EU says tax ruling ‘a revolution in transparency’

EU commissioner Pierre Moscovici hailed a new agreement on tax rulings "a first victory" in the "revolution in tax transparency" on Tuesday, as EU finance ministers endorsed a new EU directive on cross-border corporate tax rulings.

Under the new proposal tax authorities in each member state will be obliged to share information on tax rulings with tax authorities in other member states. The rule will also apply to all tax rulings offered five years before the directive enters into force. Poland, in particular, is understood to have raised concerns about the level of 'retroactivity' built into the plan due to the number of tax rulings it issues each year.

Under the deal struck yesterday, small and medium sized companies that have received rulings before April 2016 will be exempt from the regulation, except for those involved in financial or investment activities.

Plans for the European Commission to have an oversight role were significantly scaled back, amid concerns from member states that the Commission was not the proper competent authority to deal with tax rulings.

The new rules are set to come into effect in 2017 with member states obliged to transpose the directive into national law by the end of this year.

Speaking in Luxembourg, Commissioner Moscovici said the new rules would promote tax transparency and fairness. "Today's agreement means an end to obscure tax agreements between companies and authorities which can facilitate tax abuse. It means more openness and cooperation between member states on corporate tax rulings without any discretion on what information is shared and with whom."

Luxembourg's finance minister Pierre Gramegna, whose own country has been in the spotlight for the tax rulings it offered multinationals, said that companies had avoided paying large tax bills at a time when EU citizens had made financial sacrifices during the crisis. "Since the crisis our citizens have been asked to make considerable sacrifices in stopping national deficits," he said. "That really has become intolerable to the public at large or anyone observing this." Luxembourg which holds the six-month presidency of the European Union is awaiting the outcome of a European Commission probe into tax rulings offered to Fiat and Amazon.

Despite the relative speed with which the new directive was agreed since being first proposed in March, the centre-left Socialists and Democrats (S&D) group in the European Parliament criticised member states for having “watered down” the Commission proposal, in particular its proposal that tax rulings stretching back ten years be included. . The S& D’s spokeswoman on economic and monetary affairs, Elisa Ferreira also said that the decision to limit the role of the European Commission and deny the EU executive arm’s access to the contents of the rulings “is against the very essence of the transparency that is required in this matter.” “We should remember that multinationals are the only winners of the tax competition that countries indulge. Citizens and states are always losers.”

EU finance ministers also discussed the state of play regarding the Single Resolution Fund, revealing differences between member states on where the backstop funding should come from, should a bank need to be resolved. Finance ministers will return to the issue at next months’ Ecofin meeting.