COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a COUNCIL DIRECTIVE amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements
Date: 2017-06-21
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, administrative cooperation, administrative formalities, cross-border cooperation, exchange of information, fraud, single market, tax avoidance, tax evasion

EN   

EN 

   EUROPEAN COMMISSION  Brussels, 21.6.2017  SWD(2017) 236 final   COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a COUNCIL DIRECTIVE amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements  {COM(2017) 335 final} {SWD(2017) 237 final}  
  
 
Table of Content 

Introduction .................................................................................................................. 4 

Policy context ............................................................................................................... 5 

Initiatives taken by the EU ........................................................................................... 5 

Initiatives taken by EU Member States and third countries ....................................... 11 

Scope of the envisaged initiative ................................................................................ 12 

Problem Definition, Drivers and Consequences ........................................................ 13 

Problem Definition ..................................................................................................... 13 

Drivers ........................................................................................................................ 23 

Consequences ............................................................................................................. 25 

Examples on income flows that leave the internal market untaxed ........................... 26 

Why The European Union Should Act ...................................................................... 29 

Scope of this impact assessment ................................................................................ 32 

Objectives ................................................................................................................... 33 

General Objectives ..................................................................................................... 33 

Specific Objectives ..................................................................................................... 33 

Policy options ............................................................................................................. 34 

Personal scope ............................................................................................................ 36 

Material scope ............................................................................................................ 37 

Exchange of information ............................................................................................ 41 

Analysis of impact...................................................................................................... 44 

Baseline scenario: No EU policy ............................................................................... 44 

Action is undertaken to enact the mandatory disclosure of potentially aggressive 
cross-border tax planning arrangements .................................................................... 45 

Personal Scope ........................................................................................................... 45 

Material Scope ........................................................................................................... 48 

Exchange of information ............................................................................................ 54 

Comparison of options ............................................................................................... 59 

Personal scope ............................................................................................................ 59 

Material scope ............................................................................................................ 61 

Exchange of information ............................................................................................ 63 

The Preferred Option.................................................................................................. 65 

Analysis of Impacts of the preferred policy option .................................................... 67 

Choice of the legal instrument ................................................................................... 70 

1. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

4. 

5. 

6. 

6.1. 

6.2. 

7. 

7.1. 

7.2. 

7.3. 

8. 

8.1. 

8.2. 

8.3. 

8.4. 

8.5. 

9. 

9.1. 

9.2. 

9.3. 

9.4. 

10. 

11. 

11.1.  Commission Recommendation (non-binding instrument) ......................................... 70 

2 

 
11.2. 

EU Code of Conduct for intermediaries (non-binding instrument) ........................... 70 

11.3. 

EU Directive (binding instrument) ............................................................................. 71 

12. 

13. 

Monitoring and Evaluation ........................................................................................ 71 

Glossary...................................................................................................................... 73 

Annex 1:

  Procedural Information .......................................................................................... 77 

Annex 2:

  Stakeholder consultation ........................................................................................ 80 

Annex 3:

  Consultation Strategy ............................................................................................. 87 

Annex 4:

  Who is Affected by the Initiative and How ........................................................... 90 

Annex 5:

  Directive on Administrative Cooperation in the Field of Taxation (DAC) ........... 92 

Annex 6:

  Mandatory Disclosure Rules: OECD BEPS Action 12 ......................................... 93 

Annex 7:

  Regimes in Place in Ireland, Portugal and the United Kingdom ........................... 95 

3 

 
 
 
1. 

INTRODUCTION 

Tackling tax avoidance and evasion is among the political priorities in the EU, with a view to 
creating a deeper and fairer single market. In this context, the Commission has presented in 
recent  years  a  number  of  initiatives  in  order  to  promote  a  fairer  tax  system.  Enhancing 
transparency is one of the key pillars in the Commission's strategy to combat tax avoidance 
and evasion. In particular the exchange of information between tax administrations is crucial 
in order to provide them with the necessary information to exercise their duties efficiently. 

Recent  leaks,  including  the  Panama  Papers,  have  highlighted  how  certain  intermediaries 
appear to have actively helped their clients to make use of aggressive tax planning schemes in 
order  to  reduce  the  tax  burden  and  to  conceal  money  offshore.  Whilst  some  complex 
transactions  and  corporate  structures  may  have  entirely  legitimate  purposes,  it  is  also  clear 
that some activities, including offshore structures, may not be legitimate and in some cases, 
may even be illegal. Different and complex structures, often involving a company located in a 
jurisdiction  which  is  low  tax  or  non-transparent,  are  used  to  create  distance  between  the 
beneficial  owners  and  their  wealth  with  a  view  to  ensuring  low  or  no  taxation.  Certain 
taxpayers use shell companies registered in tax/secrecy havens and appoint nominee directors 
to conceal their wealth and income by hiding the identity of the real owners of the companies 
(beneficial  owners).  The  Commission  Staff  Working  document  on  Corporate  Income 
Taxation in the European Union1 as well as the Commission staff working document prepared 
for  the  Anti-Tax  Avoidance  Package2,  provide  evidence  on  profit  shifting  and  base  erosion 
practices. 

Given  the  nature  of  tax  avoidance  and  evasion,  the  impact  on  total  tax  loss  is  difficult  to 
measure.  A  recent  study  commissioned  by  the  European  Parliamentary  Research  Service3 
found that corporate income tax revenue loss from profit shifting within the EU amounted to 
about EUR 50-70 billion in 2013. The UK reported that the overall cost of tax avoidance was 
GBP 2.7 billion in 2013-14.4 

Several calls have been made to the EU to take the lead in this field and further investigate the 
role of intermediaries. In particular, the European Parliament has called for tougher measures 
against  intermediaries  who  assist  in  tax  evasion  schemes.5  Member  States  at  the  informal 
ECOFIN Council of April 20166 invited the Commission to consider initiatives on mandatory 
disclosure rules inspired by the OECD/G20 Base Erosion and Profit Shifting (BEPS) Action 
127, with regard to introducing more effective disincentives for intermediaries who assist in 
tax evasion schemes. In May 2016, the Council presented conclusions on an external strategy 
and measures against tax treaty abuse8. In this context, the ECOFIN invited “the Commission 

1   Commission  Staff  Working  Document  SWD(2015)121  final  "Corporate  Income  Taxation  in  the  European 

Union" 

2   Commission  Staff  Working  Document  SWD(2016)06  final  "Anti  Tax  Avoidance  Package:  Next  Steps 

towards delivering effective taxation and greater tax transparency in the EU" 

3   European  Parliamentary  Research  Service  –  EPRS  (2015):  "Bringing  transparency,  coordination  and 

convergence to corporate tax policies in the European Union"  
4   HM Revenue & Customs (2015): "Measuring tax gaps 2015 edition" 
5   European Parliament resolution of 6 July 2016 on tax rulings and other measures similar in nature or effect 

(2016/2038(INI))  

6   Informal ECOFIN Council of 22 April 2016 
7   OECD  Base  erosion  and  profit  shifting  –  BEPS  (2015):  "Public  Discussion  Draft  BEPS  Action  12: 

Mandatory Disclosure Rules". See also for further clarification the entry in the glossary. 

8   Council  of  the  European  Union  (2016),  Conclusions  on  the  "Commission  Communication  on  an  External 
Strategy  and  Recommendation  on  the  implementation  of  measures  against  tax  treaty  abuse  −  Council 
conclusions", 25.5.2016 (May 2016 ECOFIN Conclusions). 

4 

 
                                                 
to consider legislative initiatives on Mandatory Disclosure Rules inspired by BEPS Action 12 
of the OECD project in order to introduce more effective disincentives for intermediaries who 
assist in tax evasion or avoidance schemes”.9  

With  the  aim  to  enhance  transparency,  the  OECD/G20  Action  12  recommends  countries  to 
introduce a regime for the mandatory disclosure of aggressive tax planning arrangements but 
does  not  define  any  minimum  standard  for  member  countries  to  comply  with.  Instead,  the 
recommended  actions  are  drafted  as  alternatives  without  pointing  to  preferred  options.  The 
final report on Action 12 was published as part of the set of BEPS actions in October 2015. 
The  report  stresses  that  the  lack  of  timely,  comprehensive  and  relevant  information  on  the 
aggressive tax planning strategies is one of the main challenges  faced by the tax authorities 
worldwide. 

The set of BEPS measures, as recommended by the OECD, has been endorsed by the G20 and 
most EU Member States have committed, in their capacity as OECD members, to implement 
them. Furthermore, the current G20 President, Germany, has identified tax certainty as one of 
the main themes.10  Providing tax administrations with timely information  on the design  and 
use  of  potentially  aggressive  tax  planning  schemes  supplies  them  with  an  additional  tool  to 
take  appropriate  measures  against  certain  tax  planning  schemes,  which  ultimately  increases 
tax certainty and is fully compatible with the G20 priorities. 

The  July  2016  Communication  on  further  measures  to  enhance  transparency  and  the  fight 
against  tax  evasion  and  avoidance11  outlined  the  Commission's  assessment  of  the  priority 
areas for action in the coming months, at EU and international level. Increasing oversight of 
intermediaries was identified as one of the areas for future action. Indeed, Lux Leaks and the 
Panama Papers12 have demonstrated that the role of intermediaries in the area of aggressive 
tax  planning  has  not  been  addressed  in  a  comprehensive  fashion.  The  European  Parliament 
(EP) and EU Finance Ministers (ECOFIN) are pushing for swift action.  

In fact, Member States adopted EU legislation for the automatic exchange of foreign account 
information  according  to  the  Common  Reporting  Standard  (CRS)  and  also  implemented 
several of the BEPS Actions on Transparency and Fairer Taxation through common rules. It is 
now critical to ensure that these instruments are actually applied and bring positive results as 
well as that they are not circumvented. 

It is therefore critical to act on time and make use of the existing momentum. Deferring this 
initiative to a later stage would risk that it would be out of context or no longer useful. 

2. 

POLICY CONTEXT  

2.1. 

Initiatives taken by the EU 

Aggressive tax planning includes taking advantage of the technical features of a tax system or 
of mismatches in the interaction between two or more tax systems for the purpose of reducing 
the  overall  tax  liability  of  a  taxpayer  or  group  of  companies.  A  key  characteristic  of  these 
practices is that they usually involve strictly legal arrangements which however contradict the 

9   May 2016 ECOFIN Conclusions, point 12. 
10   G20 priorities: https://www.g20.org/Webs/G20/EN/G20/Agenda/agenda_node.html  
11   European  Commission,  Communication  on  further  measures  to  enhance  transparency  and  the  fight  against 

tax evasion and avoidance, COM(2016) 451 final, 5.7.2016 (Panama Communication). 

12 The Panama Papers consists of 11.5 million leaked documents from Panamanian Law form Mossack Fonesca, 
detailing how the corporate service provider helped creating 214,488 offshore entities around the world for 
its clients since the 1970's. https://panamapapers.icij.org/ 

5 

 
                                                 
intent of the law. Aggressive tax planning may also benefit from weaknesses in compliance 
frameworks or even extend to measures resulting in tax evasion.  

A number of initiatives at the EU level, which aim at tackling tax avoidance by improving the 
coherence of tax systems and increasing tax transparency, have been adopted in recent time or 
are still under consideration. Some of these initiatives represent a direct response to – and go 
even beyond – the new international standards developed by the G20/OECD with the BEPS 
project.13  

All of these initiatives aim to clamp down on aggressive tax planning. None of these measures 
specifically addresses the role of intermediaries in aggressive tax planning. This issue is one 
of the remaining elements for finalising our agenda on implementing BEPS in a coordinated 
fashion in the EU. Only some of the initiatives are aimed at gathering information that could 
be used for detecting and countering aggressive tax planning and where certain intermediaries 
could help to assist in the detection and response. However, the use of information would only 
be  possible  with  considerable  time  delay.  Therefore,  further  efforts  concerning  the  existing 
information  tools  or  in  the  field  of  coherence  do  not  represent  a  direct  alternative  to  an 
instrument which would target the intermediaries directly and would ensure that information 
is available to tax authorities early in the process, in the best case before the potentially  

2.1.1.  Anti-Tax Avoidance Directive 

At  EU  level,  the  efforts  to  tackle  aggressive  tax  planning  and  implement  the  anti-BEPS 
measures led to the Anti-Tax Avoidance Directive of 12 July 2016 (ATAD).14 ATAD focuses 
on  legally-binding  measures  aimed  to  create  a  minimum  level  of  protection  for  the  internal 
market  against  corporate  tax  avoidance.15  Furthermore,  on  21  February  2017,  the  Council 
agreed its position on rules aimed at neutralising 'hybrid mismatches' in the interaction of the 
tax systems between Member States and/or between the system of a Member State and that of 
a  third  country16.  The  agreed  directive  is  the  latest  of  a  number  of  measures  designed  to 
prevent  tax  avoidance,  mainly  by  large  companies.  It  seeks  to  prevent  taxpayers  from 
exploiting mismatches between two or more tax jurisdictions for the purpose of reducing their 
overall tax liability. Such arrangements can result in a substantial erosion of the taxable bases 
of corporate taxpayers in the EU.  

2.1.2.  Directive on Administrative Cooperation (DAC) 

EU  Member  States  have  agreed  that  their  tax  authorities  cooperate  in  order  to  apply  their 
taxes  correctly  to  their  taxpayers  and  combat  tax  fraud,  tax  evasion  and  tax  avoidance. 
Council  Directive  77/799/EEC17  was  the  first  response  to  the  need  for  enhanced  mutual 
assistance  in  the  field  of  taxation.  This  was  replaced  by  Council  Directive  2011/16/EU18, 
which is the essential piece of legislation on administrative cooperation in the field of taxation 
('DAC'). The DAC establishes useful tools for better cooperation between tax administrations 

13   OECD base erosion and profit shifting (BEPS) 
14   Council  Directive  (EU)  2016/1164  of  12  July  2016  laying  down  rules  against  tax  avoidance  practices  that 

directly affect the functioning of the internal market, OJ L 193, 19.7.2016, p. 1–14 (ATAD).. 

15   The anti-avoidance measures in the ATAD are: controlled foreign company (CFC) rule, exit taxation, interest 

limitation general anti-abuse rule and rules on hybrid mismatches. 

16   Council  of  the  European  Union,  Proposal  for  a  Council  Directive  amending  Directive  (EU)  2016/1164  as 
regards  hybrid  mismatches  with  third  countries  −  General  approach,  6595/17,  ECOFIN  143,  21  February 
2017. 

17   Council  Directive  77/799/EEC  of  19  December  1977  concerning  mutual  assistance  by  the  competent 

authorities of the Member States in the field of direct taxation, OJ L 336, 27.12.1977, p. 15–20. 

18   Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and 

repealing Directive 77/799/EEC, OJ L 64, 11.3.2011, p. 1–12 (DAC). 

6 

 
                                                 
in  the  European  Union,  such  as  exchanges  of  information  on  request,  spontaneous  and 
automatic exchanges, and the participation in administrative enquiries, simultaneous controls 
or notifications of tax decisions amongst tax authorities19.  

information 

The  Directive  was  recently  amended  several  times  as  a  result  of  which  its  scope  was 
significantly extended to also cover: automatic exchange  of financial account information20; 
exchange  of 
tax  rulings  and  advance  pricing 
arrangements21;  and  country-by-country  reporting  requirements  for  multinational  enterprise 
groups operating in the EU22. The most recent amendment to the DAC23 was legally adopted 
on  6  December  2016  and  ensures  that  tax  authorities  have  access  to  beneficial  ownership 
information gathered in the context of anti-money laundering. 

involving  cross-border 

The  DAC  was  adopted  in  2011  and  Member  States  started  applying  its  rules  on  1  January 
2013, with the exception of the provisions on the automatic exchange of information, which 
followed  on  1  January  2015.  Under  spontaneous  exchange,  a  country  provides  its  treaty 
partner(s) with information about likely tax evaders if it happens to uncover such information 
during its own audits. Automatic exchange consists of a periodic exchange of information of 
pre-defined content from the authorities of one country to the authorities of another regarding 
the  income  of  residents  of  the  second  country.  In  the  case  of  cross-border  tax  rulings  and 
advance  pricing  arrangements,  the  exchange  is  to  all  other  Member  States  and  the 
Commission.  When  it  comes  to  the  latter,  the  disclosed  information  is  subject  to  certain 
limitations. The exchange is usually in electronic form and takes place on a mutually agreed 
periodic basis. Information exchange on request is a response by one country to a request for 
information by another country. 

