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TAXATION : COMMISSION CRACKS OPEN BANKING SECRECY.

This is just a "limited step towards abolishing banking secrecy," but the European Commission would at least like to prevent member states from invoking banking secrecy abusively as a pretext for refusing to cooperate with each other, explained Taxation Commissioner Laszlo Kovacs, on 2 February, as he presented two draft directives meant to combat tax fraud. The aim is to improve mutual assistance between member states' tax authorities in the assessment and recovery of taxes. The two proposals will have to be adopted unanimously by the 27 member states after consultation of the European Parliament.

The first proposal is for a Council directive concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures. The second puts in place administrative cooperation for the assessment and recovery of taxes (proposal for a Council directive on administrative cooperation in the field of taxation).

Both proposals are very wide in scope, covering all taxes and duties, including mandatory social security contributions (the directive on administrative cooperation excludes indirect taxes already covered by EU legislation on administrative cooperation between member states). The proposed scheme establishes clearer and more precise rules for cooperation. It sets up a compulsory system for spontaneous exchange of information on tax refunds made by national tax authorities to non-residents. Each member state will be obliged to "designate a single central liaison office, which shall have principal responsibility for contacts with other member states and the Commission".

Tax administration officials from one member state should be allowed to participate actively in administrative enquiries on the territory of another member state, enjoying the same inspection powers. The question of banking secrecy being invoked to refuse cross-border cooperation is one of the main problems addressed by these proposals. Based on the OECD Model Tax Convention, the texts contain a provision whereby a member state cannot refuse to provide information concerning a taxpayer of the requesting member state solely because the information is held by a bank or other financial institution. As such, the administrative cooperation proposal abolishes banking secrecy in relations between tax authorities when a requesting member state is assessing the tax situation of one of its resident taxpayers. The proposals do not concern the banking secrecy that may be invoked by taxpayers in dealings with the tax authorities of their own country, explained Laszlo Kovacs.

The two proposals are available at www.europolitics.info > Search = 242834

Background

For recovery, the Commission notes that arrangements for mutual assistance (Directive 76/308/EEC of 15 March 1976, codified by Directive 2008/55/EC of 26 May 2008 on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures) have proved insufficient to meet the requirements of the internal market. National provisions are only applicable on the respective territory of each member state and the administrative authorities do not have the possibility to recover taxes outside their own member state. At the same time, the free movement of persons and capital is on the increase and fraudsters take advantage of these loopholes to organise their insolvency in the country where they have tax debts.

For assessment of the amount of taxes due, the Commission states that Directive 77/799/EEC no longer responds to needs in the field of administrative cooperation, while Directive 2003/48/EC on the taxation of savings income concerns only a certain type of savings.
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Publication:European Report
Date:Feb 3, 2009
Words:565
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