COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Anti-Tax Avoidance Package: Next steps towards delivering effective taxation and greater tax transparency in the EU
Date: 2016-01-28
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, action programme, corporation tax, exchange of information, single market, tax avoidance, tax evasion, tax law

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 28.1.2016  COM(2016) 23 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Anti-Tax Avoidance Package: Next steps towards delivering effective taxation and greater tax transparency in the EU {SWD(2016) 6 final}  
 
 
1.  FAIR  AND  EFFICIENT  CORPORATE  TAXATION:  A  CORNERSTONE  OF  THE  SINGLE 

MARKET 

The Single Market is one of Europe’s greatest achievements, designed to allow people, 
goods,  services  and  capital  to  move  freely.  It  reduces  red  tape  for  professionals  and 
businesses  operating  cross  border.  It  provides  greater  choice  and  lower  prices  for 
consumers.  It  enables  people  to  travel,  live,  work  and  study  wherever  they  wish.  The 
Commission  has  therefore  made  it  a  priority  to  develop  a  deeper  and  fairer  Internal 
Market, which is fundamental to delivering a thriving economy that benefits all.  

As set out in the June 2015 Action Plan for a Fair and Efficient Corporate Tax System in 
the EU1, a healthy Single Market needs a fair, efficient and growth-friendly corporate tax 
system,  based  on  the  principle  that  companies  should  pay  taxes  in  the  country  where 
profits are generated. Aggressive Tax Planning undermines this principle. The majority 
of  businesses  do  not  engage  in  aggressive  tax  planning  and  suffer  a  competitive 
disadvantage to those that do. The aggressive behaviour of these companies distorts price 
signals and allows them to enjoy lower capital costs, disrupting the level playing field in 
the Single Market.  Small and medium sized businesses are particularly affected by this 
phenomenon. 

Meanwhile,  Member  States  suffer  significant  revenue  losses  due  to  this  aggressive  tax 
planning by certain companies. Other less aggressive, less mobile taxpayers then have to 
carry  a  heavier  burden.  As  Europe  emerges  from  a  difficult  economic  crisis,  citizens 
understandably  resent  having  to  carry  a  heavier  tax  burden  while  certain  corporations 
avoid paying their fair share, with sometimes the voluntary or involuntary complicity of 
national  governments.  This  uneven  burden-sharing  erodes  fairness  in  taxation,  reduces 
general  tax-payer  morale  and  threatens  the  social  contract  between  citizens  and  their 
governments. The European Parliament, voicing the concerns of European citizens, has 
demanded that these practices should stop.  

Member  States  agree  and  understand  that  if  they  want  a  stronger  Single  Market  then 
taxation  cannot  be  left  aside.  A  coordinated  approach  to  implementing  growth-friendly 
tax systems and tackling cross-border problems is essential for a well-functioning Single 
Market, a successful Capital Markets Union and to attract inward investment to the EU. 
Member  States,  now,  acknowledge  this  and  have  called  for  an  end  to  aggressive  tax 
planning2. This requires a common approach at EU level or the introduction of general 
and specific anti-tax avoidance provisions in the Union, covering both internal measures 
and common actions against external base erosion threats.   

1 

2 

http://ec.europa.eu/taxation_customs/resources/documents/taxation/company_tax/fairer_corporate_tax
ation/com_2015_302_en.pdf  

http://www.consilium.europa.eu/en/press/press-releases/2015/12/08-ecofin-conclusions-corporate-

taxation/  

2 

 
 
 
                                                 
2.  AGGRESSIVE  TAX  PLANNING:  A  GLOBAL  PROBLEM  REQUIRING  EU  AND  GLOBAL 

SOLUTIONS 

Unilateral  action  by  Member  States  would  not  adequately  tackle  the  problem  of 
Aggressive Tax Planning and would create problems. In a Single Market founded on 
free movement  of goods, persons,  services and capital, uncoordinated measures against 
profit  shifting  can  do  more  harm  than  good.  Divergent  national  approaches  to  tackling 
this cross-border problem can create loopholes for aggressive tax planners. Rules in one 
Member  State  can  undermine  the  effectiveness  of  the  rules  of  others.  Moreover,  an 
uncoordinated approach can bring uncertainty and administrative burdens for businesses. 