2.1.3.  Extension of the DAC to financial account information (DAC 2) 

DAC 2 amended Directive 2011/16/EU, in order to include a mandatory automatic exchange 
of financial account information in the field of taxation. Section VIII(D)(4)(c) of the Directive 
stipulates that the European Commission publishes a list of jurisdictions with which there is 
an EU agreement in place to provide Member States with financial account information to the 
standard mentioned in the extension of the Directive. The list currently comprises  the Swiss 
Confederation, the Principality of Liechtenstein, the Republic of San Marino, the Principality 
of Andorra, the Principality of Monaco and Saint-Barthelemy. 

2.1.4.  Extension  of  the  DAC  to  information  on  cross-border  tax  rulings  and  advance 

pricing arrangements (DAC 3) 

DAC 3 amended Directive 2011/16/EU, in order to extend further the automatic exchange of 
information; that is, to cross-border rulings and advance pricing arrangements in the EU. This 
amendment was aimed at discouraging the engagement in potentially aggressive tax planning 
schemes  in  the  EU  by  requiring  the  automatic  exchange  of  information  on  advance  cross-
border tax rulings in the EU. However many aggressive tax planning schemes do not involve 

19   An outline of the Directive and its main provisions can be found here.  
20   Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory 

automatic exchange of information in the field of taxation, OJ L 359, 16.12.2014, p. 1–29 (DAC 2). 

21   Council  Directive  (EU)  2015/2376  of  8  December  2015  amending  Directive  2011/16/EU  as  regards 
mandatory automatic exchange of information in the field of taxation, OJ L 332, 18.12.2015, p. 1–10 (DAC 
3). 

22   Council  Directive  (EU)  2016/881  of  25  May  2016  amending  Directive  2011/16/EU  as  regards  mandatory 

automatic exchange of information in the field of taxation (DAC 4). 

23   Council Directive (EU) 2016/2258 of 6 December 2016 amending Directive 2011/16/EU as regards access to 

anti-money-laundering information by tax authorities (DAC 5). 

7 

 
                                                 
the issuance of a ruling and are therefore not subject to this requirement. Some Member States 
do  not  operate  an  advance  tax  ruling  practice  or  their  practice  is  very limited.  Furthermore, 
taxpayers  do  not  seek  tax  rulings  from  the  authorities  in  connection  with  all  structures  they 
put in place. Finally, tax rulings may relate only to a specific transaction or a limited part of a 
tax  planning  scheme,  which,  if  looked  at  individually  –  i.e.  outside  the  full  picture  -  would 
possibly  not  give  rise  to  suspicion.  Consequently,  a  substantial  portion  of  aggressive  tax 
planning schemes are neither reported nor exchanged. 

2.1.5.  Extension  of  the  Directive  on  Administrative  Cooperation  to  country-by-country 

reporting (DAC 4) 

DAC  4  lays  down  an  obligation  for  reporting  revenues,  profits  before  tax,  taxes  paid  or 
accrued  and  the  number  of  employees  to  tax  authorities  on  a  country-by-country  basis.  It 
should  be  noted  that  only  large  multinationals  with  a  total  consolidated  group  revenue 
exceeding  EUR 750  million  in  the  preceding  financial  year  are  captured  by  this  reporting 
obligation.  In  addition,  country-by-country  reporting  may  not  allow  authorities  to  identify 
specific cases of aggressive tax planning. Thus, although the provided information may give 
an indication of certain BEPS-related risks, the set of high-level information that is given to 
the tax authorities does not usually include details of specific tax planning schemes. However, 
such reporting is confined to corporate income tax, and it is unlikely to bear direct effects on 
intermediaries  as  long  as  the  ultimate  responsibility  for  tax  liabilities  remains  with  the 
taxpayers. 

2.1.6.  Access to Information on Beneficial Ownership (DAC 5) 

Recent  media  leaks,  known  as  the  Panama  Papers,  revealed  how  secret  companies  and 
accounts can be used to hide income and assets offshore, often for tax evasion and other illicit 
purposes.  Although  important  progress  has  already  been  made  at  EU  level  to  tackle  such 
practices, especially through the series of initiatives on transparency, it was found that there 
are still gaps in the tax framework and this need to be addressed in order to prevent tax abuse 
and  illicit  financial  flows.24  For  this  purpose,  tax  authorities  must  know  the  ultimate 
beneficiary  behind  a  company,  trust  or  fund.  Yet,  this  information  is  not  always  available 
throughout the EU. 
The Commission proposed legislation25 in this field whereby tax authorities can have access 
to  national  anti-money  laundering  information,  particularly  with  regard  to  beneficial 
ownership registers  and due diligence  controls. The relevant  legislation took  the form of an 
amendment  to  the  DAC.  These  amendments  to  the  DAC  aimed  to  reinforce  the  measures 
introduced by the Fourth Anti-Money Laundering Directive.26 

24   In  parallel  to  the  proposal  to  amend  the  Fourth  Anti-Money  Laundering  Directive,  the  Commission  also 
presented  a  Communication  setting  out  priorities  for  our  work  towards  fairer,  more  transparent  and  more 
effective taxation. 

25   Proposal for a Council Directive amending Directive 2011/16/EU as regards access to anti-money-laundering 

information by tax authorities, COM(2016) 452 final, 5.7.2016. 

26   Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of 
the  use  of  the  financial  system  for  the  purposes  of  money  laundering  or  terrorist  financing,  amending 
Regulation  (EU)  No  648/2012  of  the  European  Parliament  and  of  the  Council,  and  repealing  Directive 
2005/60/EC  of  the  European  Parliament  and  of  the  Council  and  Commission  Directive  2006/70/EC  (Text 
with EEA relevance), OJ L 141, 5.6.2015, p. 73–117. 

8 

 
                                                 
2.1.7.  Revision  of  the  fourth  AML  Directive  with  targeted  amendments  and  Panama 

Communication27 

In the context of the fight against tax avoidance, money laundering and terrorism financing, 
the Commission proposed to further reinforce EU rules on anti-money laundering, to counter 
against terrorist financing and increase transparency on the beneficial ownership of companies 
and trusts.  

2.1.8.  EU list of non-cooperative jurisdictions 

In  the  External  Strategy  for  Effective  Taxation,  the  Commission  set  out  a  new  EU  listing 
process  to  identify  and  address  third-country  jurisdictions  that  fail  to  comply  with  tax  good 
governance standards. Member States have endorsed this initiative and called for a first EU 
list to be ready within 2017.  

The new listing process is part of the EU's political priority to fight against tax evasion and 
avoidance  and  promote  fairer  taxation,  both  in  Europe  and  beyond.  The  EU  needs  stronger 
instruments to  tackle  external tax  avoidance  and  deal  with  third  country  jurisdictions  which 
refuse to play fair. A single EU list should be expected to carry much more weight than the 
current  patchwork  of  national  lists,  and  will  have  an  important  dissuasive  effect  on  third 
country  jurisdictions  that  operate  harmful  tax  regimes.  It  will  also  be  clearer  and  fairer  for 
businesses and third country jurisdictions, as it will be transparent, objective and aligned with 
international tax good governance standards.  

Recently, the Commission presented the scoreboard of its pre-assessment of all third-country 
jurisdictions  for  tax  purposes.  This  was  the  first  step  in  the new  EU  listing  process.  On  the 
basis  of  the  scoreboard  results,  Member  States  are  meant  to  decide  on  the  third-country 
jurisdictions  to  be  screened  against  tax  good  governance  criteria  in  greater  detail.  The 
screening began in early 2017.28 

2.1.9.  EU financial market sectorial legislation 

EU  law  in  the  area  of  financial  regulation  already  contains  certain  existing  or  forthcoming 
reporting  requirements  which  are  -  to  some  extent  -  relevant  for  aggressive  tax  planning 
structures.  This  includes  the  Market  Abuse  Regulation,  the  Prospectus  Regulation  and 
MiFID229,  which  could  result  in  reporting  requirements  regarding  tax  planning.  However, 
they  only  apply  in  precise  circumstances  and  could  be  usefully  completed  by  a  more 
horizontal legislation. 

Public  country-by-country  reporting  (public  CbCR),  a  proposed  amendment  to  the 
Accounting Directive30, may be seen as a deterrent to aggressive tax planning schemes. It is 
thus likely to create a disincentive for intermediaries. So far, public CbCR is mandatory for 
EU banks and the extractive and logging industry. In April 2016, the Commission proposed to 

27   Proposal for a Directive of the European Parliament and of the Council amending Directive (EU) 2015/849 
on  the  prevention  of  the  use  of  the  financial  system  for  the  purposes  of  money  laundering  or  terrorist 
financing and amending Directive 2009/101/EC, COM(2016) 450 final, 5.7.2016. 

28   https://ec.europa.eu/taxation_customs/tax-common-eu-list_en  
29   Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial 
instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, OJ L 173, 12.6.2014, p. 349–
496. 

30   Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial 
statements, consolidated financial statements and related reports of certain types of undertakings, amending 
Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  and  repealing  Council  Directives 
78/660/EEC and 83/349/EEC, OJ L 182, 29.6.2013, p. 19–76. 

9 

 
                                                 
expand  it  to  very  large  companies  in  all  the  other  sectors31.  However,  like  for  DAC4,  such 
reporting  is  unlikely  to  bear  direct  effects  on  intermediaries  as  long  as  the  ultimate 
responsibility for tax liabilities remains with the taxpayers. 
The Audit Regulation32 ensures that auditors do not  provide tax services during their  audit 
mandate. It does not lay down any obligations for auditors to identify aggressive tax planning 
schemes and does not regulate auditors when they provide services such as tax advice to non-
audit clients.  

Overall,  the  EU  has  made  great  progress  on  tax  transparency  in  recent  years.  With  those 
measures in place, Member States should be in a better position to increase the collection of 
revenues where taxpayers try to avoid or evade taxes. However, the tax instruments available 
in the EU are not sufficient. In particular, they do not explicitly require that Member States 
collect  timely  information  on  tax  avoidance  and  evasion  schemes  from  intermediaries. 
Neither  is  there  an  obligation  to  exchange  that  information,  where  relevant,  with  other 
Member  States.  The  DAC  contains  a  general  obligation  for  tax  authorities  in  EU  Member 
States  to  spontaneously  communicate  information  to  the  other  EU  tax  authorities  in  certain 
circumstances. This would include a loss of tax revenue in a Member State or savings of tax 
resulting from artificial transfers of profits within groups of companies. Yet, such exchange 
would only occur after aggressive tax planning schemes have been implemented. At present, 
Member States do not hold this information a priori.  

Having  said  this,  if  the  relevant  information  were  received  prior  to  the  implementation  of 
aggressive tax schemes, it would enable Member States to take appropriate measures timely. 
The  current  legislative  framework  (both  in  the  EU  and  within  the  national  context)  is  not 
designed  to  ensure  that  tax  administrations  receive  timely  information  about  potentially 
aggressive tax planning schemes which are readily available for implementation or already in 
use  by  taxpayers.  This  is  critical  regardless  of  whether  a  scheme  is  purely  national  or  of  a 
cross-border dimension. It is therefore necessary to complement the current framework with 
an additional tool, to ensure the ex-ante flow of information. 

2.1.10.  Initiatives taken by the OECD 

In July 2013 the OECD published its Action Plan on Base Erosion and Profit Shifting (BEPS 
Action Plan)33 identifying fifteen actions to counter against base erosion and profit shifting in 
a comprehensive manner. The Action Plan set deadlines to implement these actions. One of 
the proposed actions is BEPS Action 12 on mandatory disclosure rules.34  

Based on the final report on BEPS Action 12, mandatory disclosure offers tax administrations 
a  number  of  advantages  over  other  forms  of  disclosure,  as  it  requires  both  taxpayers  and 
promoters to report information early in the tax compliance process. In addition, the OECD 
report points out that "countries that have introduced mandatory disclosure rules indicate that 
they  both  deter  aggressive  tax  planning  behaviour  and  improve  the  quality,  timeliness  and 

31   Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/34/EU as 
regards disclosure  of  income  tax  information by  certain undertakings  and branches, COM(2016)  198 final, 
12.4.2016. 

32   Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific 
requirements  regarding  statutory  audit  of  public-interest  entities  and  repealing  Commission  Decision 
2005/909/EC, OJ L 158, 27.5.2014, p. 77–112. 

33   OECD, Action Plan on Base Erosion and Profit Shifting, OECD Publishing, 2013, available here.  
34   For a detailed description of BEPS Action 12 see Annex 6. 

10 

 
                                                 
efficiency  in  gathering  information  on  tax  planning  schemes  allowing  for  more  effective 
compliance, legislative and regulatory responses"35. 

BEPS  Action  12  is  not  a  minimum  standard  like  some  other  elements  of  the  OECD  Action 
Plan. Instead, it allows countries the freedom to introduce elements from amongst the options 
given in the final report. A minimum standard could result in a more consistent application in 
the EU or worldwide. Furthermore, mandatory disclosure is not included in the scope of the 
multilateral  instrument  (i.e.  Multilateral  Convention  to  Implement  Tax  Treaty  Related 
Measures to Prevent BEPS36 - more than 100 jurisdictions committed to it in November 2016, 
for the purpose of swiftly implementing a series of tax treaty measures to update international 
tax rules and lessen the opportunity for tax avoidance by multinational enterprises). Finally, 
BEPS Action 12 is not part of the BEPS Inclusive Framework either. As such, it is not subject 
to a review process looking at its implementation by member countries. 

Initiatives taken by EU Member States and third countries 

2.2. 
Ireland, the UK and Portugal operate mandatory disclosure regimes37 in response to existing 
practices of aggressive tax planning which are enabled and promoted by intermediaries.  

2.2.1.  The system in Ireland 

Ireland’s mandatory disclosure regime was first introduced in 2011, with some amendments 
made  subsequently.  The  regime  is  intended  to  act  as  an  early  warning  mechanism  for 
"aggressive tax avoidance schemes". The regime provides that promoters or taxpayers, either 
in  contemplation  or  implementation  of  certain  transactions,  shall  give  information,  as 
specified by the Irish Revenue relating to any transactions that give rise to a ‘tax advantage’ 
where one of the main benefits of the transaction is such tax advantage. 

2.2.2.  The system in the UK 

The  disclosure  of  tax  avoidance  schemes  (DOTAS)  regime  introduced  in  2004  essentially 
requires promoters of certain types of tax avoidance schemes, or in some cases users of such 
schemes, to disclose them to HMRC. The regime has been subject to several changes over the 
time that it exists. Its scope has gradually been broadened and so, it now covers the whole of 
Income Tax, Corporation Tax, Capital Gains Tax, and certain arrangements relating to Stamp 
Duty, Land Tax and Inheritance Tax. The regime also applies, with necessary modifications, 
to National Insurance contributions and Value Added Tax. In the Budget of March 2015, the 
Government announced a package of measures to ensure that the DOTAS regime keeps pace 
with the current avoidance market. As part of this, the Government launched a consultation on 
the  detail  of  changes  to  strengthen  the  DOTAS  hallmarks  and  the  results  were  published  in 
February 2016. New changes are expected in regard to the Indirect Tax Avoidance Disclosure 
Regime and penalties for enablers of abusive tax planning arrangements in line with measures 
recently published on 5 December 2016. 

Her  Majesty's  Revenue  and  Customs  (HMRC)  found  that  additional  revenue  of  between 
GBP 225  million  and  GBP 650  million  a  year  had  been  collected  against  what  would  have 
been achieved without disclosures made under DOTAS38. 

