EU Commission To Expand Info Sharing Rules On Direct Tax

by Ulrika Lomas, Tax-News.com, Brussels

11 September 2003

The European Commission has proposed new measures to improve cross-border information sharing procedures between member states concerning fraud in the sphere of direct taxation (income tax, corporate tax and capital gains tax). The move would increase the amount of activity members could undertake on each others' behalf and corrects weaknesses present in the existing Directive on Mutual Assistance.

"Modern technology and increased cross-border activity have made it more important than ever for information exchange and co-operation between tax administrations to be improved," states the Commission. "A Council report on tax fraud of June 2000 noted that the existing EU directives and regulations were inadequate for the combat of fraud, which in the direct tax area involves, in particular, problems of under-invoicing and over-invoicing (transfer pricing). This proposal would complement other recently adopted EU legislation in the field of information exchange, the agreement on savings income (see IP/03/787) and the Regulation on strengthening administrative co-operation in the VAT area (see MEMO/03/36)."

Meanwhile Frits Bolkestein, Commissioner for Taxation, comments: “The progressive removal of cross-border tax obstacles for individuals and businesses operating within the Internal Market must not provide increased opportunities for tax dodgers and cheats. Every taxpayer must pay what he or she owes and strengthened co-operation between Member States is the best way to ensure this”.

The proposal aims to speed up the operation of mutual assistance between Member States and make it more effective.

• It contains four elements: it introduces the possibility for Member States to conduct simultaneous control checks of the locally based activities of taxpayers operating in several countries of the EU and to share the information obtained with each other.
• It would ensure that, when a State has to initiate enquiries in order to obtain information needed by another country's tax agency, it would treat the enquiry as it were acting on its own behalf (because the procedures are generally less complicated in domestic cases and the information should thus be provided more quickly).
• It would ensure that a Member State that has been requested to supply information would, if requested, carry out certain administrative procedures on behalf of another Member State such as serving the taxpayer with an amended assessment.

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