also a matter of concern
to other Member States;
- in view of these concerns the working group has
come to the view that decisions on automatic exchange of information
should not be made under a comitology procedure;
- instead the proposed Directive itself should
make clear that automatic exchange of information should be confined
to certain specific categories of income and capital (except where
Member States agree other arrangements bilaterally);
- discussions are continuing on the precise categories
to be subject to automatic exchange of information — the
Government's view is that these should be confined to categories
where information is readily available to the Member State providing
the information; and
- in particular, it would wish to ensure that any
compulsory automatic exchange of information would not extend
to areas where new reporting systems would be necessary for UK
industry.
17.6 The Minister tells us that the Presidency was
expected to seek political agreement at the ECOFIN Council on
10 November 2009. However, two Member States that currently have
banking secrecy and are hesitant about any extension of automatic
exchange of information were likely to block the proposal. The
Minister continues, in the context of our still holding the document
under scrutiny, that:
- in view of the way discussions
were progressing, the Government feels confident that the final
draft presented by the Presidency will meet its concerns that
there should be no disproportionate burdens on industry;
- as a leading supporter of transparency and exchange
of information — a G20 priority — it would not wish
to actively oppose the proposed Directive;
- in the event that other Member States do not
block political agreement, the Government would come under pressure
to lift its Parliamentary scrutiny reserve; and
- in these circumstances the Government would not
wish to prevent agreement.
We understand that in the event the Presidency was
unable to secure the political agreement it sought at the ECOFIN
Council this month and that it is possible that this will be attempted
again at the ECOFIN Council on 2 December 2009.
Conclusion
17.7 We note that the potential breach of the
scrutiny reserve resolution, to which the Minister alerted us,
did not occur.
17.8 As for the substance of the proposal, we
recognise the improvements the Government has secured, or is confident
of securing, have no further questions to ask and now clear the
document.
61 Comitology is the system of committees which oversees
the exercise by the Commission of powers delegated to it by the
Council and the European Parliament. Comitology committees are
made up of representatives of the Member States and chaired by
the Commission. There are three types of procedure (advisory,
management and regulatory), an important difference between
which is the degree of involvement and power of Member States'
representatives. So-called "Regulatory with Scrutiny",
introduced in July 2006, gives a scrutiny role to the European
Parliament in most applications of comitology. Back
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