35   OECD/G20  Base  Erosion  and  Profit  Shifting  Project,  Mandatory  Disclosure  Rules,  Action  12:  2015  Final 

Report, pp. 22-23. 

36   OECD,  Multilateral  Convention  to  Implement  Tax  Treaty  Related  Measures  to  Prevent  BEPS,  OECD 

Publishing, 2016, available here. 

37   See Annex 8. 
38   National  Audit  Office,  HMRC,  Report  by  the  Controller  and  Auditor  General,  Tax  Avoidance:  Tackling 

Marketed Avoidance Schemes, HC 730, Session 2012-13, 21.11.2012, p. 26. 

11 

 
                                                 
2.2.3.  The system in Portugal 

The  Portuguese  Mandatory  Disclosure  Regime  is  based  on  the  UK  regime  and  was  put  in 
place  in  2008.  The  Portuguese  authorities  have  received  almost  100  reports  on  tax  schemes 
from  intermediaries  (promoters)  since  their  mandatory  disclosure  regime  was  introduced. 
They reached a peak between 2009 and 2011. Around 25% of reports came from users, who 
are  obliged  to  report  where  the  promoter  is  not  resident  in  Portugal  or  is  prevented  by  the 
rules  of  profession  (e.g.  lawyers),  or  the  tax  planning  scheme  is  developed  in-house.  The 
definition of intermediaries is broad and covers corporations and individuals. Schemes under 
discussion are those, where 1) achieving a tax advantage (relating to income taxes) is a sole or 
main  purpose,  and  2)  one  of  the  following  hallmarks  applies:  i)  the  participating  entity  is 
subject to a special regime or is tax exempt, ii) (hybrid) financial instruments and derivatives 
are involved, iii) there is a use of tax losses. If a reported scheme is considered abusive, it is 
published together with the provision of the law based on which it should be defeated. Some 
reported schemes were outside of the scope and others were not seen as problematic.  

Outside  the  EU,  a  number  of  countries  have  introduced  national  mandatory  disclosure 
regimes, such as the USA, Canada, South Africa, India and Israel. Each of them has chosen a 
slightly different approach, which is yet in line with the objectives of BEPS Action 12. 

Existing national regimes for disclosure are confined to national tax bases. The obligation to 
report is therefore triggered by the question of whether a certain scheme could have an impact 
on  the  domestic  tax  base.  Hence,  for  the  time  being,  these  national  regimes  do  not  cover 
cross-border  schemes,  which  would  potentially  affect  residents  and  the  tax  bases  of  other 
Member States.  

In  France  and  Germany,  there  have  been  initiatives  to  introduce  mandatory  disclosure,  but 
legislation  has  not  (yet)  been  adopted  for  various  legal  reasons.  Alternative  disclosure 
instruments  can  be  found  in  other  Member  States  such  as  co-operative  compliance  or 
horizontal monitoring. 

Member  States  naturally  endeavour  to  defend  their  own  tax  base  and  as  a  result  look  for 
information  on  schemes  which  seek  to  reduce  the  domestic  base.  However,  from  a  cross-
border  perspective,  there  are  loopholes  in  national  regulations.  A  potential  legislative 
initiative at EU level should not discourage or even substitute existing national systems, but 
rather build upon them and also consider the cross-border dimension of potentially aggressive 
tax planning structures. Thus, the EU internal market requires a greater degree of cooperation 
and therefore there is a need for monitoring cross-border schemes. Currently, Member States 
do not receive such information on a timely basis. 

2.3. 

Scope of the envisaged initiative 

2.3.1.  Framework and aims 

This initiative complements the series of legislative acts that were passed at the level of the 
EU over the previous years in implementation of some of the conclusions in the context of the 
BEPS  project  of  the  OECD/G20  and  the  work  of  the  Global  Forum  in  the  field  of 
transparency.  The  main  aim  remains  linked  to  curbing  tax  evasion  and  avoidance  through 
capturing aggressive tax planning schemes. These schemes may have escaped the framework 
of anti-tax avoidance and transparency rules that the Member States adopted through Union 
legislation in the context of implementing BEPS and the CRS over the last couple of years. 

The  initiative  generally  envisages  that  potentially  aggressive  cross-border  tax  planning 
schemes be disclosed to the authorities. The proposed rules do not presume the existence of 

12 

 
tax avoidance. It is also considered whether the disclosure should be coupled with exchange 
of information. 

The  disclosure  should  give  the  authorities  the  opportunity  to  investigate  into  these  schemes 
and reach a conclusion on whether those should be acceptable or not. In return, the authorities 
would be expected to legislate in order to render the disclosed schemes that they have found 
to be unacceptable illegitimate. 

The ultimate aim of the proposed rules is to discourage the availability of such schemes for 
taxpayers altogether. 

2.3.2.  Link to OECD/G20 Action 12 of the BEPS Project 

The envisaged initiative follows the recommended options of the OECD report on Action 12 
but  goes  beyond  a  mere  implementation  of  EU  commitments  under  Action  12.  The  OECD 
report  on  mandatory  disclosure  does  not  lay  down  any  minimum  standard.  In  addition,  the 
recommended  actions  are  drafted  as  alternatives  without  pointing  to  preferred  options. 
Therefore, only the fact that the proposed initiative lays down binding rules (in the form of a 
Directive) is a step further than the OECD Action 12. 

In addition, the disclosure is coupled with a proposed system for the automatic exchange of 
the disclosed data amongst tax authorities. This element comes on top  of the OECD Action 
12, which is limited to the disclosure of data. 

It is also worth mentioning that this initiative is meant to cover gaps in the CRS of the Global 
Forum,  as  it  broadly  applies  within  the  Union  under  the  Administrative  Cooperation 
Directive. 

2.3.3.  Penalties 

On  the  consequences  of  non-reporting/penalties,  the  envisaged  initiative  treats  this  area  as 
falling within the sovereign control of Member States. As the delineation of penalties remains 
outside the ambit of EU legislation, there will not be any detailed assessment of options in this 
respect. Member States would only undertake to ensure that effective and dissuasive penalties 
be put in place. However, in addition to penalties posed at national level, due to the increased 
transparency the initiative creates disincentives for intermediaries to design and market new 
schemes plus reputational risks in case of non-compliance with a reporting obligation. It also 
creates  disincentives  for  taxpayers  to  use  potentially  aggressive  tax  planning  schemes  that 
would have to be reported as well as disincentives to engage with intermediaries that carry a 
reputational risk triggered by non-compliance with the rules. 

3. 

PROBLEM DEFINITION, DRIVERS AND CONSEQUENCES  

3.1. 

Problem Definition 

The detected underlying problem is that certain tax planning schemes are being designed and 
promoted  by  intermediaries  and  used  by  taxpayers  for  the  purpose  of  avoiding  or  evading 
taxes. Most services provided by intermediaries are legal and legitimate, but recent scandals 
have demonstrated that in many cases intermediaries design structures that play a significant 

13 

 
 
 
 
role in devising and using aggressive tax planning schemes. According to one of the findings 
in  a  recent  study  issued  by  the  European  Parliament39,  the  offshore  structures  cited  in  the 
Panama Papers were set-up for a broad range of motives, including: undesirable but legal tax 
planning,  aggressive  tax  avoidance,  illegal  tax  evasion,  hiding  and  shielding  assets,  money 
laundering and crime financing.  

39   European  Parliament  (2017)  IP/A/PANA/2016-05  PE  602.030  "Role  of  advisors  and  intermediaries  in  the 

schemes revealed in the Panama Papers – Study for the PANA Committee, p. 15. 

14 

 
 
                                                 
Figure 1: Problem Tree 

Source:  

European Commission (2017) 

15 

EnterprisesCompetitor not applying aggressive tax planning (e.g. SMEs)SocietyState authoritiesEnterprise applying aggressive tax planningTax evasion and avoidanceUnfair competitive advantageLack of information on aggressive tax planning schemesBase erosionObserved unfairnessSocial dissatisfactionUnfair competitive disadvantageAggressive tax planningDesign and use of aggressive tax planning schemesDriversProblemDirect consequencesIndirect consequencesDistortion of the Internal MarketNo effective nor transparent monitoring of compliance Lack of timely information on aggressive tax planning for MS tax authoritiesDifferences amongst national frameworks on disclosures requirements Substantive tax legislation in place enabling aggressive tax planning designed by intermediariesInter-mediariesMarket opportunitiesPromoting schemes to many usersIndividualsIndividual applying aggressive tax planningIndividual not applying aggressive tax planningAggressive tax planningTax evasion and avoidanceWealth concen-trationWealthDistribu-tion Wealth ineauqlity 
 
 
3.1.1.  Design and use of aggressive tax planning schemes  

Aggressive tax planning is a major concern for the EU and internationally, given that it leads 
to losses of tax revenues for countries; for example, through schemes leading to double non-
taxation.  Aggressive  tax  planning  is  facilitated  by  disparities  amongst  national  tax  systems 
which,  in  their  interaction,  often  suffer  mismatches  that  lead  to  double  non-taxation.  In 
addition,  taxpayers  may  also  work  out  arrangements  that  take  advantage  of  preferential  tax 
regimes within a Member State, or beyond a single jurisdiction, and reduce their overall tax 
bills. Lack of transparency and the absence of an obligation to disclose potentially aggressive 
tax  planning  schemes  create  incentives,  in  particular  for  taxpayers  engaged  in  cross-border 
activities,  to  set  up  structures  that  channel  taxable  profits  towards  low  tax  countries.  The 
result is that certain – usually high-tax countries - see their tax bases being eroded. From an 
EU point of view, such a situation creates distortions in the internal market and jeopardizes its 
proper functioning as well as hampers the application of more growth-friendly tax policies at 
national  level.  Furthermore,  it  threatens  the  social  contract  at  large,  as  honest  taxpayers 
(individuals and companies) might become less inclined to comply with the rules. 

3.1.2.  Role of Intermediaries  

Taxpayers are rarely experts in the company or tax law of all jurisdictions which they use in 
structuring  their  business  in  a  tax  efficient  way.  They  usually  rely  on  intermediaries  who 
assist  them  in  the  design  of  the  most  appropriate  structure.  These  intermediaries  include, 
amongst others, consultants, lawyers, financial (investment) advisors, accountants, solicitors, 
financial institutions, insurance intermediaries, and company-formation agents. Intermediaries 
advise  clients  on  structuring  their  business,  to  reduce  tax-related  costs  and  they  receive  a 
premium  fee  as  remuneration.  It  is  also  common  that  intermediaries  design  and/or  market 
certain standard schemes to more users/clients. In this way, they make a profitable business 
out  of  facilitating  tax  optimisation,  which  sometimes  may  carry  the  characteristics  of 
aggressive  tax  planning  and  lead  to  the  avoidance  of  tax.  The  role  of  intermediaries  in  this 
process is of primary importance and the lack of disincentives only facilitates their behaviour.  

Aggressive  tax  planning  schemes  usually  involve  complex  structures  which  are  deployed 
across  multiple  jurisdictions  and  in  particular,  use  offshore  centres.  These  schemes  take 
advantage  not  only  of  differences  in  the  tax  systems  between  jurisdictions  but  also  of 
regulatory  disparities.  Furthermore,  taxpayers  may  exploit  the  fact  that  jurisdictions  often 
require  divergent  degrees  of  transparency,  for  example  limited  commitment  to  the 
international  exchange  of  information  through  agreements  for  tax  purposes.  Planning  these 
schemes therefore involves intermediaries with a wide knowledge that covers more than one 
tax system and several tax-related domains. 

3.1.3.  Evidence of the involvement of intermediaries in aggressive tax planning schemes 

There  is  a  wide  range  of  different  types  of  intermediaries  and  geographic  locations  which 
intermediaries commonly use to set up opaque structures. These locations involve a number 
of jurisdictions, including offshore centres which are identified as hallmarks  for tax evasion 
and  avoidance.  A  current  study40  seeks  to  analyse  the  main  characteristics  of  the  "go-
betweens".  These  are  the  'intermediaries',  who  advise  clients  to  contact  offshore  service 

40   The Greens/EFA Group (2017): "Usual suspects? Co-conspirators in the business of tax dodging". 

16 

 
 
                                                 
providers for setting up an offshore entity.41 The definition in the study for intermediaries is 
the following: 

"We  understand  intermediaries  as  a  go-between  for  a  client  seeking  an  ultimate 
offshore  service  provider  in  order  to  create  (and  sometimes  run)  one  or  several 
offshore entities. These intermediaries are often unknown to the public but play a key 
role in the existence of shell companies in tax havens".42 

The study provides data on where intermediaries are located by continent and also gives more 
details for Europe.  

Figure 2: Global distribution of intermediaries 

10 292 

12 000

10 000

8 000

6 000

4 000

2 000

5 704 

3 497 

2 095 

1 979 

Asia

Europe

North and
Central
America

South
America

 429 

 187 

Unidentified

Oceania

Africa

Source:  

Study by the Greens/EFA Group (2017): "Usual Suspects? Co-conspirators in the business of tax dodging", p.9 

41   The  data  used  in  the  study  is  from  the  following  three  datasets:  Panama  Papers,  Offshore  Leaks  and  the 

Bahamas Leak.  

42   The Greens/EFA Group (2017): "Usual suspects? Co-conspirators in the business of tax dodging", p5. 

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Figure 3: Top 10 European countries where intermediaries operate 

1 540 

1 321 

1 800

1 600

1 400

1 200

1 000

 800

 600

 400

 200

 403 

 336 

 249 

 210 

 203 

 176 

 170 

 124 

Source:  

Study  by  the  Greens/EFA  Group  (2017):  "Usual  Suspects?  Co-conspirators  in  the  business  of  tax  dodging", 
p.10 

The wide range of categories of intermediaries which vary from banks and company service 
providers to consultancies is outlined in the table below: 

Table 1:   International intermediaries and the countries they operate in  

(top 10 of 144 intermediaries) 

Position  Name 

Countries 

Number of 
offshore companies 
requested 

1 

United  Bank  of 
Switzerland 

Bahamas,  Cayman  Islands,  France,  Germany,  Hong 
Kong, 
Jersey,  Luxembourg,  Monaco,  Singapore, 
Switzerland, Taiwan, UK, US, Indonesia, Canada 

2 

Crédit Suisse 

Singapore,  Switzerland,  Taiwan,  UAE,  UK,  US, 
Bahamas,  China,  Gibraltar,  Guernsey,  Liechtenstein, 
Monaco 

3 

4 

5 

Trident  Corporate 
Services 

Offshore Business 
Consultant Ltd. 

Bahamas, BVI, Guernsey, Jersey, Isle of Man 

Hong Kong, China, Unidentified 

Orion 

House  Belize, Hong Kong, Jersey 

13 285 

11 347 

8 507 

7 515 

7 061 

18 

 
 
 
 
 
 
Position  Name 

Countries 

Number of 
offshore companies 
requested 

6 

7 

8 

9 

Services 

Prime  Corporate 
Solutions 

Hong Kong, Luxembourg, Gibraltar 

Citibank 

UK,  Singapore,  Jersey,  Switzerland,  Hong  Kong, 
Indonesia, US, Bahamas, Jersey 

G.S.L.  Law  & 
Consulting 

Russia, Cyprus, Unidentified 

HSBC 

Singapore,  Guernsey,  Hong  Kong,  Isle  of  Man,  Israel, 
Jersey,  Lebanon,  Luxembourg,  Singapore,  Switzerland, 
Taiwan, UK, US, Guernsey, Bahamas, Switzerland 

4 300 

3 393 

2 909 

2 882 

10 

Ansbacher 

Bahamas, Switzerland, British Virgin Islands 

2 262 

Source:  

Study  by  the  Greens/EFA  Group  (2017):  "Usual  Suspects?  Co-conspirators  in  the  business  of  tax  dodging", 
p.21 

The  increasing  use  of  entities  in  offshore  jurisdictions  since  2000  is  demonstrated  in  the 
recently published study by the European Parliament43. Since 2000 there has been a surge in 
the  number  of  entities  registered  in  offshore  jurisdictions  which  may  be  explained  by 
increasing  globalisation  and  digitalisation,  which  make  it  easier  to  establish  and  maintain 
offshore structures. Although this trend has decreased in recent years due to the financial and 
economic  crisis  and  as  result  of  several  policy  measures,  including  the  adoption  of  more 
stringent anti-money laundering standards, global private wealth of high net value individuals 
is projected to rise at a compound annual rate of 6% over the next five years to reach United 
States Dollar (USD) 224 trillion in 202044 with accelerating digital innovation leading to new 
investment products in a wide range of geographic locations. 