An  uncoordinated  approach  can  further  encourage  suboptimal  responses  by  Member 
States.  In  some  instances  Member  States  are  reluctant  to  act,  being  fearful  of  the 
competitive disadvantage this might bring.   Some Member States instead respond to the 
problem by intensifying their efforts to attract or maintain multinationals' profits in their 
own  territories  –  sometimes  through  preferential  tax  regimes  or  individual  tax  rulings 
granting a selective advantage, which are in conflict with EU State aid rules. However, 
harmful tax competition tends to create greater incentives for companies to shift profits, 
while  further  reducing  Member  States'  overall  tax  revenues  and  distracting  them  from 
growth-friendly  tax  policies.  While  preferential  regimes  and  individual  tax  rulings  are 
currently being subject to targeted enforcement action under State aid rules, this needs to 
be complemented by legislative measures. 

Aggressive  Tax  Planning  is  a  global  problem,  which  requires  European  and 
international  solutions.  Many  Member  States  now  recognise  that  unilateral  action  is 
insufficient.  There is a large degree of consensus that a coordinated response is needed 
to the problem of aggressive tax planning to ensure competition on a level playing field 
on tax matters.      

3.  NO  TIME  FOR  BUSINESS  AS  USUAL:  NEED  FOR  POLITICAL  AMBITION  AND  LEGAL 

CERTAINTY  

The  Commission  Communication  of  17  June  2015  on  "a  Fair  and  Efficient  Corporate 
Tax  System  in  the  European  Union:  5  Key  Areas  for  Action"  laid  the  groundwork  for 
action  on  aggressive  tax  planning.  The  Common  Consolidated  Corporate  Tax  Base 
(CCCTB)  is  central  to  the  Action  Plan,  as  it  would  fundamentally  reform  corporate 
taxation  and  provide  a  holistic  solution  to  the  problem  of  profit  shifting  in  Europe.    It 
would also create a better tax environment for business, reducing tax burdens.  

Pending  the  adoption  of  the  forthcoming  revised  CCCTB  proposal,  in  the 
immediate term, other actions were set out in the June Action Plan, and were aimed 
at  ensuring  effective  taxation  where  profits  are  generated,  creating  a  better  tax 
environment  for  business,  making  further  progress  on  tax  transparency  and 
strengthening EU tools for coordination. These actions link strongly to the G20/OECD 
project  on  Base  Erosion  and  Profit  Shifting  (BEPS),  which  was  still  ongoing  when  the 
Action Plan was published. Since then, good progress has been made on many of these 
actions.  However,  in  some  areas  of  the  Action  Plan,  EU  level  action  depended  on  the 
completion of the G20/OECD exercise.  

3 

 
The  G20/OECD  reports3  were  published  in  October  2015  and  Member  States  are  now 
expected to implement many of these recommendations in an EU law compliant manner. 
Many Member States have stated that they intend to implement these solutions as soon as 
possible,  but  there  is  a  risk  that  they  will  do  so  in  divergent  ways  or  have  varying 
interpretations of the OECD BEPS measures.  

This is not sufficient. In the EU, action in the form of anti avoidance measures must be 
taken in a clear and coherent way, to strengthen Member States' collective stance against 
tax avoidance, while upholding the Treaty freedoms and EU competitiveness.   

