THE STATE OF THE EUROPEAN UNION

THE FIGHT AGAINST TAX EVASION AND AVOIDANCE: TOWARDS A HARMONISATION OF CORPORATE INCOME TAXES WITHIN THE EU

intention of renouncing this “privilege” until the

European Commission convinces five neighbour-

ing jurisdictions (Switzerland, SanMarino, Monaco,

Liechtenstein and Andorra) to make similar com-

mitments. During the same period, Switzerland set

about forging bilateral agreements with major

European countries

in an attempt to undermine

the effectiveness of the EUSTD.

European countries continued on this path

of vacillation until the implementation of the US

Foreign Account Tax Compliance Act (FATCA

)

got underway, at which point five major

European countries (the G5) not only adopted

one of the models of implementation contem-

plated in FATCA, but also decided to share

amongst themselves the same types of informa-

tion they would be exchanging going forward

with the United States. Other countries within

and beyond the EU quickly followed suit in a

wave of enthusiasm that led to the long-await-

ed revision of the EUSTD by the European

Council, which entered into effect in March

2014. In November of the same year, G20 lead-

ers ratified the OECD’s new global standard on

automatic information exchange, which bor-

rowed elements from both FATCA and the EU

Directives. The OECD’s Global Forum on

Transparency and Exchange of Information for

Tax Purposes will monitor for the application of

the new automatic sharing standards through

its peer review programme.

One such treaty was signed by Switzerland and the Unit-

ed Kingdom.

FATCA was enacted to curb tax abuses committed by US

taxpayers who hold assets in offshore accounts. The novelty

of this law the 30% withholding tax it imposes on foreign

financial institutions that refuse to sign disclosure agree-

ments with the US Internal Revenue Service to identify and

provide information regarding US accounts. This law, which

was ratified by the US Congress in 2010, requires financial

institutions to implement account procedures to identify US

account holders as of July 2014.

The OCDE Standard envisages that financial

institutions will report a wide range of informa-

tion to tax authorities. It likewise envisages that

source countries will exchange this information

on a regular and automatic basis with the tax

authorities of countries of residence. At the re-

cent OECD Global Forum meeting in Berlin, fif-

ty-one jurisdictions signed a multilateral compe-

tent authority agreement to automatically

exchange information as per the new OECD

Standard based on the Convention on Mutual

Administrative Assistance in Tax Matters

. It is

interesting to note that the United States has

not, to date, become a signatory to this agree-

ment.

Synergies between the EU and the OECD

were further strengthened at the ECOFIN meet-

ing held in December 2014 with the amend-

ment of another piece of key community legis-

lation related to taxation, Directive 2011/16/UE

on administrative cooperation in the field of

taxation. This document complements the

EUSTD by requiring AEOI for revenues other

than interest on savings. By extending AEOI to

items such as dividends, and capital gains, the

EU has met, and on certain points, surpassed,

the levels of transparency covered by OECD

standards.

Although it was forged between the OECD and the Eu-

ropean Council, participation in this convention is open to

developing countries and countries currently serving as tax

havens around the world.