43   European  Parliament  (2017)  IP/A/PANA/2016-05  PE  602.030  "Role  of  advisors  and  intermediaries  in  the 

schemes revealed in the Panama Papers – Study for the PANA Committee". 

44   Boston  Wealth  Management  Report  2016:  http://www.fondstrends.ch/fileadmin/pdf/BCG-Navigating-the-

New-Client-Landscape_June_2016.pdf 

19 

 
                                                 
Figure 4: Establishment of entities across time 

Source: International Consortium of Investigative Journalists (2016). 

According to this study the amounts of unpaid taxes and fines can be substantial: for France 
alone taxpayers involved in the Panama Papers already owed tax authorities EUR 1.2 billion 
in  taxes  and  fines.  The  study  underlined  the  broad  range  of  intermediaries  involved  in  the 
Panama Papers: 

Figure 5: Type of intermediary (share of entities) in Panama Paper 

Source: International Consortium of Investigative Journalists (2016). 

20 

 
 
 
 
 
 
 
In order to create aggressive tax planning schemes, intermediaries propose complex structures 
involving  many  jurisdictions  which  often  include  offshore  financial  centres.  The  Second 
Review  of  the  Savings  Directive45  reflects  the  involvement  of  offshore  centres  as  suitable 
locations for setting up intermediary entities within structures that involve legal entities and/or 
arrangements, like trusts, often using onshore financial centres. The analysis in the review on 
publically available statistics by the Swiss National Bank and aggregate statistics of the Bank 
of International Settlements (BIS), supplemented at the time with bilateral statistics from the 
BIS, obtained on a non-disclosure basis. Although the statistical data is no proof of facilitating 
tax evasion, the complexity of structures and indeed the evidence leaked in the Panama Papers 
show  that  the  creation  of  such  structures  largely  relies  on  the  knowledge  and  skills  of 
intermediaries.  

In its issue for 2010, the annual publication Banks in Switzerland by the Swiss National Bank 
encompasses  some  very  detailed  geographical  and/or  client  breakdowns  in  'Table  38 
Fiduciary business, by country'. The definition of a fiduciary business, for the purposes of the 
report on Banks in Switzerland, can be found in the 1997 edition of the publication, which is 
not available in English. It follows that the definition is an unofficial translation.46 It is clear 
that  a  fiduciary  business  primarily  consists  of  deposits  from  non-residents  (fiduciary 
liabilities)  which  are  afterwards  re-deposited  abroad  in  the  name  of  the  bank,  but  for  the 
account  of  the  depositor.  Fiduciary  liabilities  are  heavily  represented  in  offshore  centres. 
Eight  countries  which  may  be  considered  to  be  offshore  centres  list  amongst  the  first  15 
countries that represent an average of 67% of the fiduciary liabilities.  

45   European  Commission  (2012)  SWD(2012)16  final,  "Commission  Staff  Working  Document  presenting  an 

evaluation for the second review of the effects of the Council Directive 2003/48/EC"  

46   Fiduciary transactions include investments, loans and equity interests which the bank holds or grants in its 
own  name,  but  for  the  account  and  at  the  risk  of  the  customer,  on  the  basis  of  a  written  agreement.  The 
instructing  customer  bears  the  full  currency,  transfer,  price  and  collection  risks  and  is  the  exclusive 
beneficiary  of  all  accruals  from  such  transactions;  the  bank  only  charges  a  commission.  Fiduciary  funds 
received by the banks mainly come from abroad and are almost exclusively invested abroad. They essentially 
consist of short term foreign investments in third banks or in branches legally dependent on Swiss banks. In 
the latter case, these transactions must appear in the balance-sheet, since they involve a commitment from the 
branch towards the head office in Switzerland. 

21 

 
                                                 
Figure 4: Geographical breakdown of fiduciary liabilities 2002 - 2010 

Source:  

Swiss National Bank ("Banks in Switzerland 2010)" 

The same order and similar shares regarding the BVI, Panama and the Bahamas emerge from 
the data that features  in the Panama  Papers. Specifically, it appears that  more than 113 000 
offshore  trusts  and  companies  have  been  created  in  the  BVI  with  almost  50 000  in  Panama 
and around 17 000 in Bahamas. 

The  International  Locational  Banking  Statistics  of  the  BIS  includes  quarterly  data  on  assets 
and  liabilities  of  domestic  banks  and  branches  of  foreign  banks  in  the  43  reporting 
countries.This  is  broken  down  on  a  bilateral  basis  per  country  of  each  counterparty47. 
Nevertheless,  it  is  not  possible to  differentiate  between  deposits  from  individuals,  non-bank 
financial  entities  and  commercial  entities  or  other  structures  within  the  total  amount  of  the 
non-bank balances48. 

The  analysis  in  the  Second  Review  of  the  Savings  Directive,  based  on  a  breakdown  per 
counterparty jurisdiction, showed that  the  share of  accounts of  offshore non-banks in EU 
banks is around 20%. This amounts to around USD 1 trillion for 2007. 

47   There is also a breakdown of the data by sector and the country of residence of the counterparty, as well as 
according to the country of the reporting banks. The sectorial breakdown includes liabilities to non-banks. 
48  The latest BIS data have some non-country-specific aggregates for a breakdown of the non-banks share into 

other financial corporations and non-financial corporations, but no country-specific data. 

22 

 
 
 
                                                 
Figure 5: Share of accounts of offshore non-banks in EU banks 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Other

Offshore

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source:  

Bank  for  International  Settlements  –  2001-2010  Quarterly  data  supplied  by  BIS  on  liabilities  per 
offshore/onshore jurisdictions per domestic banks and foreign bank branches of reporting jurisdictions  

Some  of  those  accounts  would  also  be  attributable  to  non-bank  financial  entities.  BIS 
statistics49 on cross-border positions show that, based on aggregate data for all jurisdictions, 
broadly 50% of the liabilities are towards non-bank non-financial entities. 

3.2. 

Drivers  

3.2.1.  Lack  of  timely information  on  aggressive  tax  planning  schemes  for  Member  States' 

tax authorities  

Countries  around  the  world  have  been  developing  tax  compliance  strategies  in  order  to  be 
able  to  deal  more  effectively  with  aggressive  tax  planning.  Usual  tax  compliance  strategies 
based  on  the  analysis  of  tax  returns  and  conventional  tax  audits  are  not  sufficient  to  ensure 
timely access to relevant information on the tax planning.50  

The  absence  of  a  mandatory  disclosure  regime  in  most  Member  States  presents  no 
disincentive  for  intermediaries  and  users  who  remain  enabled  to  design,  market  and  use 
aggressive tax planning schemes. While some Member States provide for voluntary disclosure 
regimes at the domestic level, no similar instrument is envisaged for cross-border schemes. 

Furthermore, the entire BEPS Action Plan lacks a binding legal effect on the OECD member 
countries. It follows that OECD countries have to take measures to implement these actions 
through  their  domestic  law,  bilateral  treaties,  or  a  multilateral  instrument.  While  the  OECD 
has  set  up  an  Inclusive  Framework  to  monitor  BEPS  implementation  and  participating 
countries  have  committed  to  implement  the  comprehensive  BEPS  Package,  the  peer  review 

49   Bank  for  International  Settlements  –  BIS  (2016):  "Cross-border  positions,  by  residents  and  sector  of 

counterpart"  

50OECD (2011) Report: Tackling Aggressive Tax Planning through Improved Transparency and Disclosure  

23 

 
 
  
                                                 
and monitoring process concerns only  the four BEPS  minimum standards51. Action 12 does 
not constitute a minimum standard.52 It only takes the form of recommendations that allow for 
several options and approaches which may lead to substantially divergent disclosure regimes 
in different countries.  

Only 3 out of 28 Member States operate a mandatory disclosure regime. The analysis of their 
statistics  reveals  that  the  number  of  disclosures  drastically  decreased  after  the  first  years  of 
introduction in the domestic context.  

UK HMRC DOTAS Direct Tax Disclosure was first launched in 2004 and received 503 direct 
tax disclosures for the 8-month period from 1 August 2004 to 31 March 2005. The number of 
notifications  decreased  to  fewer  than  10  in  the  6-month  period  from  1  April  2014  to  30 
September 201453. 

The  reason  for  this  decrease  of  disclosures  has  not  been  identified  in  detail  by  national 
authorities. This could be due to (i) fewer schemes being devised and used, which would be a 
success; or (ii) intermediaries engage in illegal activities, i.e. non-reporting is illegal; or (iii) 
intermediaries re-design the schemes that they market so that those are no longer subject to a 
mandatory disclosure. 

The remaining 25 Member States do not accommodate a mandatory disclosure regime and the 
OECD framework in connection with Action 12 does not create an obligation upon them to 
enact  one.  However,  such  circumstances  lead  to  lack  of  transparency  on  the  applied 
administrative  practice.  For  instance,  without  receiving  information  on  the  elements  of 
potentially aggressive tax schemes relevant to a particular multinational enterprise, activity or 
business, the affected Member States are unlikely to be aware of the impact that such schemes 
can have on their tax revenues. Consequently, they cannot react to them. 

3.2.2. 

 Differences amongst national frameworks on disclosure requirements  

A mandatory disclosure regime is only established in three EU Member States and while the 
main  characteristics  are  rather  similar,  there  are  some  differences  between  these  three 
systems.  In  other  areas,  e.g.  automatic  exchange  of  tax  rulings  and  CbCR,  the  adopted 
legislation  is  about  to  be  transposed  and  enter  into  force  but  these  areas  capture  a  different 
type  of  information.  The  existing  differences  amongst  national  frameworks  on  disclosure 
prevent  an  efficient  and  coherent  collection  of  information  on  aggressive  tax  planning 
schemes across the EU.  

3.2.3.  Neither effective nor transparent monitoring of compliance with existing law 

The complexity of existing tax laws contributes to ineffective and non-transparent monitoring. 
The  lack  of  transparency  facilitates  aggressive  tax  planning  and  prevents  the  national 
authorities from gathering information on aggressive tax planning schemes and consequently, 
from levying tax on income taxable in their country.  

3.2.4.  Existing tax legislation may enable aggressive tax planning 

Aggressive tax planning consists in taking advantage of the technical features of a tax system 
or  of  mismatches  in  the  interaction  between  two  or  more  tax  systems  for  the  purpose  of 
reducing the overall tax liability of a taxpayer or group of companies. A key characteristic of 

51   See  BEPS  Actions  5,  6,  13  and  14  in  OECD  (2013),  "Action  Plan  on  Base  Erosion  and  Profit  Shifting", 

OECD Publishing. 

52   OECD (2015), "Mandatory Disclosure Rules, Action 12 - 2015 Final Report", Executive Summary, p. 9. 
53   Last period for which figures are publically available are provisional. See HM Revenue & Customs (2014), 

"Tax avoidance and disclosure statistics"  

24 

 
                                                 
these  practices  is  that  they  usually  involve  strictly  legal  arrangements  which  however 
contradict the intent of the law. Aggressive tax planning may also benefit from weaknesses in 
the compliance frameworks. A study published by the European Commission on Structures of 
Aggressive Tax Planning and Indicators54 has identified and examined seven common model 
aggressive tax planning structures in the EU: 

  A hybrid finance structure 
  A two-tiered intellectual property structure with a cost-contribution arrangement 
  A one-tiered intellectual property structure with a cost-contribution arrangement 
  An offshore loan structure 
  A hybrid entity structure 
  An interest-free-loan structure 
  A patent-box aggressive tax planning structure 

As  a  matter  of  principle,  these  structures  would  fall  within  the  definition  laid  down  in  the 
Commission's  Recommendation  on  Aggressive  Tax  Planning.55  Since  2016,  Member  States 
have agreed to coordinate their policies in clamping down on aggressive tax planning. They 
thus adopted a set of anti-tax avoidance measures in the form of minimum standards (ATAD). 
This framework was complemented with more comprehensive rules on hybrid mismatches in 
2017 (ATAD 2).  Yet  still, other features  remain available at least for the foreseeable future 
and new ones may be developed in the meantime. 

3.2.5. 

Insufficient beneficial ownership information (external factor) 

An entity with an anonymous beneficial owner enables aggressive tax planning schemes to be 
established in a way that they take advantage of mismatches between two or more tax and/or 
regulatory systems. Although measures have been taken in the meantime to allow national tax 
administrations  access  to  information  on  the  beneficial  owner,  this  remains  a  weak  point. 
Namely,  intermediaries  use  their  expertise  to  exploit  the  rules  by  setting  up  structures  that 
make  it  burdensome  or  even  impossible  to  identify  the  ultimate  beneficial  owner(s).  In 
particular,  aggressive  tax  planning  schemes  often  use  third-country  jurisdictions  and 
especially offshore centres where the regulatory framework on the identification of beneficial 
ownership and its enforcement are inadequate. 

3.3. 

Consequences  

3.3.1.  Effects on Taxpayers (individuals and companies) 

Aggressive  tax  schemes  disrupt  the  functioning  of  the  internal  market.  Notably,  the  lack  of 
transparency grants certain taxpayers a competitive advantage. This is, in particular, true for 
those companies and individuals  that have the resources  to make  use  of professional advice 
from experts that act as intermediaries in proposing aggressive tax optimisation schemes. On 
the  other  hand,  companies  that  do  not  engage  in  aggressive  tax  planning  schemes  or  shift 
profits to low-tax jurisdictions tend to suffer higher costs, as compared to those who benefit 
from aggressive tax planning schemes.  

The situation looks similar in the field of individuals. Those who can afford to lower their tax 
liability through expert tax advice tend to be wealthier than those who pay their fair share of 
tax.  

54   European Commission (2015) Taxation Papers Working Paper N.61, "Study on Structures of Aggressive Tax 

Planning and Indicators Final Report" 

55   Commission Recommendation of 6 December 2012 on aggressive tax planning, C(2012) 8806 final. 

25 

 
                                                 
3.3.2.  Effects on intermediaries 

The absence of an obligation to disclose advice on aggressive tax planning schemes results in 
the creation of business and market opportunities for certain intermediaries. Whereas the large 
majority of intermediaries is engaged in business as usual, some of them are fully specialised 
and/or  engaged  in  the  design  and  promotion  of  aggressive  tax  planning  schemes  and  offer 
their services on the market to taxpayers. 

3.3.3.  Effects on Member States and national tax administrations  

The  tax  administrations  of  Member  States  seek  to  prevent  losses  of  tax  revenue  that  result 
from  aggressive  tax  planning  schemes.  However,  with  only  insufficient  information  on  the 
structure of such schemes, Member States end up in a position whereby they cannot respond 
effectively  to  the  challenges  in  a  globalised  world  and  become  less  able  to  defend  their  tax 
base.  Otherwise,  attempts  by  tax  administrations  to  improve  tax  collection  may  result  in 
increasing  administrative  costs  (e.g.  introduction  of  complex  anti-abuse  measures).  Thus,  to 
enhance  their  tax  revenues,  Member  States  may  engage  in  the  design  of  complex  counter-
measures (such as special tax regimes to incentivise enterprises to shift profits towards their 
jurisdictions etc.).  

