The European Commission will this week propose that aggressive tax planning schemes by intermediaries who help reduce clients’ burdens and conceal money offshore must be reported to the authorities.
A draft proposal seen by this newspaper shows that the European Commission is proposing to place an obligation on intermediaries to disclose to the tax authorities “aggressive tax planning arrangements” they set up for clients.
In an explanatory memorandum annexed to the proposal, the Commission says recent leaks, including the Panama Papers, have highlighted how certain intermediaries appear to have actively helped their clients to make use of aggressive tax planning arrangements to reduce the tax burden and conceal money offshore.
READ: Taxman recovers €10m from Panama Papers, Swiss Leaks
The obligations to notify the tax authorities would be limited to cross-border situations, involving either more than one EU country or an EU member State and a third country.
Disclosed information would be exchanged automatically among national tax authorities, which would have access to a central directory.
Statistics provided to this paper by the local tax authorities in March show the taxman recovered €10 million as a result of investigations into the Swiss leaks and Panama Papers data.
The Panama Papers show that scores of Malta-based intermediaries used offshore jurisdictions synonymous with tax evasion and money laundering to stash their clients’ wealth.
Both Tourism Minister Konrad Mizzi and the Prime Minister’s chief of staff, Keith Schembri, had failed to declare their financial set-ups to the Maltese tax authorities.
In cases where professional secrecy rules apply to intermediaries, the proposed directive envisions the disclosure obligation being shifted to the taxpayer making use of the financial set up.
The disclosure obligations are meant to serve as a “deterrent”.
To bolster the deterrent effect, Brussels is proposing that the relevant information should reach the tax authorities before a taxpayer’s financial scheme is actually implemented.
On this premise, the Commission says the reportable arrangements should be disclosed within five days, beginning on the day after such arrangements become available to a taxpayer for implementation.
In a reaction to the Commission’s proposals, MEP Sven Giegold, who is the European Greens spokesman on financial and economic policy, said the proposal could be more ambitious if it contained an obligation for auditors to also report tax arrangements they discovered when they signed off taxpayers’ financial statements.
Mr Giegold called on EU members to scale up resources in their tax administrations to have adequate resources to track down tax evaders.
The MEP noted that disclosure to tax authorities would only start once the directive had been transposed into national law but intermediaries would have to retroactively disclose tax arrangements.
Provisions in the Commission’s proposals are set to apply as of January 1, 2019.
jacob.borg@timesofmalta.com