An EU plan to tackle corporate tax evasion was a compromise that suited Malta, Finance Minister Edward Scicluna told the Times of Malta.
The European Council yesterday reached an agreement on proposals aimed at tackling what is known as aggressive tax planning.
The draft directive, which EU Member States unanimously backed after a lengthy debate, is the latest in a number of measures designed to prevent corporate tax avoidance.
The agreement will see financial intermediaries such as tax advisers, accountants and lawyers that design or promote tax planning schemes start being obliged to report them to the authorities in the country they are based. Member States will then be required to automatically provide the information they receive to a centralised database.
This, EU members believe, will enable new risks of tax avoidance to be determined earlier and measures to be taken to block harmful arrangements.
Speaking to this newspaper shortly after the vote was taken in Brussels, Prof. Scicluna said he was glad that an acceptable compromise had been reached after having defended Malta’s position.
Measures to block harmful arrangements
“While we took exception with Malta being mentioned in certain ways, we maintain that the level of tax set in a jurisdiction is an issue that falls under a country’s own sovereignty. That said, this agreement is something we are on board with as we do not agree with aggressive tax planning,” he said.
Asked if the new rules could affect Malta’s competitiveness, Prof. Scicluna said the country had no interest in facilitating tax avoidance. Competitiveness, he added, had nothing to do with the fight on aggressive tax planning.
Member States will be obliged to impose penalties on intermediaries that do not comply with the new transparency measures once they are transposed into national law.
EU Member States have complained that they have found it increasingly difficult to protect their tax bases as cross-border tax planning structures become ever more sophisticated.
The draft directive is aimed at preventing aggressive tax planning by enabling increased scrutiny of the activities of tax intermediaries.
The requirement to report a scheme will not imply that it is harmful but that it may be of interest to tax authorities for further scrutiny.
If the rules are approved, banks and accountants that do not report potentially harmful cross-border tax schemes could face “effective, proportionate and dissuasive penalties” under the draft law.
“We hope we are able to reach an agreement on rules on tax intermediaries and transparency of potentially aggressive tax schemes which will need to be reported,” European Commission vice-president Valdis Dombrovskis said.
The new reporting requirements will come into force on July 1, 2020.
Member States will be obliged to exchange information every three months, within one month from the end of the quarter in which the information was first filed.
The first automatic exchange of information will be completed by October 31, 2020.
The directive requires unanimity within the Council, after consulting the European Parliament.