3.3.4.  Effects on citizens and society  

Citizens  are  indirectly  affected,  mainly  in  their  capacity  as  individual  taxpayers.  Given  that 
Member  States  lose  tax  revenues  if  multinational  enterprises  or  wealthy  individuals  escape 
from paying their fair share of tax, States are inclined to make up for this loss by raising taxes 
through  the  least  mobile  tax  bases;  for  example,  income  from  employment.  This  results  in 
unfairness.  

Recent  press  reports  on  the  Panama  Papers,  but  also  on  the  use  of  aggressive  tax  planning 
structures by big multinational enterprises, have led to public criticism. There is a widely held 
perception that companies, in particular multinational enterprises, avoid contributing their fair 
share  to  the  funding  of  public  goods  by  artificially  lowering  their  taxable  income.  This  is 
made more acute in the context of the current austerity measures being imposed on countries 
that  need  to  engage  in  fiscal  consolidation.  Many  citizens  feel  that  companies  avoid  taxes 
while they see themselves faced with increasing tax burdens. 

3.4. 

Examples on income flows that leave the internal market untaxed 

Example 1 – No Withholding Tax – Zero Rate at Destination 

Company A, a franchisee of an MNE headquartered in a major trade partner of the EU, is tax 
resident in MS A which is a high-tax jurisdiction. 

Company A is licensed to use intellectual property (IP) of the MNE group via the group´s IP 
centre on an island in the Caribbean where corporate tax is at zero rate. 

To avoid paying the high withholding tax (WHT) of 15% on royalties from Company A to the 
group's IP centre in the Caribbean (due to the absence of a tax treaty), the group sets up a 
NewCo  in  an  EU  MS  where  outflows  in  the  form  of  dividends,  interest  and  royalties  are 
subject to no WHT. 

Company  A  is  no  longer  directly  licensed  for  the  use  of  IP  from  the  Caribbean  entity  but 
instead via NewCo, which is given the function of sub-licensing the group IP across the EU.  

26 

 
 
Company A pays royalties to NewCo. The Interest & Royalties Directive does not apply to the 
transfer between Company A and NewCo but  there is a tax treaty which follows the OECD 
Model and provides for no WHT on royalties.  

Further,  when  NewCo  passes  the  royalties  to  the  Caribbean  affiliate,  there  is  no  WHT 
because the MS where NewCo is tax resident has unilaterally abolished WHT on outflows.  

NewCo  is  taxable  on  the  royalties  that  it  receives  from  Company  A  but  its  tax  base  is 
significantly  reduced  by  the  fact  that  it  pays  out  most  of  these  amounts  to  its  Caribbean 
affiliate.   

NewCo  passes  royalties  tax-free  to  its  Caribbean  parent  company  where  this  income  is 
taxable at zero rate.  

Who is liable to disclose 

Under a scheme of mandatory disclosure, the law firm which advised and possibly carried out 
the formalities for setting up NewCo would need to inform on the specifics of this scheme. The 
disclosure  of  the  arrangement  would  have  to  be  done  in  the  Member  State  of  NewCo  if  the 
intermediary has a presence (e.g. at least an office) there.  

If  the  intermediary  advised  from  outside  the  EU  (e.g.  the  third  country  where  the  MNE  is 
headquartered) and collaborated with a local firm for the formation of NewCo, it would be 
for  the  local  firm  to  report.  In  the  event  that  the  third-country  intermediary  only  gave  tax 
advice and sold the scheme to the MNE group but NewCo was set up by in-house lawyers, the 
obligation to disclose would be shifted to the taxpayer, i.e. NewCo. 

Relevant hallmarks 

Generic: the scheme above could be a massively marketed scheme 

A  massively  marketed  scheme  would  be  designed  by  promoters/  tax  experts  with  the  aim  to 
generally  address  situations  whereby  a  third-country  taxpayer  wishes  to  mitigate/  eliminate 
its liability to withholding tax on royalty income in the EU. It would not look at the specific 
details of the corporate and business structure of the taxpayer. 

The scheme would be sold for a fee, which would vary depending on the services supplied by 
intermediary.  For  instance,  the  intermediary  may  only  sell  the  scheme  or  may  also  be 
involved in tis implementation. 

The intermediary/ (taxpayer) may be in a position to prove that the creation of NewCo has a 
main aim other than obtaining a tax advantage, e.g. there is a need to centrally manage all 
EU franchise contracts for the MNE group and the actual activity of NewCo proves that it is 
actively involved in doing this. In such case, the scheme is not captured by the hallmark and 
does not need to be reported. In the opposite case, the fact that MNE group benefits from no 
or  minimal  withholding  tax  on  the  royalties  that  NewCo  pays  out  of  the  EU  is  a  clear  tax 
benefit and should be sufficient to bring the scheme within the scope of the hallmark. 

Specific: zero taxation in the Caribbean. 

If  the  outbound  royalty  payments  are  subject  to  zero  rate  tax  in  the  Caribbean,  the  scheme 
would be captured by hallmark C.1.b).ii 

It  would  suffice  that  one  of  these  two  hallmarks  captures  the  scheme,  for  the  purpose  of 
making it reportable.  

27 

 
 
 
Example 2 – Mismatch - Transparency/Non-Transparency of an Entity 

Company  A  is  resident  for  tax  purposes  in  third  country  A  and  licenses  IP  to  entity  B,  a 
wholly-owned subsidiary, in EU MS B.  

Entity B is treated as transparent under the law of MS B but has opted to  be considered as 
non-transparent for tax purposes from the viewpoint of third country A.  

Entity B sub-licenses the use of its IP to subsidiaries of the group in several MS. 

The subsidiaries pay royalties for the use of the IP back to entity B. 

MS  B  does  not  see  a  taxable  presence  of  entity  B  in  its  territory  (not  even  a  permanent 
establishment, as most of the management of the licences takes place from abroad). 

Given the fact that MS B would not supply a tax residence certificate for transparent entity B, 
the franchisees will  need to  apply the tax treaty with  third country  A. It is assumed that all 
these applicable tax treaties follow the OECD Model and so provide for no WHT on royalties. 

From the point of view of MS B, the royalty payments are deemed to be paid to Company A, 
which is the only shareholder/partner of entity B. 

Third country A treats entity B as non-transparent, i.e. a company resident for tax purposes in 
MS B. 

Third  country  A  would  therefore  not  tax  the  royalties  paid  to  B  (unless  it  decided  to  apply 
controlled foreign company legislation on company A). 

Who is liable to disclose 

Under a scheme of mandatory disclosure, the law firm which advised and possibly carried out 
the  formalities  for  setting  up  entity  B  would  need  to  inform  on  the  specifics  of  this  scheme. 
The disclosure of the arrangement would have to be done in the Member State of entity B if 
the intermediary has a presence (e.g. at least an office) there.  

If the intermediary advised from outside the EU (e.g. the third country where company A is 
resident  for  tax  purposes)  and  collaborated  with  a  local  firm  in  MS  B,  it  would  be  for  the 
local firm to report. In the event that the third-country intermediary only gave tax advice and 
sold the scheme to company A but entity B was set up by in-house lawyers, the obligation to 
disclose would be shifted to the taxpayer, i.e. entity B. 

Relevant hallmarks 

Generic: the scheme above could be a massively marketed scheme; it would be sold for a fee.  

The observations made on generic schemes under Example 1 would also apply to the facts of 
this example. 

Specific: not subject to tax in the third country of destination. 

Considering  that  third  country  A  treats  entity  B  as  non-transparent,  it  assumes  that  it  is 
resident for tax purposes in MS B and has been subject to corporate tax there. Consequently, 
If the royalty payments are not taxable in the third country of destination, the scheme would 
be captured by hallmark C.1.b).i.  

In addition, there would be a mismatch as the same entity would be treated as transparent in 
the EU MS and non-transparent by the third country. Even if the scheme were not captured by 

28 

 
 
 
the hallmark above referring to the level/ existence of tax liability, it would still fall within the 
scope of C.1.e) due to the mismatch.  

It  would  suffice  that  one  of  these  two  hallmarks  captures  the  scheme,  for  the  purpose  of 
making it reportable. 

It should be clarified that reporting a scheme under the proposed Directive does not imply that 
the scheme(s) necessarily involve(s) arrangements of tax  avoidance. The tax authorities will 
have to assess the disclosed details in combination with the tax file of the taxpayer concerned. 
The  aim  is  that  the  tax  authorities  receive  information  about  potentially  aggressive  tax 
planning  schemes  before  these  schemes  are  implemented  and  that  this  enhances  their  
effectiveness in clamping down on tax avoidance. 

4. 

WHY THE EUROPEAN UNION SHOULD ACT  

Article 115 of the Treaty on the Functioning of the European Union (TFEU) is the legal base 
for legislative initiatives in the field of direct taxation. Although no explicit reference to direct 
taxation  is  made,  Article  115  refers  to  directives  for  the  approximation  of  national  laws  as 
those  directly  affect  the  establishment  or  functioning  of  the  internal  market.  It  follows  that, 
under  Article 115  TFEU,  directives  are  the  only  available  legal  instrument  for  the  Union. 
Based on Article 288 TFEU, directives shall be binding as to the result to be achieved upon 
Member States but leave the choice of form and methods to the national authorities.  

Given that the scope of the proposed rules is limited to direct taxes, it would not have been 
possible to refer to Article 113 TFEU on the harmonisation of legislation in turnover taxes.  

The lack of transparency facilitates activities of certain intermediaries involved in promoting 
and selling aggressive tax planning schemes. As a consequence of this, Member States suffer 
from the shifting of profits, which would otherwise be generated and become taxable in their 
territory, towards low-tax jurisdictions and often experience an erosion of their tax bases. In 
addition,  such  a  situation  should  be  expected  to  give  rise  to  conditions  of  unfair  tax 
competition  against  businesses  that  refuse  to  engage  in  these  illegitimate  activities.  The 
ultimate outcome is to distort the operation of the internal market. 

Experience  shows  that  national  provisions  against  aggressive  tax  planning  cannot  be  fully 
effective. The disclosure requirements under national rules would be limited to the domestic 
territory and therefore only deal with a single fragment of a cross-border scheme. In fact, such 
schemes usually involve numerous companies with tax residence in a variety of jurisdictions. 
Sometimes, when it comes to multinational groups, the taxpayer in a single jurisdiction may 
not  even  be  fully  informed  of  the  structure  of  a  scheme  that  stretches  across  the  group.  It 
would therefore be unrealistic to expect to  receive the full picture of a cross-border scheme 
applying  to  a  multinational  group  through  placing  an  obligation  of  disclosure  to  a  local 
subsidiary. In addition, if only part of a scheme becomes known to the authorities, it is very 
possible that the potentially harmful elements of the scheme escape. 

Many  of  the  structures  devised  to  avoid  taxes  have  a  cross-border  dimension  while  also 
capital  and  persons  are  increasingly  mobile,  especially  within  an  integrated  market,  such  as 
the  internal  market  of  the  EU.  The  need  for  collective  action  at  EU  level  to  improve  the 
current state of play has become apparent and can usefully complement existing initiatives in 

29 

 
 
 
 
 
this  area,  in  particular  within  the  context  of  the  DAC.  This  is  all  the  more  so,  as  existing 
instruments  at  national  level  have  shown  to  be  only  partially  effective  in  increasing 
transparency.  

Typical structure of aggressive tax planning arrangements 

A typical cross-border tax planning arrangement or a series of arrangements would involve a 
structure  that  engages  more  than  one  jurisdiction  within  the  EU  (and that  possibly stretches 
even to third countries). In accordance with the proposed rules, the intermediary who carries 
the responsibility vis-à-vis the taxpayer(s) for designing and implementing the arrangement(s) 
shall  file  the  requisite  information  with  the  tax  authorities.  In  the  business  practice,  it  is 
usually the case that the intermediary exclusively deals with one taxpayer within a group; that 
is, the top company in the shareholding tree. It follows that in such cases, individual national 
measures  oriented  towards  disclosing  the  domestically-focussed  individual  bits  of  a  broader 
arrangement  or  series  of  arrangements  would  be  impossible  to  apply.  This  is  because  there 
would be no presence of an intermediary in most of the subsidiary jurisdictions. Inevitably, it 
would be the intermediary who signed with the taxpayer that would have to disclose the EU-
wide dimension of an arrangement(s). 

It  can  also  occur  that,  depending  on  the  specifics  of  a  tax  planning  arrangement,  lower-tier 
group  companies  with  a  predominantly  domestic  focus  sign  a  contract  with  intermediaries. 
This would often refer to the local aspects of a broader cross-border scheme for a corporate 
group. In this context, although it could be possible to identify the intermediary related to the 
local aspect of the overall arrangement, one would normally need to have a global picture, in 
order to identify the contrived steps that make such a scheme illegitimate. Namely, if seen in 
isolation (e.g. State by State), the domestic dimension of a scheme is often unlikely to provide 
the authorities with sufficient input for assessing whether a part of a certain scheme should be 
acceptable or not. It therefore follows that a country-by-country notification of pieces in the 
puzzle, without knowledge of the full picture, would not fulfil the ultimate objective of this 
initiative,  i.e.  to  clamp  down  on  tax  avoidance  and  evasion  and  consequently,  improve  the 
functioning of the internal market. On the contrary, a localised approach would exacerbate the 
fragmentation of the market. 

Example 1 

In Example 1 under section 3.4, the intermediary (e.g. law firm which advised and possibly 
carried out the formalities for setting up NewCo) would need to inform the authorities about 
the specifics of this scheme, including by providing a summary of the facts. The disclosure of 
the arrangement will have to be done in the Member State of NewCo if the intermediary has a 
presence  (e.g.  at  least  an  office)  there.  If  the  intermediary  is  not  identifiable,  in  terms  of 
physical presence in the EU, the responsibility for disclosure will shift to the taxpayer, i.e. the 
group member which signed the contract with the intermediary. 

In this example, it becomes obvious that a disclosure of solely the local aspects of the scheme 
(e.g. the situation in Member State A) would not suffice for identifying the tax-related motive 
behind the creation of New Co.  

Example 2 

In Example 2 under section 3.4, the intermediary (e.g. law firm which advised and possibly 
set up the hybrid entity B) is most likely to carry the obligation of disclosing the relevant data 
of the entire scheme to the authorities. Assuming that the intermediary is based, or maintains a 
presence, in Member State B, the intermediary will need to notify the full picture to the tax 
authorities  of  that  Sate.  Thus,  it  will  not  be  enough  to  disclose  only  the  local  aspects  that 
solely pertain to Member State B. In fact, in such case, the authorities would be unlikely to 

30 

 
trace  the  element  of  hybridity  which  is  inherent  in  this  scheme  and  leads  to  double  non-
taxation.  

Subsidiarity 

Both examples demonstrate that a country-by-country disclosure of fragments of the overall 
schemes  would  not  supply  the  authorities  with  the  necessary  minimum  of  knowledge  to 
identify an arrangement or a series of arrangements in their entirety and assess whether it  is 
legitimate or not. Considering that the mandatory disclosure is aimed to inform tax authorities 
about schemes with a dimension beyond a single State, it would be necessary to embark on 
any such initiative through action at the level of the EU, in order to ensure a uniform approach 
to  the  identified  problem.  Thus,  the  internal  market  needs  a  robust  mechanism  to  address 
loopholes in a uniform fashion and rectify existing distortions by ensuring that tax authorities 
receive  appropriate  information,  on  a  timely  basis,  about  aggressive  tax  planning  schemes 
with cross-border implications.  

Uncoordinated  action  undertaken  by  Member  States  based  on  own  initiative  would  create  a 
patchwork of rules on the disclosure of schemes by intermediaries while it would perpetuate 
unfair tax competition between States. 