The EU can and should go further to ensure that Member States develop a common 
standard.  The  EU  has  tools  at  its  disposal  which  can  be  used  to  ensure  that  anti 
avoidance  measures  are  implemented  in  a  coordinated  manner  in  all  Member  States, 
reinforcing  each  other's  defences  against  abuse,  and  providing  more  legal  certainty  to 
businesses. In particular, the EU can secure a common approach through the adoption of 
legal  instruments.  This  is  appropriate  in  some  circumstances,  for  example  where 
defensive measures relate to national legislation. Legislation can include some flexibility, 
to  allow  Member  States  to  take their  different  circumstances  into  account,  but  could  at 
least ensure that a minimum standard is in place across the Union. EU legislation would 
help  level  the  playing  field  on  tax  for  Member  States  and  limit  the  distortions  which 
undermine the Single Market.     

In other cases, legislation may not be appropriate, for instance if it relates to tax treaties.  
In these cases, a Commission Recommendation may be a better way to provide guidance 
on an EU law compatible approach. In other areas, it may be appropriate to employ other 
tools  at  our  disposal  in  the  EU,  such  as  the  Joint  Transfer  Pricing  Forum,  the  Code  of 
Conduct for Business Taxation, or the Platform for Tax Good Governance Group.  

Action  is  needed  now  to  develop  a  corporate  tax  environment  in  the  EU  that 
promotes a competitive and growth friendly economy.  The longer the wait, the higher 
the  risk  that  diverging  approaches  will  emerge,  creating  administrative  burdens  and 
uncertainty  for  business  and  damaging  the  Single  Market.    There  is  no  case  for  delay. 
Member States have explored these issues in depth and at length, both in the EU and the 
OECD.    During  this  process,  businesses,  NGOs  and  professional  groups  have  been 
extensively consulted, and have made their views known. The European Parliament has 
delivered its reports on aggressive tax planning.  All the elements are now on the table. It 
is time to act.   

4.  EFFECTIVE TAXATION: ENSURING TAX IS PAID WHERE THE VALUE IS GENERATED 

As was set out in the June 2015 Action Plan, companies that benefit from the Single 
Market  and  generate  profits  there  should  pay  tax  on  those  profits  within  the  EU, 
where  the  activity  takes  place.  However,  it  is  clear  that  this  link  has  been  broken  by 
some  companies  which  shift  profits  from  where  they  are  generated  to  Member  States 
offering low tax rates and preferential regimes, and out to third countries, with no link to 
the  place  of  actual  economic  activity.    Some  of  the  incentives  offered  to  selected 
undertakings, may breach EU State aid rules and can be tackled via State aid control. The 
Commission has been active in pursuing cases where these rules have been breached. At 

3 http://www.oecd.org/ctp/beps.htm  

4 

 
                                                 
the same time, though, aggressive tax planning strategies often take advantage of wider 
systemic issues, such as mismatches between national tax legislation, as well as existing 
EU corporate tax legislation4, to pay a low effective level of tax (or no tax at all) at the 
place where the profits were generated. The European Parliament, many Member States 
and stakeholders have demanded change, which is why a commitment to ensure effective 
taxation of profits in the EU was central to the June Action Plan.  

The EU has various means at its disposal to advance this agenda and progress has 
already  been  made,  on  a  number  of  initiatives  to  ensure  the  effective  taxation  of 
profits in the Single Market.  

The  new  G20/OECD  guidelines  on  Transfer  Pricing  should  help  link  profits  to  the 
economic activities which generate them. The Commission reviewed the mandate of the 
Joint  Transfer  Pricing  Forum  (JTPF)5,  which  is  already  deeply  involved  in  examining 
how best to build on the G20/OECD BEPS work in order to develop a more effective and 
consistent application of the rules within the EU, reflecting the Single Market.  The JTPF 
has  repeatedly  proved  itself  to  be  capable  of  delivering  comprehensive  pragmatic 
solutions to the problems posed by EU transfer pricing practices, and should continue to 
deliver results. The Commission will monitor Member States' implementation of the new 
rules and will consider whether stronger rules are required to prevent manipulation. 

