EU Finance Ministers talk BEPS and CBCR

Today saw the latest ECOFIN meeting under the Netherlands presidency of the EU.

A key item on the agenda was the first real discussion by the Finance Ministers of 24 of the EU Member States, on the BEPS inspired tax proposals of the European Commission. Pierre Moscovici was in attendance to present the Commission proposals and hear views.

Of all the proposals, the one that got the most specific debate was country-by-country reporting (CBCR), with George Osborne being clear on his view of public CBCR.

As EU President, the meeting was chaired by Netherland Finance Minister Jeroen Dijsselbloem.

He confirmed ECOFIN’s aim of reaching agreement on the tax proposals by the May ECOFIN meeting, whilst acknowledging that some countries are already adopting BEPS proposals. He raised the usual concern that uncoordinated unilateral tax reform may lead to a less satisfactory outcome, and so EU Member States should act jointly and quickly on this.

Piere Moscovici then set out the Commission proposals and his “love of tax”.

He agreed that there is a need to act quickly, and thought that the ECOFIN timetable is ambitious but realistic.

He believes the Commission proposals offer a robust EU framework to implement BEPS in line with requirements of the single market, meet the expectations of public opinion, and are balanced, realistic and feasible. I suspect some of those points are debatable.

On CBCR he hailed it as a key element of the Tax Transparency Revolution, and that it gives a clear signal to EU citizens that the EU is working together to tackle tax avoidance.

The Commission proposal is for OECD style CBCR, with the information shared only between tax authorities. But he sees this as the first step. Many MEPs want to go further, with full public CBCR. The Commission will be pragmatic, but Moscovici made it clear once more that he is personally in favour of public CBCR, provided it can be shown to not harm competitiveness.

On the tax avoidance proposals, he came back to the core principle that multinationals will have to pay taxes where the profits are actually generated. “It is what we want, and what is expected of us.”

On 3^rd countries, and particularly those seen as “uncooperative”, he said there is a need for a clearer approach. The Commission published a list last June, which he said had achieved two things.

Firstly, it showed how useful if it to have a list, as he saw changes in behaviour as a result.

The other achievement, and probably one to be less proud of in my opinion, is that is showed the inherent weaknesses in some of the individual lists published by some Member States.

The Commission clearly sees this as the driver for a single EU list, to be used to promote good global tax governance. “We need this to have a vigorous debate with 3^rd countries.”

To the Finance Ministers, he said, “Citizens are watch us closely. They are watching you closely. We are the driving force behind the BEPS initiative.” I suspect the OECD might have put that slightly differently.

It was then the turn of the Finance Ministers.

In general they were supportive, although there were a number who were concerned about the EU going beyond the OECD proposals.

There were a number of key themes:

• General support for BEPS, and implementation of the BEPS proposals
• Determination that tax remains a national issue
• Support for a coordinated approach
• The benefits of achieving BEPS implementation, and particularly CBCR quickly
• Caution over going beyond the OECD BEPS proposals, at the expense of competitiveness and unintended consequences

More specific comments came from Germany, UK, Spain and Luxembourg.

Germany (Minister of Finance, Wolfgang Schäuble)

Wolfgang Schäuble called for the Commission proposals to be split into two separate packages.

A package to implement the OECD BEPS proposals

A second package to implement anything going above and beyond what the OECD proposed.

He also urged caution, so as to avoid countries adopting their own BEPS measure, only to find that slightly different EU BEPS measures have to be adopted into domestic legislation.

UK (Chancellor, George Osborne)

George Osborne repeated the UK mantra of “low taxes, but that those taxes should be paid”.

He said multinationals are using out-dated international tax laws to avoid paying a fair share of taxes, but that the UK is tackling this.

“Companies paying no tax in the past are now paying some tax.”

He said that the OECD had made faster progress than anyone dared to hope at the time, and that the question now is how quickly the proposals can be implemented. He confirmed that the UK is one of the first adopters, having already started on CBCR, and that it would be better if we had an EU approach to adoption.

He agreed that there should be a focus on the OECD proposals first, but that we can go further.

On CBCR he said the UK position is that we should be moving to public CBCR, and that the UK will seek to promote this internationally.

He did express concern that the wider Commission proposals do not adequately address the issue of transfer pricing, which has been of greatest concern.

Spain (Minister of Economy and Competitiveness, Luis de Guindos)

Luis de Guindos expressed particular concern that the “black list” of countries should be handled with care, as it is very political sensitive, and will impact on the relationships with 3rd countries. He called for this aspect to be run by the Code of Conduct Group (Business taxation).

Luxembourg (Finance Minister, Pierre Gramegna)

Pierre Gramegna supported the German suggestion that the EU should first focus on implementing BEPS.

“We might end up with a level playing field within EU, but what about outside EU?”

He suggested that perhaps further reforms should be included in the CCCTB project.

Piere Moscovici then responded.

He put forward a robust defence of the overall Commission package, as you might expect. This was based on the assertion that implementation of only what the OECD proposed might leave loopholes for multinationals, by virtue of the freedoms of the EU.

“If we leave it at that, we risk no being able to protect the integrity of the internal market.”

He does not think the proposals should be rolled into the CCCTB project, as this will cause delay, and the EU should have a “higher ambition”.

Moscovici is convinced that public CBCR is where we are heading. “It is not a matter of whether, but when. It is a question of political will.”

Jeroen Dijsselbloem then wrapped up for the EU Presidency, saying the EU needs to be pragmatic but achieve as much as possible, as soon as possible.

“It is not about high or low taxes. It is about fair taxation.”