What  is  more,  action  on  disclosure  at  the  level  of  the  EU  would  bring  an  added  value,  as 
compared  to  individual  Member  State  initiatives  in  the  field.  This  is  because  the  proposal 
exclusively deals with cross-border situations, which is not the focus of the existing national 
regimes  on  mandatory  disclosure.  In  fact,  most  of  the  aggressive  tax  planning  schemes  are 
structured to have a cross-border dimension or impact, as they have the aim of shifting taxable 
income  towards  low-tax  jurisdictions.  In  this  light,  the  EU  is  in  a  better  position  than  any 
Member State individually to ensure the effectiveness and completeness of the system for this 
exchange of information. 
On  this  point,  stakeholders  confirmed  at  the  consultation  stage  that  the  most  interesting  tax 
planning  schemes  for  them  are  those  with  a  cross-border  element.  It  follows  that  the 
disclosure of potentially aggressive tax planning schemes  at the level of the Union brings a 
definitive advantage into the equation: it allows tax administrations to obtain the full picture 
of a structure of cross-border transactions and its impact on the overall tax base. In addition, 
the  automatic  exchange  of  information  among  tax  authorities  increases  the  chances  of 
identifying potentially aggressive tax schemes, as reportable information will be available to 
all  Member  States.  It  should  also  be  considered  that  a  common  cross-border  system  for  the 
internal  market  should  be  expected  to  gradually  fix  as  a  level-playing  field  which  could 
complement  national  systems  of  disclosure.  It  is  thus  true  that  national  rules  of  a  purely 
domestic  dimension  may  be  circumvented  if  taxpayers  moved  activities  and  wealth  to  a 
jurisdiction without rules of disclosure. 

Proportionality 

The  assessed  policy  response  represents  a  proportionate  answer  to  the  identified  problem 
since it does not exceed what is necessary to achieve the objective of the Treaties for a better 
functioning  of  the  internal  market  without  distortions.  Indeed,  the  common  rules  will  be 
limited  to  creating  the  minimum  necessary  common  framework  for  the  disclosure  of 
potentially harmful arrangements:  

(i)  The  common  rules  are  limited  to  addressing  potentially  aggressive  tax  planning 

schemes with a cross-border element. 

31 

 
 
 
(ii)  The  imposition  of  penalties  for  non-compliance  with  the  national  provisions  that 
implement  the  Directive  into  national  law  will  remain  under  the  sovereign  control  of 
Member States. 

Leaving the decision on this element exclusively to individual national initiatives, or relying 
on the effectiveness of a soft-law initiative, would mean that some States could decide to act, 
while others not. This is notably so, given that BEPS Action 12 is not a minimum standard 
and  implementation  in  the  EU  could  therefore  diverge  substantially.  Indeed,  39  out  of  131 
stakeholders  replied  in  the  public  consultation  that,  in  case  there  was  no  EU  action,  no 
transparency requirements would be introduced and 107 stakeholders stated that it is likely or 
very  likely  that  differing  transparency  requirements  would  be  introduced.  Furthermore,  the 
exchange of information on disclosed cross-border schemes would not be ensured if it were 
left  to  individual  action  by  Member  States.  For  all  these  reasons,  introducing  a  reporting 
requirement  at  EU  level  linked  with  exchange  of  information  could  resolve  the  identified 
problems and contribute to improving the functioning of the internal market.  

This impact assessment evaluates whether there is a need for action at EU level and to what 
extent a harmonised approach is needed for the EU internal market. Like for other recent EU 
initiatives  in  this  field,  there  are  strong  indications  that  if  action  is  eventually  taken, 
aggressive  tax  planning  arrangements  cannot  be  efficiently  addressed  within  domestic 
legislation or through bilateral tax treaties. 

5. 

SCOPE OF THIS IMPACT ASSESSMENT  

This assessment looks into the possibilities of introducing mandatory disclosure rules with the 
objective  to  enhance  transparency  in  the  design  and  promotion  of  aggressive  tax  planning 
schemes.  

The term 'intermediaries' refers to any natural or legal person who is sufficiently linked to an 
EU Member State and is responsible for the design, marketing, organisation or management 
of a potentially aggressive tax planning scheme. The concept also includes those who provide 
assistance or advice in creating, developing, planning, organizing, marketing or implementing 
such  a  scheme.  The  term  comprises  consultants,  lawyers,  financial  (investment)  advisors, 
accountants,  solicitors,  insurance  intermediaries,  financial  institutions,  and  company-
formation agents known as Trust and Company Service Providers. 

The assessment discusses who should report to tax administrations and which types of taxes 
should be covered. Regarding the reportable schemes, the focus is on potentially aggressive 
tax  planning  structures,  which  implies  that  a  reportable  scheme  may  not  necessarily  be 
illegitimate or illegal. Whether a scheme is reportable depends on certain criteria referred to 
as 'hallmarks'. The composition of hallmarks is also under assessment.  

Another topic of analysis concerns the form and frequency of the exchange of information 
on  disclosed  schemes  between  Member  States,  i.e.  whether  the  exchange  should  be 
spontaneous  or  automatic.  Finally,  the  text  discusses  how  this  information  should  be 
exchanged. 

32 

 
 
 
6. 

OBJECTIVES  

Figure 6:  Objectives of the policy intervention 

Source:  

European Commission (2017) 

6.1. 

General Objectives  

The general objective of a potential initiative would be to improve the proper functioning of 
the  internal  market,  which  is  currently  undermined  by  the  use  of  aggressive  tax  planning 
schemes, as these schemes result in market distortions and cause a lack of fairness. It is true 
that national corporate tax systems in the EU are not fully harmonised and Member States are 
– to some extent – free to provide exemptions and incentives for taxpayers. Yet, at the same 
time, it is widely agreed that there is an urgent need for curbing tax planning practices which 
take  advantage  of  mismatches  in  the  interaction  between  corporate  tax  systems,  exploit 
beneficial tax regimes, or interpret the law in a way that was not envisaged by the legislators. 
In  this  context,  it  would  be  crucial  to  stand  against  the  lack  of  transparency  or  uncertainty 
over beneficial ownership. If tax authorities receive more timely information about potentially 
aggressive  tax  planning  schemes  with  a  cross-border  element,  they  should  be  able  to  take 
appropriate measures. 

6.2. 

Specific Objectives 

6.2.1.  Fighting  tax  evasion  and  avoidance  through  identifying  aggressive  cross-order  tax 

planning schemes 

In  order  to  efficiently  fight  against  tax  evasion  and  avoidance,  it  is  necessary  to  track 
potentially  aggressive  tax  planning  schemes  and  to  respond  to  the  tax  risks  they  pose.  The 
national authorities need to receive information on a timely basis – ideally, already before a 
scheme  is  implemented  –  and  it  is  also  crucial  to  identify  the  users  and  promoters  of  such 
schemes. It is then up to them to take immediate action such as changing the law in order to 
prevent the implementation of certain arrangements or to focus on certain arrangements in the 
context of upcoming audits. 

6.2.2. 

Improving transparency and timely access to information on aggressive cross-border 
tax planning schemes 

Transparency and access to the right information at an early stage should allow the authorities 
to  improve  the  speed  and  accuracy  of  their  risk  assessment  and  make  timely  and  informed 
decisions  on  how  to  protect  their  tax  revenues.  Ideally,  information  about  a  certain  scheme 
should be obtained before this is implemented and/or used. Disclosure within a strict deadline 
would maximize the tax administration’s ability to assess the risk of schemes at an early stage 
and, if necessary, take appropriate actions to prevent a loss of tax revenue and/or increase the 
deterrent effect.   

33 

Create a deterrent for the design and use of aggressive cross-border tax planning schemesFight tax evasion and avoidance through identifying aggressive cross-border tax planning schemesSpecific direct objectiveSpecific indirect objectiveProper functioning of the Internal MarketGeneral objectiveImprove transparency and timely access to information on aggressive cross-border tax planning schemes 
 
 
6.2.3.  Creating a deterrent to the design and use of aggressive cross-border tax planning 

schemes  

It  should  be  expected  that  the  mandatory  disclosure  of  potentially  aggressive  tax  planning 
schemes  would  dissuade  intermediaries  from  designing  and marketing  such  schemes.  When 
the national tax authorities receive information, they can take appropriate action to ensure that 
their  tax  legislation  is  sufficiently  developed  to  tackle  the  disclosed  schemes.  Furthermore, 
dissuasive penalties in case of non-compliance are of high importance in ensuring an effective 
mechanism.  Monetary  sanctions  are  the  most  common,  while  some  countries  combine  this 
with non-monetary sanctions. The main purpose of setting penalties is as deterrence. As far as 
more material sanctions for intermediaries involved in aggressive tax planning schemes, such 
as sanctions within professional regulation or increased publicity, are concerned, it should be 
left to the national level to deal with.  

7. 

POLICY OPTIONS 

An initiative that addresses the identified problems would need to delineate the objectives it 
seeks  to  achieve  and  the  mechanisms  that  can  best  bring  these  objectives  into  fruition.  The 
challenge  is  how  to  design  a  proportionate  system  which  would  target  the  most  aggressive 
forms  of  tax  planning.  The  OECD  report  on  BEPS  Action  12  gives  examples  of  the 
approaches taken by tax authorities in a number of jurisdictions around the world, including 
the  three  national  mandatory  disclosure  regimes  that  exist  in  the  EU,  namely  in  Ireland, 
Portugal and the UK.  

The policy choices can in practice be drawn between a context where there is a (mandatory) 
disclosure  of  information  on  potentially  aggressive  tax  planning  arrangements  to  tax 
authorities and a context where there is no such obligation, i.e. the so-called status quo.  

The public consultation set out a list of policy options for stakeholders. Some of these options 
concerned the type of appropriate legal instrument for the proposed initiative. That is, whether 
legislation or a soft law act in the form of a Recommendation or Code of Conduct presents the 
optimal  solution.  Amongst  the  options  that  built  on  binding  rules,  the  stakeholders  were 
invited  to  mainly  consider  the  possibility  of  agreeing  a  common  framework  for  disclosing 
information  to  tax  authorities  or  alternatively,  of  coupling  the  disclosure  with  an  automatic 
exchange of the disclosed data across tax authorities in the EU.  

Following the consultations with stakeholders, it became clear that all of the available policy 
choices  which  involved  binding  rules  would  lead  to  a  similar  outcome.  Thus,  if  there  is  a 
(mandatory) disclosure of data to the tax authorities, it always enables some form of exchange 
of information. This is because spontaneous exchanges form part of the general framework of 
the  Directive  on  Administrative  Cooperation.  Therefore  the  exchange  of  information  is 
present in distinct forms under all policy options that involve a disclosure of data. 

It  was  further  considered  that  the  only  real  comparison  between  policy  choices  could  in 
practice be drawn between a context where there is an obligation to disclose information on 
potentially aggressive tax planning arrangements (coupled with exchange of information) and 
a  context  where  there  is  no  such  obligation,  i.e.  the  so-called  status  quo.  In  addition,  the 
prospect for limiting the exchange of information to spontaneous exchanges would not appear 
consistent with the series of initiatives that the Commission has lately undertaken in the field 
of  Transparency.  Thus,  the  framework  for  information  exchange,  both  in  the  rules  that 
implement  the  common  reporting  standard  in  the  EU  and  in  advance  cross-border  rulings, 
involves  automatic  exchanges.  In  this  context,  it  is  necessary  to  assess  the  constituent 

34 

 
 
elements  of  a  policy  choice  consisting  of  a  mandatory  disclosure  of  reportable  cross-border 
arrangements  coupled  with  automatic  exchange  of  information.  The  following  questions 
appear mostly relevant: 

  Who has to report?  
  Which type of taxes is covered? 
  What types of schemes should be disclosed, i.e. what is a reportable scheme? 
  Which hallmarks should be used to identify reportable schemes? 
  Should only new or also existing schemes be included? 
  Should there be an exchange of information on disclosed schemes? 
  What form and which means should be used for information exchange? 

Some questions will not be tackled by this impact assessment, as they precisely pertain to the 
way  that  Member  States  have  organised  their  public  administration  and  judiciary.  These 
matters can be dealt with more effectively at national level: 

  What should be the consequences of non-compliance by intermediaries or taxpayers?  
  What should be the follow up by Member States after receiving reports?  
  How should collected information be used?  

Table 2:   Overview of Options 

Policy options concerning disclosure regime 

Baseline scenario 
Specific features 
Personal scope 

Subject of reporting obligation 

Material scope 

Type of taxes covered 

Composition of hallmarks 

Timeframe 

Exchange of information 

Form and frequency of  
exchange of information 

Means for exchange of information 

Source: 

European Commission (2017) 

No action 
Description of options 

1. Single requirement (only intermediaries or only users) 
2. Double requirement (intermediaries and users) 
3. Primary and secondary requirement (intermediaries or users) 

1. All taxes 
2. Direct taxes only 
1. Generic hallmarks 
2. Specific hallmarks 
3. Generic and specific hallmarks 
1. Only new schemes 
2. New and existing schemes 

1. Spontaneous exchange 
2. Automatic exchange 
1. Compulsory publication in the Member State of disclosure 
2. Direct exchange between Member States 
3. Indirect exchange through a central directory 

Under the baseline scenario, Member States that have a mandatory disclosure scheme (three 
Member States currently) could exchange information in the framework of the DAC if they 
considered that the information is relevant to other Member States (spontaneous exchange). 

35 

 
 
 
As far as  the  alternatives to  the baseline scenario  are concerned, the assessment identifies a 
number  of  features  relevant  to  the  scope  and  content  of  the  disclosure  as  well  as  to  the 
possibility  of  information  exchange.  The  available  options  for  shaping  each  feature  of  a 
possible  disclosure  scheme  are  mutually  exclusive,  which  implies  that for  each  feature  only 
one of the options can be chosen. Hence, the approach is to choose the preferred option for 
each feature individually.  

7.1. 

Personal scope 

Two  key  players  are  involved  in  the  implementation  of  tax  planning  schemes:  (i) 
intermediaries, who design and promote the schemes and (ii) taxpayers, who use the schemes. 
There are different options regarding who should be required to  report. For each of the key 
players, there can be three basic situations: they are never liable to report; or, they are always 
liable to report; or, they have to report under certain circumstances.  

According  to  the  OECD  report  on  BEPS  Action  12  recommendation,  countries  adopting 
mandatory disclosure rules will need to decide whether or not they introduce a dual reporting 
requirement  that  applies  to  the  intermediary  and  taxpayer  (see  the  option  under  7.1.2)  or  a 
reporting  obligation  that  falls  primarily  on  the  promoter  (see  the  option  under  7.1.3). 
However, where the primary reporting obligation falls on the promoter it is recommended that 
the reporting obligation switches to the taxpayer where: 
•  The promoter is offshore; 
•  There is no intermediary; 
•  The intermediary asserts legal professional privilege. 
Mandatory  disclosure  regimes,  which  exist  in  practice,  usually  rely  on  the  role  of  both 
intermediaries and taxpayers. Nevertheless, a mandatory regime can be built around the role 
of only one key player, either the taxpayer or intermediary (see the option under 7.1.1)  

7.1.1. 

Single requirement (only intermediaries or only users)  

Under  this  option,  either  only  intermediaries  or  only  users  are  subject  to  a  reporting 
obligation.  Intermediaries  are  identified  through  the  activity  they  conduct  regarding  the  tax 
planning,  rather  than  through  their  affiliation  to  a  certain  professional  group.  Therefore,  the 
concept of an intermediary should include a non-exhaustive list of certain professions, such as 
lawyers,  tax  advisers,  accountants,  wealth  managers,  bankers,  company  and  trust  service 
providers etc. At the same time, it should extend to anybody who is involved in the  design, 
promotion and marketing of potentially aggressive tax planning schemes.  

Users  are  taxpayers  who  accept  the  advice  received  from  intermediaries,  in  cases  where  an 
intermediary  is  involved,  and  implement  such  schemes.  Users,  in  certain  circumstances, 
develop  potentially  aggressive 
involvement  of 
intermediaries. 

tax  planning  schemes  without 

the 

Under  this  option,  there  would  only  be  a  single  reporting  requirement,  either  for  the 
intermediaries, who design and market schemes, or for the users, who implement schemes. 

