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EU Committee To Consider VAT Response To Paradise Papers

by Jason Gorringe,, London

28 February 2018

Value-added tax avoidance will be considered by a new EU anti-tax avoidance committee, the creation of which is expected to be endorsed at an EU parliamentary plenary on March 1, 2018.

The Committee is being established to follow up after the leak of confidential files of international law firm Appleby – the so-called Paradise Papers.

In a "proposal for a decision," published on February 26, 2018, ahead of the plenary, the EU has set out what the proposed mandate of the Committee will cover. According to the document, among other things, the Committee will "assess how EU VAT rules were circumvented in the framework of the Paradise Papers and to evaluate in a more general way the impact of VAT fraud and administrative cooperation rules in the Union." It will also be tasked with preparing an analysis of the exchange of information framework in place in the EU and coordination policies between member states and Eurofisc, the anti-fraud agency.

Earlier, when announcing that the Committee will be established, Philippe Lamberts, the co-president of the Greens/EFA political group, said: "The Paradise Papers showed that there is clearly unfinished work to do if we are to secure tax justice in Europe. We want to make sure that national treasuries are able to collect the money that is needed to build shared prosperity across Europe."

"The European Parliament's inquiry committee into the Panama Papers has already produced a strong action plan for clamping down on tax dodging… This new committee can now make sure this progress is not lost and that these much-needed measures are implemented by the Commission and by governments across Europe."

In the area of value-added tax, the Paradise Papers resulted in allegations of widespread VAT avoidance on aircraft leasing. The allegations were made by media associated with the International Consortium of Investigative Journalists, who broke the "Paradise Papers" story, and center on the importation of business jets via the Isle of Man into the EU.

When these allegations first emerged, a press release was issued by the Isle of Man's Cabinet Office, which said the UK's Treasury Department had been invited to conduct an assessment. It said the island had already conducted an internal review, which showed no evidence of wrongdoing, or to suggest the Isle of Man's Customs and Excise Division has been involved in the mistaken refunding of VAT.

The Isle of Man's Chief Minister, Howard Quayle, emphasized back when the allegations surfaced that the VAT treatment on importing aircraft into the EU is a highly technical and complex area, and that the Isle of Man follows the same policy, laws, and rules as the UK.

Subsequently French aircraft manufacturer Dassault Aviation issued a statement on its tax arrangements in response to media coverage.

The company, which was accused in media as enabling its clients to circumvent French VAT on plane purchases by importing the aircraft into the EU through the Isle of Man, said at the time it "complies with all of its tax obligations and in this respect pays taxes and duties in the countries where it conducts its industrial activities, i.e. chiefly in France and in the United States, via its American subsidiary. No tax optimization structure has been set up by the company in order to evade French taxes or French VAT."

It said: "Between 2008 and 2012 only, Dassault Aviation incorporated seven leasing companies in the Isle of Man, to cover the financing needs of customers amid the financial crisis. This represented two percent of Falcons delivered worldwide over the period 2008 to 2012. The Isle of Man was chosen for reasons related to operational flexibility and corporate management. The Isle of Man is with respect to VAT a European Community territory and is not listed among the non-cooperative tax jurisdictions."

"Whether for direct sales or financing of its Falcon business jets, Dassault Aviation conducts out the necessary checks and formalities in compliance with the laws and regulations in force, with all such operations being regularly checked by the French tax authorities. Dassault Aviation keeps a scrutiny on its operations leading to the delivery of aircraft to its clients. The choice of country of registration and the mode of operations of aircraft delivered are the exclusive prerogative of clients."

TAGS: Isle of Man | compliance | tax | business | value added tax (VAT) | tax avoidance | VAT legislation | VAT cross-border transactions | law | legislation | France | United States | regulation | Panama | VAT compliance matters | Europe | Invest

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