The  Code  of  Conduct  Group  on  Business  Taxation6  has  established  a  monitoring 
process which will ensure that Member States implement the revised approach to patent 
boxes.   If  Member  States  are  not  applying  the  new  approach  appropriately,  then  the 
Commission will consider introducing legislation to ensure its proper implementation.  

EU Ministers of Finance have discussed effective taxation and agreed to focus efforts in 
the short term on a new anti-abuse clause in the Interest and Royalties Directive7. This 
work will continue, and the Commission is confident that agreement can be reached. 

Europe  now  has  the  opportunity  to  go  further  in  some  areas,  and  take  action  in 
respect of other aggressive tax planning structures that have been discussed at the 
OECD and in the inter-institutional debate. These structures are discussed further both 
in  the  Staff  Working  Document  accompanying  this  package  and  in  the  Commission's 
Aggressive Tax Planning Study. The OECD and other EU institutions have flagged the 
following  potential  additional  measures  which  could  help  address  aggressive  tax 
planning:  

 

limiting interest deductions, one of the principal instruments for profit shifting;  

  eliminating  negative  impacts  of  hybrid  mismatches,  so  they  do  not  result  in 

double non taxation;  

4 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003L0049:en:HTML 

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003L0123:en:HTML  

5 http://ec.europa.eu/taxation_customs/taxation/company_tax/transfer_pricing/forum/index_en.htm  

6 http://ec.europa.eu/taxation_customs/taxation/company_tax/harmful_tax_practices/index_en.htm  

7 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003L0049:en:HTML 

5 

 
                                                 
  strengthening controlled foreign company rules, which ensure that profits parked 

in low or no tax countries are effectively taxed;  

 

reinforcing  rules  relating  to  how  assets  are  taxed  when  they  are  transferred  to 
another state (exit taxation);  

  denying the exemption of certain cross border corporate receipts in the absence of 

effective taxation in the other state (switchover rules); 

 

introducing an EU wide General Anti Abuse Rule; and   

  amending  the  rules  to  make  it  more  difficult  for  companies  to  artificially  avoid 
having a taxable presence in a Member States or to abuse tax treaty agreements 
(permanent establishment and treaty abuse). 

An  EU  wide  approach  to  these  measures  would  strengthen  the  link  between  profit 
generation and taxation in the EU.  As a result, since the publication of the Action Plan, 
Council  discussions  have  focussed  on  finding  a  common  solution  to  these  issues,  and 
Member States have made good progress. These discussions have been enhanced by the 
publication of the BEPS reports, which are linked to several of these actions. 

The  Commission  is  convinced  that  the  common  solutions  being  discussed  in  Council 
would  considerably  enhance  Member  States'  abilities  to  tackle  aggressive  tax  planning 
pending the outcome of the CCCTB. The June Action Plan stated that the Commission 
would ensure that consensus on these items could be made legally binding. This package 
therefore  includes  an  Anti-Tax  Avoidance  Directive,  which  makes  good  on  this 
promise  by  delivering  a  legislative  proposal  for  those  elements  which  can  be 
implemented in national legislation prior to agreement and introduction of the CCCTB. 
It  also  responds  to  the  European  Parliament's  Resolutions  that  the  Commission  bring 
forward legislative proposals on these anti avoidance measures.   

Some issues, however, would not be suited to a standalone directive. In particular, issues 
relating  more  to  tax  treaties  have  not  been  included  in  the  Directive.  Nonetheless,  a 
coordinated approach is needed now to prevent negative spill-overs.  The Commission is 
therefore  presenting  a  Recommendation  on  the  implementation  of  measures 
relating to  Permanent Establishments, as well  as to  the  G20/OECD report on Tax 
Treaty abuse. In this context, the Commission is concerned that the G20/OECD report 
includes Limitation of Benefits clauses as an option, although it is acknowledged that this 
may not be appropriate in all regions.  These clauses limit the benefits of tax treaties to 
entities  owned  by  residents  of  only  one  Member  State,  and  therefore  can  be  seen  as 
detrimental  to  the  Single  Market  by  discouraging  cross  border  investment.  These  rules 
can be problematic for the Capital Markets Union.  Where Member States include rules 
based  on the  G20/OECD  option  of  a  Principal Purpose  Test  in  their  Tax  Treaties,  they 
should  do  so  in  an  EU  law  compliant  manner.  For  this  purpose  Member  States  are 
encouraged to use the additional wording included in the Recommendation.   