7.1.2.  Double requirement (intermediaries and users) 

According  to  this  option,  the  reporting  obligation  is  jointly  placed  on both  the intermediary 
and the user. This means that intermediaries have to report on schemes within the scope of the 
obligation and, in addition, taxpayers have to provide information about specific transactions 
(e.g.  in  their  tax  declarations),  regardless  of  whether  the  intermediary  has  already  disclosed 
these transactions. Accordingly, the intermediary's obligation to disclose would not be waived 
by the fact that the user will provide information on the same scheme.  

36 

 
7.1.3.  Primary and secondary requirement (intermediaries and/or users) 

Under this option, a primary reporting obligation is put on intermediaries. However, in order 
to  ensure  that  the  schemes  under  discussion  are  reported  in  all  situations,  the  reporting 
obligation should be shifted to the user of the scheme in one of the following scenarios:  

a)  Non-EU  intermediary:  Where  an  intermediary  of  the  scheme  is  not  located  in  the  EU,  it 
may become impossible to ensure the intermediary's compliance. Therefore, the obligation to 
disclose  potentially  aggressive  tax  planning  schemes  would  capture  intermediaries  who 
market,  promote,  sell,  enable  the  set-up  of  such  schemes  and  fulfil  one  of  the  following 
conditions: 

(i)  they  are  incorporated  or  organised  in  a  non-incorporated  legal  form  in  an  EU 
Member State; 

(ii) they are registered with a professional association in an EU Member State; 

(iii)  they  maintain  premises  in  an  EU  Member  State  from  where  they  habitually 
exercise their activity related to tax planning. 

b)  No  intermediary:  It  may  be  that  a  scheme  is  developed  by  the  user  for  internal  use,  for 
example  an  "in-house"  scheme.  This  may  be  the  case,  for  example,  for  large  multinational 
corporations which have the necessary internal resources to devise such schemes. 

c) Intermediary bound with legal professional privilege or secrecy rules: Some intermediaries 
may not be in a situation to make a disclosure legally, due to specific legal constraints related 
to  the  domestic  regulation  of  their  profession.  These  issues  commonly  involve  legal 
professional  privilege  and  secrecy  rules.  In  their  contributions  to  the  proposal  a  number  of 
stakeholders  noted  the  need  for  any  proposal  to  uphold  the  professional  secrecy/legal 
professional  privilege  to  facilitate  full  and  frank  disclosure  between  those  who  need  legal 
advice and their lawyers and safeguarding this in the public interests and also for taxpayers. It 
is also worthwhile mentioning that the clients have may have the choice to waive the right to 
legal privilege or secrecy. In such a case, disclosure may still be provided by the intermediary. 
Only in case of no waiver would the obligation to report be shifted to the user. Both scenarios 
ensure that the legal privilege or secrecy is not infringed upon and the reporting is secured at 
the same time. 

If  none  of  the  conditions  in  a)  is  fulfilled  and  in  cases  b)  and  c),  the  obligation  to  disclose 
should be shifted to the user of a potentially aggressive tax planning scheme. The user of the 
scheme  should  remain  legally  responsible  for  the  disclosure  obligations,  including  any 
default, regardless of whether the intermediary fulfils the necessary disclosure requirements. 

7.2.  Material scope 

7.2.1.  Type of taxes covered 

7.2.1.1.  All taxes  

A  reporting  requirement  may  concern  schemes  that  relate  to  any  type  of  tax.  The  OECD 
report  on  BEPS  Action  12  indicated  that  jurisdictions  which  have  introduced  mandatory 
disclosure  regimes  have  included  a  broad  range  of  taxes;  amongst  them,  income  taxes  and 
value added taxes. The sub option to cover all taxes will be discarded and not retained for the 
comparison of options later on. The prospect for covering all taxes would not seem justified 
as  the  exchange  of  information  on  VAT,  customs  duties,  excise  duties,  as  well  as  on  social 
security  contributions,  is  already  covered  by  other  legislative  instruments  on  administrative 
cooperation, which specifically focus on these types of taxes.  

37 

 
In  theory,  any  type  of  tax  or  duty  may  suffer  from  aggressive  tax  planning.  However,  the 
problem  definition  shows  that  the  concerns  are  related  to  international  tax  issues  which  are 
precisely linked to income taxes. On this premise, it is justified to focus on direct taxation. 

7.2.1.2.  Direct taxes  

This  option  excludes  certain  types  of  taxes  and  instead  concentrates  on  direct  taxation, 
notably personal and corporate income tax.  

7.2.2.  Object of reporting (hallmarks) 

When  it  comes  to  the  object  of  reporting,  there  are  two  aspects  to  be  considered.  The  first 
question is which  tax planning  schemes  should fall  under the scope of the proposal and the 
second question is what information should be reported and exchanged. This chapter outlines 
which schemes should be reported. 

Targeting the appropriate tax planning schemes lies at the heart of this transparency initiative. 
Tax authorities are likely to be interested in situations where loopholes or mismatches in the 
interaction of tax systems are exploited to obtain tax benefits. A disclosure regime needs to be 
designed in a way that there is legal certainty about the types of schemes or arrangements that 
should  be  disclosed  to  tax  authorities.  Here  the  question  is  which  approach  or  which 
techniques could help target and capture the key information that tax administrations need in 
order to make informed policy decisions, while avoiding over-disclosure or undue compliance 
burdens  on  taxpayers  and  administrations.  One  crucial  element  in  this  exercise  is  the 
indicators or criteria which clearly identify the schemes that would have to be reported; these 
are  the  so-called  hallmarks.  It  is  sufficient  that  a  tax  planning  scheme  meets  one  of  the 
hallmarks to be identified as potentially aggressive and become subject to reporting. 

Definition of hallmarks in the BEPS Action 12 OECD report 

Hallmarks  act  as  tools  to  identify  the  features  of  schemes  that  tax  administrations  are 
interested  in.  They  are  generally  divided  into  two  categories:  generic  and  specific 
hallmarks. Generic hallmarks target features that are common to promoted schemes, such 
as the requirement for confidentiality or the payment of a premium fee. Generic hallmarks 
can  also  be  used  to  capture  new  and  innovative  tax  planning  arrangements  that  may  be 
easily  replicated  and  sold  to  a  variety  of  taxpayers.  Specific  hallmarks  are  used  to  target 
known  vulnerabilities  in  the  tax  system  and  techniques  that  are  commonly  used  in  tax 
avoidance arrangements such as the use of losses. 

Existing national disclosure regimes use hallmarks (and sometimes also other filters) to target 
schemes  in  the  tax  authorities'  interest.  It  should  be  stressed  that  the  fact  that  a  scheme  is 
reportable does not automatically mean that it amounts to tax avoidance or tax evasion. Some 
of  the  hallmarks  which  have  generally  been  linked  to  abusive  tax  transactions  may  also  be 
found in legitimate transactions. Therefore, the disclosure regime seeks to identify potentially 
aggressive  tax  planning  schemes  and  does  not  judge  whether  a  scheme  under  disclosure  is 
actually abusive or aggressive. 

Another important observation is that existing disclosure regimes are not designed to pick up 
all  tax  avoidance  schemes.  For  the  purpose  of  designing  the  EU  disclosure  regime,  the 
primary  target  should  involve  potentially  aggressive  tax  planning  schemes  with  a  cross-
border element. The cross-border element would generally imply that the user and/or any of 
the intermediaries and/or any of arrangements/transactions in the scheme are not all linked to 
the same Member State. Intermediaries would have to identify the cross-border element and 
include it to their report. 

38 

 
A  key  question  is  which  hallmarks  should  be  included  in  the  EU  disclosure  regime.  One 
approach  could  be  to  delineate  them  through  major  categories,  i.e.  generic  and  specific 
hallmarks. On that basis, one can identify three major options. 

7.2.2.1.  Generic hallmarks 

Under  this  option,  the  EU  regime  would  include  only  generic  hallmarks.  These  refer  to  the 
behaviour  of  intermediaries.  They  focus  on  marketing  and  the  form  in  which  advice  on  tax 
planning schemes is supplied. They target features which are common to mass marketed and 
standardised  products,  either  existing  or  new  and  innovative.  The  following  items  include 
typical generic hallmarks used in a number of jurisdictions: 

  "Premium fee” or “contingent fee” hallmarks: the amount that the client pays for the 
advice can be attributed to the value of the tax benefits obtained under the scheme. 
  "Confidentiality" hallmarks where the promoter or adviser requires the client to keep 

the scheme confidential. 

  "Standardized  tax  product"  or  "marketability"  hallmarks  intended  to  capture  widely-

marketed schemes. 

Generic  hallmarks  only  become  relevant  where  they  additionally  fulfil  a  minimum  standard 
requirement that relates to whether the relevant schemes point to tax avoidance or their main 
benefit is to obtain a tax advantage. According to the OECD report on BEPS Action 12, most 
generic hallmarks in national regimes (with the exception of the United States) are designed 
on this basis.  

According to the OECD report on BEPS Action 12, it is recommended that generic hallmarks 
include  a  confidentiality  and  premium/contingent  fee.  A  country  may  also  wish  to  adopt 
additional generic hallmarks such as the one applying to standardised tax products.  

7.2.2.2.  Specific hallmarks 

Under this option, the EU regime would include only specific hallmarks. Specific hallmarks 
reflect the particular concerns of tax authorities, and target areas of perceived high risk, such 
as the use of losses, leasing contracts, the use of hybrid instruments and income conversion 
schemes.  Those  concerns  include  situations  of  double  non-taxation.  Some  hallmarks 
specifically target cross-border schemes e.g. schemes involving entities located in listed third 
countries.  Some  other  specific  hallmarks  do  not  draw  any  such  distinction.  Other  sets  of 
hallmarks specifically look at schemes aimed at separating legal from beneficial ownership or 
concealing them. Specific hallmarks also refer to the possibility of exploiting mismatches that 
result  from  the  interaction  of  disparate  national  tax  systems  and  may  lead  to  double  non-
taxation (e.g. different rules on depreciation between two Member States may result in having 
the same asset depreciated in two separate jurisdictions; i.e. the State of the economic owner 
and that of the legal owner). 

The following set of specific hallmarks was listed for the purpose of the Commission's public 
consultation in November 2016.  

Set of specific hallmarks listed in the Commission's Public Consultation 

1. Use of jurisdictions included in the (future) EU list of third country jurisdictions that fail to comply with tax 
good governance standards.  

2.  Use  of  certain  legal  arrangements/entities  (trusts  and  similar)  in  jurisdictions  that  pose  difficulties  in 
identifying the beneficial owner.  

39 

 
3. Use of entities subject to zero taxation or less than a certain % (to be defined), including hybrid entities (i.e. 
entities that are treated as transparent by one country but as non-transparent by another country).  

4. Schemes designed to circumvent the Common Reporting Standard (CRS) for automatic exchanges of financial 
account information. 

5. Use of a group company in a low tax jurisdiction for intra-group financing of other group companies in high 
tax jurisdictions. 

6.  Use  of  group  companies  with  very  little  substance  that  are  nevertheless  entitled  to  tax  treaty  benefits  and 
through which large amounts of money flow. 

7.  A  general  artificial  arrangement  or  an  artificial  series  of  arrangements  created  for  the  essential  purpose  of 
avoiding or evading taxation and which leads to a tax benefit. 

8.  A  transfer  pricing  arrangement  not  in  conformity  with  the  arm's  length  principle  and/or  the  OECD  transfer 
pricing guidelines. 

9. A profit allocation between different parties of the same group that it is not in conformity with the arm's length 
principle and/or the OECD transfer pricing guidelines.  

10.  A  preferential  treatment  under  the  application  of  the  national  tax  law  that  is  not  in  line  with  the  general 
application or interpretation of the law. 

The respondents to the public consultation ranked the hallmarks based on their relevance for 
classifying aggressive tax planning schemes in the following order: 

  7. A general artificial arrangement;  
  10. A preferential treatment under the application of national law; 
  4. Schemes designed to circumvent the CRS ; and 
  2. Difficulties in identifying the beneficial owners.  

Hallmark  1.  Use  of  future  EU  list  of  third  country  jurisdictions  that  fail  to  comply  with  tax 
good governance standards was considered by stakeholders to be less relevant.  

A  specific  consideration  would  be  required  for  the  hallmarks  related  to  the  EU  list  of  third 
countries  because  the  procedure  leading  to  the  establishment  of  the  list  has  not  yet  been 
finalised and so the final list and other details are not known for the time being.  

There  is  also  a  group  of  specific  hallmarks  that  targets  arrangements  which  are  designed  to 
assist the evasion of tax by making it difficult to identify the beneficial owner of income and 
gains: 

  The  use  of  certain  legal  arrangement/entities  (trusts  and  similar)  in  jurisdictions  that 

pose difficulties in identifying the beneficial owner; 

  Transactions  designed  to  circumvent  the  Common  Reporting  Standard  (CRS)  for 

automatic exchanges of financial account information; 

  Transactions that have the effect of obscuring or concealing the relation between legal 
and  beneficial  ownership,  for  example  through  the  use  of  a  power  of  attorney  or 
nominees. 

7.2.2.3.  Generic and specific hallmarks 

Under  this  option,  the  EU  regime  would  use  a  compilation  of  both  generic  and  specific 
hallmarks and thus jointly cover both previous options. This option is the most comprehensive 
of the three available ones and combines the two basic concepts; that is, the effectiveness of 
broad  generic  hallmarks  in  capturing  a  large  part  of  (massively)  marketed  schemes  and  the 
precision of the specific ones which can better reflect tailor-made schemes. 

40 

 
7.2.3.  Timeframe for reporting 

If  the  main  objective  of  a  disclosure  regime  is  to  provide  tax  authorities  with  timely 
information on aggressive tax planning schemes, then an appropriate timeframe should be an 
important feature. The actual disclosure takes place normally within specific time limits (days 
or months) after the obligation to report has been triggered. Certain points in time may be of 
higher relevance than others. The timeframe could be linked to the availability of the scheme 
or  its  implementation.  It  may  also  depend  on  who  is  to  make  the  reporting  –  i.e.  the 
intermediary or the user. One option could be a combination of both. 

In  this  regard,  the  OECD  report  makes  the  following  recommendation,  which  could  be 
followed in the EU regime: 

"156. It is recommended that where the promoter has the obligation to disclose then 
the timeframe for disclosure should be linked to the availability of the scheme and that 
the timescale for disclosure should aim to maximise the tax administration’s ability to 
react  to  the  scheme  quickly  and  to  influence  taxpayers’  behaviour.  This  would  be 
achieved by setting a short timescale for reporting once a scheme is available. 

157. Where a taxpayer is required to disclose it is recommended that the disclosure is 
triggered by implementation rather than availability of a scheme. In addition, if only 
the taxpayer discloses (i.e. because there is no promoter or the promoter is offshore) 
the timescale for reporting should be short to maximise the tax administration’s ability 
to act against a scheme quickly." 

Consideration should be given as to whether schemes that  pre-date the entry into force of a 
disclosure  regime  should  be  included  or  the  disclosure  obligation  should  be  limited  to  the 
schemes  created  subsequently.  It  should  be  noted  in  this  regard  that  many  tax  schemes  are 
multi-annual  and  may  well  still  be  active  after  the  disclosure  obligation  enters  into  force 
despite  having  been  created  prior  thereto.  Furthermore,  these  schemes  may  also  have  been 
modified  after  their  creation  and  taken  on  different  characteristics  which  would  need  to  be 
assessed under the disclosure regime.  

7.2.3.1.  Only  schemes  introduced  after  the  legislation  for  mandatory  disclosure  has  entered 

into force 

Intermediaries  will  report  information  only  on  schemes  that  will  be  created  after  the  EU 
disclosure  regime  enters  into  force.  This  option  would  not entail  any  retrospective  elements 
and would cover schemes that have been implemented in the past but due to their life-cycle 
still have an impact on taxes paid. 

7.2.3.2.  Both existing and new schemes  

Intermediaries will report information on existing active schemes as well as schemes that will 
be  created  after  the  EU  disclosure  regime  enters  into  force.  This  option  ensures  that  all 
aggressive tax planning schemes in the scope of the initiative at the time of entry into force 
would be reported. Tax administrations may have an interest to receive information not only 
about new but also existing schemes. 

