14 Feb

ICAEW: EC needs to bring clarity to tax avoidance proposals

Responding to the draft package of Anti-Tax Avoidance measures from the European Commission, Ian Young, ICAEW Technical Manager, International Tax, said:

We need a global tax regime that is regarded as fair and fits the 21st century business environment. The G8, G20 and OECD have all worked hard towards achieving this, and it is good to see the European Commission draft anti-tax avoidance Directive which aims to provide a consistent implementation across all the EU member states.

However, the latest proposals from the Commission do not yet provide a clear, deliverable pathway for EU members. Some of the detailed provisions seem likely to produce uncertainty.

For example there is confusion between the Controlled Foreign Corporations (CFC ) rule – that would only take action against “wholly artificial arrangements” where there is “the essential purpose of obtaining a tax advantage

The equivalent test in the proposed General Anti Avoidance Rule (GAAR) – which is somewhat different and is likely to create some confusion. In the UK, the point of the GAAR is to catch actions not caught by specific anti avoidance measures.  We also have concerns about some of the other provisions in the anti-tax avoidance Directive.

The Commission also announced a number of additional measures, some of which should facilitate a more coordinated response to anti-tax avoidance, including a more standard approach to identifying non-cooperative countries.

Ian Young concluded:

We hope the next phase of the EU legislative process will enable wide consultation amongst member states, practitioners and professional bodies to ensure the final version of any legal text will have been scrutinised by the people it is going to affect

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