The Anti-Tax Avoidance Package also includes a Communication that sets out steps 
for  a  more  coordinated  EU  approach  to  third  countries  on  tax  matters.    This  will 
complement the anti-avoidance measures already foreseen.  It examines how the EU can 
better promote international tax good governance standards globally and further support 
third countries in meeting these standards.  

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This  Communication  presents  updated  EU  good  governance  criteria,  in  line  with  the 
latest international developments, which should underlie all EU external policies on tax 
matters. It seeks to improve the use of the EU's international agreements to promote tax 
good  governance  and  advocates  more  support  to  developing  countries  in  the  area  of 
corporate taxation.  

In  line  with the commitment  made  in  the June 2015 Action Plan,  the Communication 
also  details  a  new  EU  process  for  assessing  and  listing  third  countries  for  tax 
purposes.  This  reflects  many  of  the  measures  which  the  European  Parliament's  TAXE 
and  ECON  Committees  identified  as  essential  for  combatting  aggressive  tax  planning 
involving third countries. 

5.  TRANSPARENCY: ENSURING EFFECTIVE ACCESS TO TAX INFORMATION 

Transparency is an essential ingredient in ensuring fairer taxation, both in the EU 
and  internationally.  Member  States  need  to  have  access  to  information  on  tax  paid  in 
other  jurisdictions  if  they  are  to  tackle  aggressive  tax  planning.  In  March  2015,  the 
Commission  put  forward  a  proposal  to  achieve  further  transparency  towards  tax 
administrations  through  the  automatic  exchange  of  information  on  cross  border  tax 
rulings.  The  proposal,  which  has  been  adopted  by  the  Council  in  December  2015,  will 
help ensure more effective cooperation between tax authorities and help governments to 
better protect their tax bases.  

However, more needs to be done to ensure the fairness of taxation in the Single Market.  
Despite the recent adoption of the proposal for the automatic exchange on cross-border 
tax rulings, tax administrations may still often lack information necessary to identify 
whether  companies  have  engaged  in  artificially  shifting  substantial  amounts  of 
income  into  tax-advantaged  environments  through  transfer  pricing  or  similar 
practices.   The  G20/OECD  have  recommended  that  countries  share  more  information 
between tax authorities, including information on how much tax a company pays and on 
what  profits  on  a  country  by  country  basis.   This  information  is  essential  for  the 
assessment  and  audit  of  practices  in  which  large  multi-national  companies  sometimes 
engage. 

These  rules  should  be  implemented  uniformly  throughout  the  EU,  in  order  to  ensure  a 
level playing field between Member States, and avoid the administrative burdens which 
might  arise  if  businesses  have  to  provide  different  information  in  every  Member  State. 
The Commission is therefore putting forward a proposal to implement G20/OECD 
CbCR  EU  level,  building  on  the  existing  legislative  framework  for  information 
exchange, through amendments to the Directive on Administrative Cooperation (DAC). 
By including CbCR within DAC, Member States would also benefit from the Directive's 
existing  provisions  on  administrative  cooperation,  which  would  ease  exchange  of 
information between tax administrations.   

