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EU Agrees New Mutual Assistance Law

by Ulrika Lomas,, Brussels

09 December 2010

The European Union Economic and Financial Affairs Council has reached a political agreement on a draft directive aimed at strengthening administrative cooperation in the field of direct taxation between EU member states.

The text of the new law provides for an overhaul of directive 77/799/EEC, on which administrative cooperation in the field of taxation has been based since 1977 and will extend cooperation between member states to cover taxes of any kind.

The directive will ensure that the Organization for Economic Cooperation and Development (OECD) model tax convention on income and capital is implemented in the EU as regards the exchange of information on request. It will thus prevent a member state from refusing to supply information concerning a taxpayer of another member state on the sole grounds that the information is held by a bank or other financial institution.

"In the light of greater taxpayer mobility and a growing volume of cross-border transactions, the draft directive sets out to fulfil the member states' growing need for mutual assistance – especially via the exchange of information – so as to enable them to better assess taxes due," the Council stated.

In order to allay the risk of member states making imprecise requests aimed at detecting irregularities ("fishing expeditions"), the Council agreed to identify in the directive certain details that must be specified in requests for information, namely the identity of the person under investigation and the tax purpose for which the information is sought. These details are however less stringent than in the OECD convention, thus allowing for more scope for information exchange.

The Council agreed on a step-by-step approach aimed at eventually ensuring unconditional exchange of information for eight categories of income and capital. From 2015, member states will communicate automatically information for a maximum of five categories, provided that that information is readily available (they will however not be required to send more information than they receive in return). By July 1, 2017, the Commission will provide a report and, if need be, a proposal. When examining that proposal, the Council will examine the possibilities for removing the condition of availability and extending the number of categories from five to eight.

The Council will adopt the directive without further discussion at a forthcoming meeting, once the text has been finalized.

TAGS: tax | law | enforcement | European Union (EU) | Europe

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