In  parallel,  the  Commission  is  currently  analysing  how  certain  accounting  and  tax 
information  could  in  addition  be  made  public  by  multinational  firms  on  a  country  by 
country basis. Such increased corporate tax transparency could place multinational firms 
under  closer  public  scrutiny,  helping  to  ensure  that  profits  are  effectively  taxed  where 
they  are  generated  and  reinforcing  public  trust.  Moreover,  it  could  add  to  a  fairer  tax 
system in the Single Market by further contributing to reducing tax avoidance practices 
and  related  Member  States'  tax  strategies  as  well  as  reducing  unfair  differences  in 
treatment between multinational and other companies. At the same time, an initiative will 

7 

 
need  to  take into account  the need  to protect legitimate business  secrets and promote a 
level playing field for globally active businesses. The Commission is assessing options as 
part  of  the  ongoing  Impact  Assessment  work  and,  following  its  completion,  intends  to 
present a legislative initiative in spring of this year. 

6.  ADDRESSING THE RISK OF DOUBLE TAXATION 

In recognition of business concerns that measures tackling aggressive tax planning may 
inadvertently lead to more double taxation or disputes between tax administrations over 
the  tax  base,  the  measures  included  in  the  Anti-Tax  Avoidance  Package  have  been 
designed  so  as  to  minimise  the  risk  of  double  taxation  as  much  as  possible.    For 
example,  the  Anti-Tax  Avoidance  Directive  explains  that  if  double  taxation  arises  as  a 
result of the application of the rules, taxpayers should receive relief for the tax paid in the 
other state. This general principle is accompanied by more specific rules where possible, 
such  as  in  the  CFC  provisions.  Furthermore,  as  set  out  in  the  June  Action  Plan,  the 
Commission  also  intends  to  put  forward  a  proposal  on  enhancing  dispute  resolution 
procedures. Work on the impact assessment on dispute resolution is progressing, with a 
view to presenting the proposal in the summer. 

7.  WAY FORWARD 

Once  adopted,  the  CCCTB  would  prevent  aggressive  tax  planning  in  the  EU.  Putting 
CCCTB in place therefore remains the Commission's objective. The public consultation 
on  a  revised  CCCTB  proposal  has  recently  closed,  and  the  Commission  is  on  track  to 
adopt  the  new  legislative  proposals  in  autumn  2016.    The  Commission  will  encourage 
Member States to adopt the proposal quickly. In the meantime, Europe cannot wait. The 
Anti-  Tax  Avoidance  Package  presents  a  pragmatic  approach,  bringing  together  key 
initiatives needed to enhance effective taxation and transparency in the Single Market. It 
will  add  momentum  to  the  current  reform  process,  keep  up  the  pressure  on  Member 
States to act, and will help convert high level commitments into legislative action where 
possible.   

This Package is composed of the following initiatives8: 

  Proposal for an Anti-Tax Avoidance Directive 

  Recommendation on Tax Treaty issues 

  Proposal  for  a  Directive  implementing  the  G20/OECD  Country  by  Country 

Reporting (CbCR)   

  Communication on an External Strategy 

  Staff  Working  Document,  which  provides  further  analysis  and  supports  these 

initiatives. 

8  All  the  actions  proposed  to  be  taken  up  by  the  Commission  in  this  document  are  consistent  and 

compatible with the current Multiannual Financial Framework 2014-2020 

8 

 
                                                 
These initiatives reflect extensive and constructive discussions in the Council, as well as 
in  the  Code  of  Conduct  on  Business  Taxation  and  Platform  for  Tax  Good  Governance 
groups, as well as in the recently released G20/OECD BEPS reports. The Commission is 
also indebted to the valuable tax reports of the European Parliament, and addresses many 
of the recommendations included in the Resolutions. 

As these measures are in line with Member States' commitments, it should be possible to 
secure early agreement to this package.  The measures provide the framework necessary 
to  deliver  real  benefits  to  help  protect  the  Single  Market,  and  create  a  coherent  and 
coordinated EU approach to corporate taxation – amongst ourselves and in relation to the 
rest  of  the  world.  It  is  up  to  Member  States  to  take  advantage  of  this  opportunity  to 
overcome  their  differences  and  help  build  a  fairer  and  more  efficient  tax  system  in  the 
EU.  

9