7.3. 

Exchange of information  

One  of  the  key  questions  is  whether  information  on  potentially  aggressive  tax  planning 
schemes which is reported to national tax administrations should stay with them or would be 
of interest to any other tax administration in the EU. Like in other areas, such as the automatic 
exchange  of  information  on  tax  rulings,  there  seems  to  be  an  interest  on  the  side  of  EU 
Member States to share information in so far as there is a potential impact on the tax base of 

41 

 
other  Member  States.  That  is  the  core  element  of  exchange  of  information  triggered  by  the 
Directive  on  Administrative  Cooperation.  Both  Member  States  and  stakeholders  appear 
willing to exchange information, at least when it comes to potentially aggressive tax planning 
schemes with a cross-border element.56  

A  mandatory  disclosure  regime  for  intermediaries  brings  most  benefits  if  it  is  coupled  with 
exchange  of  information  between  EU  Member  States.  There  are  different  options  regarding 
the design of the exchange of information. 

7.3.1.  Form and frequency of exchange of information  

7.3.1.1.  Spontaneous exchange  

Under this option, the release of information would be triggered by the fact that the national 
tax authorities become aware of a tax scheme the details of which it would be useful to share 
with other authorities. The exchange would take place on a case-by-case basis. Each Member 
State would have to send information within a specified timeframe. The information could be 
sent  within  a  limited  period  (for  instance,  a  month)  following  the  date  of  disclosure.  The 
Member State where the disclosure takes place would decide which other Member State(s) the 
information may be foreseeably relevant to. 

7.3.1.2.  Automatic exchange 

The  release  of  information  would  take  place  at  pre-established  regular  intervals.  These 
intervals could be set freely, for instance, monthly or quarterly.57 At the end of each interval, 
Member  States  would  be  required  to  either  exchange  the  information  on  the  disclosed  tax 
planning  schemes  during  this  interval,  or  confirm  that  they  have  not  received  any  relevant 
information  during  that  period.  Member  States  would  share  information  with  all  other 
Member  States  and  possibly  also  with  the  Commission.  Automatic  exchanges  should  not 
preclude spontaneous exchanges either. 

7.3.2.  Means for exchange of information 

7.3.2.1.  Compulsory publication in the Member State of disclosure  

Under  this  option,  each  Member  State  would  be  required  to  make  the  information  received 
publicly available. Not only tax authorities would receive information, but also a wider group 
of interested stakeholders would have access to what was disclosed. 

7.3.2.2.  Direct exchange among Member States  

Each  Member  State  would  exchange  information  directly  with  all  other  Member  States  and 
possibly  also  with  the  European  Commission.  Under  this  option,  standard  channels  of 
communication in the field of administrative cooperation could be used. 

7.3.2.3.  Indirect exchange through a central directory accessible to Member States 

Each Member State receiving reports from intermediaries or users would send the information 
to a central directory which would be fully accessible to the other Member States and for a 
limited  number  of  information  items,  to  the  European  Commission.  The  Directory  for  the 
automatic  exchange  of  information  about  potentially  aggressive  cross-border  tax  planning 
schemes  between  tax authorities will  essentially be the same mechanism as  the one that the 
Commission has set up for the automatic exchange of information on cross-border tax rulings 
(DAC3).  This  type  of  exchange  would  provide  more  options  for  the  management  of 

56 See feedback received from Member States in Annex 2. 
57   "Automatic" exchange should not be confused with "automated" exchange. 

42 

 
                                                 
information,  as  compared  to  a  simple  bilateral  exchange  (for  instance,  access  any  time, 
management  of  information  on  follow-up).  The  Central  Directory  will  be  hosted  by  the 
Commission and its operation has been estimated to cost around EUR 480,000 over the first 
five  years,  including  its  set  up  and  operation.  In  addition,  there  is  an  assessment  of 
administrative  expenditure  (e.g.  human  resources,  missions,  seminars,  etc.)  of  around  EUR 
206,000. 

43 

 
 
 
8. 

ANALYSIS OF IMPACT 

8.1. 

Baseline scenario: No EU policy  

Under  the  baseline  scenario,  there would  be  no  EU  policy  on  the  mandatory  disclosure  and 
automatic  exchange  of  information  of  potentially  aggressive  tax  planning  arrangements.  By 
effect,  the  situation  across  the  EU  would  be  likely  to  present  significant  disparities.  Some 
Member  States  would  operate  national  schemes,  as  currently  do  Ireland,  Portugal  and  the 
United Kingdom whilst others would decide not to go for any type of mandatory disclosure 
regime. In addition, amongst the States with disclosure regimes, a question would be whether 
a  certain  disclosure  regime  is  limited  to  purely  domestic  schemes  or  extends  to  cover  the 
domestic impact of cross-border schemes.  

Only 30% of the respondents to the public consultation considered that Member States would 
be likely/very likely to introduce transparency requirements at all if the baseline scenario were 
kept. From the main stakeholder groups who replied to this question 38% of consultancy/tax 
advisors, 32% of private citizens, and 21% of NGO's thought this would be the case. What is 
more,  82%  of  respondents  considered  that  if  transparency  requirements  for  disclosure  were 
introduced at the national level, they would be likely/very likely to diverge significantly. All 
stakeholder categories provided high affirmative responses to this question. 

Member  States  expressed  general  support  in  the  meeting  of  Working  Party  IV  on  2  March, 
2017 on the proposal for the EU to address the issues raised in the Panama Papers and that a 
focus on the cross-border elements was regarded as proportionate. 

Impacts of the option on: 

Intermediaries: 

 

 

 

They would likely re-structure their business based on the overall picture of the market. 
They  would  be  most  likely  to  move  their  consulting,  advertising,  promoting  and 
implementing  activity  towards  the  States  that  do  not  provide  for  the  disclosure  of 
potentially aggressive tax planning arrangements.  
As Member States would introduce regimes independently, the impact on intermediaries 
would  diverge  and  the  latter  may  be  faced  with  legal  uncertainty  over  the  applicable 
framework in each Member State. 
The national obligations to disclose would create a compliance cost for intermediaries, 
although they would naturally shift this amount to their clients as part of their fees. 

Taxpayers 

 

 

To  the  extent  that  this  is  possible  under  their  business  or  wealth  structure,  as 
appropriate,  taxpayers  would  try  to  avoid  going  through  the  disclosure  obligations  by 
switching  their  business  or  moving  their  wealth  to  another  Member  State  (or  third 
country).  
Disparate  regimes  across  the  EU  would  result  in  legal  uncertainty  for  taxpayers, 
especially for those who operate across the border in more than one jurisdiction. 

Tax authorities 

 

Those Member States that decided to introduce a disclosure obligation would increase 
the administrative burden of the public sector, even though such information seems to 
be  complementary  to  the  main  bulk  of  data  that  States  already  receive  through  tax 
returns. 

44 

 
 
 
  While Member States that decided to introduce a disclosure obligation will have a better 
overview  of  the  tax  affairs  of  their  taxpayers,  they  may  also  face  some  loss  of  tax 
revenues if taxpayers move their wealth or business to another Member State in order to 
avoid the disclosure. 

General economic considerations 

  Without a harmonised approach to mandatory disclosure and the automatic exchange of 
information,  the  internal  market  would  suffer  distortions  and  unfair  tax  competition, 
considering that States without rules on disclosure would clearly present an advantage, 
as compared to those where certain schemes would have to be reported.  
The  fragmentation  and differences of  transparency  requirements  in  the  EU  would  risk 
leading  to  tax  arbitrage  in  the  EU.  Such  a  situation  could  reduce  the  effectiveness  of 
other  (possibly)  existing  transparency  requirements  (e.g.  common  reporting  standard, 
advance cross-border rulings). 

 

Society 

 

In the wake of a number of scandals in the field of tax avoidance, lack of further action 
vis-à-vis  the  promoters  of  aggressive  tax  planning  schemes  and  their  users  could  fuel 
discontent and distrust from the citizens and honest taxpayers. 

8.2. 

Action is undertaken to enact the mandatory disclosure of potentially aggressive 
cross-border tax planning arrangements 

In  analysing  policy  options  available  to  address  the  issue  of  aggressive  tax  planning  any 
solution  must  have  a  broad scope to  include the  wide range  of intermediaries, both EU  and 
non-EU, that are involved  in creating aggressive tax planning  schemes. Similarly, given the 
wide geographic range of schemes used in aggressive tax planning, as evidenced in section 3. 
- Problem  Definition, any  solution should include a cross-border  element that may not  only 
involve  EU  Member  States  but  also  third  country  jurisdictions,  in  particular  off-shore 
financial  centres.  All  the  policy  options  are  designed  to  satisfy  these  objectives.  However, 
their design would have different impacts on the main groups who would be required to use, 
implement and administer these schemes. 

8.3. 

Personal Scope 

The impact  of the following three policy options is  considered regarding who  will have  the 
responsibility for disclosure: 

(a) 

Single requirement (only intermediaries or only taxpayers) 

Intermediaries 

 

 

 

If the disclosure obligation were exclusively borne by intermediaries, those engaged in 
reportable  tax  planning  schemes  would  have  to  undertake  the  cost  of  reporting  in  all 
cases. They would have to carry the costs of reporting on such schemes to the national 
authorities once those are made available to a specific taxpayer for implementation.  
Intermediaries should be expected to minimise the costs of compliance, e.g. by using the 
summary  information  sheet  that  they  prepare  for  their  clients  as  a  basis  for  the 
notification form under the EU mandatory disclosure regime.  
They would be most likely to shift the compliance cost of the disclosure to their clients, 
i.e. the taxpayers. 

45 

 
 
 

 

The  existence  of  a  mandatory  disclosure  regime  can  also  enhance  the  reputation  of 
intermediaries,  especially  where  their  disclosed  regimes  do  not  result  in  counter-
measures  by  the  authorities.  It  could  lead  to  higher  quality  control  standards  in  their 
work, including the possibility of gradually setting the blueprint for a profession-wide 
code of conduct. 
Such  obligation  should  deter  intermediaries  from  devising  aggressive  tax  planning 
schemes,  although  some  might  also  find  ways  to  avoid  this  obligation  (e.g.  through 
professional privileges or secrecy rules).  

Taxpayers 

 

 

 

If  taxpayers  had  a  disclosure  obligation,  it  would  act  as  a  deterrent  to  engaging  in 
aggressive tax planning, thereby contributing to the fairness of the tax system. 
To the extent that taxpayers do not design their own schemes, it would be very difficult 
for them to comply with an obligation to disclose such schemes ex ante, i.e. before at 
least the first steps of implementation were taken. 
Some  large  corporate  taxpayers  with  in-house  tax  departments  would  not  be  likely  to 
face particular difficulties in complying with their disclosure obligation. 

Tax authorities 

 

Receiving  information  on  the  specific  features  of  potentially  aggressive  tax  planning 
schemes  prior  to  their  implementation  or  immediately  after  the  first  step  has  been 
accomplished should be great help in clamping down on tax avoidance and aggressive 
tax planning. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal  market.  Considering  that  the  intention  of  disclosing  a  potentially  aggressive 
cross-border tax planning scheme will materialise, either through the intermediary or the 
taxpayer, this option does not seem to bring any particular impacts to the fore. 

Society 

 

The obligation to disclose potentially aggressive cross-border tax planning schemes in 
the field of direct taxes is part of an initiative aimed to respond to the citizens' demand 
for more transparency in tax matters.  

(b)  Double requirement (both intermediaries and taxpayers) 

Intermediaries 
 

Intermediaries would have to ensure that their client reported the same details about a 
scheme, since this could be double-checked. As reporting of the same schemes would in 
practice take place twice and originate in two separate sources (i.e. intermediaries and 
taxpayers),  the  authorities  would  be  in  a  better  informed  position  to  scrutinise  a  case. 
Such a situation would contribute to establishing a level-playing field of fairness. 
Intermediaries  would  be  most  likely  to  shift  the  compliance  cost  of  the  disclosure  to 
their clients, i.e. the taxpayers. 
There is a high risk of replication in the content of the disclosure, which would be likely 
to  compromise  business  efficiency,  especially  considering  the  fact  that  intermediaries 

 

 

46 

 
 
 
 
should be expected to be marketing various reportable schemes in parallel. In this sense, 
they are impacted by economies of scale. 

Taxpayers 
 

 

 

If  taxpayers  had  a  disclosure  obligation,  it  would  act  as  a  deterrent  to  engaging  in 
aggressive tax planning 
Taxpayers could bear the cost of disclosing information twice, as the intermediary who 
would  sell  them  a  reportable  tax  planning  scheme  would  possibly  include  its  cost  of 
disclosure in the price. 
There  is  a  high  risk  of  replication  of  data  but,  given  that  a  taxpayer  is  commonly 
attached  to  one  single  scheme,  the  overall  impact  of  this  replication  should  remain 
minimal. 

Tax authorities 

 

The  double  disclosure  should  allow  the  authorities  to  receive  more  comprehensive 
information and compare the accuracy of facts, as disclosed, in individual cases, which 
would  contribute  to  a  level-playing  field  of  fairness.  However,  this  also  implied 
additional  work  on  the  side  of  the  tax  authorities  (more  information  to  process). 
Whether this dual reporting would produce benefits in excess of the costs of reporting 
twice is not known. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal  market.  Considering  that  the  intention  of  disclosing  a  potentially  aggressive 
cross-border tax planning scheme will materialise, through a combination of data given 
by  both  the  intermediary  and  the  taxpayer,  this  option  does  not  seem  to  bring  any 
particular impacts to the fore. 

Society 

 

The obligation to disclose potentially aggressive cross-border tax planning schemes in 
the field of direct taxes is part of an initiative aimed to respond to the citizens' demand 
for more transparency in tax matters.  

(c) 

Primary and secondary requirement (intermediaries or taxpayers) 

Intermediaries 

 

 

 

Intermediaries would have to undertake the compliance cost of reporting in most cases; 
that is, they would always need to report unless they are entitled to a waiver based on 
professional secrecy rules, etc. 
Intermediaries  would  be  most  likely  to  shift  the  compliance  cost  of  the  disclosure  to 
their clients, i.e. the taxpayers. 
The  existence  of  a  mandatory  disclosure  regime  can  also  enhance  the  reputation  of 
intermediaries,  especially  where  their  disclosed  regimes  do  not  result  in  counter-
measures  by  the  authorities.  It  could  lead  to  higher  quality  control  standards  in  their 
work, including the possibility of gradually setting the blueprint for a profession-wide 
code of conduct. 

47 

 
 
 
 
 
 

Such  obligation  would  act  as  a  deterrent  vis-à-vis  the  intermediaries  from  devising 
aggressive tax planning schemes.  

Taxpayers 

 

 

Their  engagement  is  secondary,  which  implies  that  they  contribute  to  the  need  for 
transparency but only to the extent that there is a risk of reportable schemes remaining 
undisclosed due to the absence or other inability of an intermediary. 
They  would  need  to  bear  the  cost  of  disclosure  but  it  should  be  expected  that  in  the 
majority of cases, the compliance obligation would fall on the intermediary. 

Tax authorities  

 

Given that most intermediaries would provide tax planning services on a regular basis, 
placing the primary obligation to inform on them would mean that the tax authorities are 
in a position to identify those liable to report.  

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal  market.  Considering  that  the  intention  of  disclosing  a  potentially  aggressive 
cross-border tax planning scheme will materialise, either through the intermediary or the 
taxpayer, this option does not seem to bring any particular impacts to the fore. 

Society 

 

The obligation to disclose potentially aggressive cross-border tax planning schemes in 
the field of direct taxes is part of an initiative aimed to respond to the citizens' demand 
for more transparency in tax matters.  

With regard to the Public Consultation the most popular option for respondents at 36% was 
that  both  the  taxpayer  and  the  intermediary  should  report  the  scheme.  From  the  main 
stakeholder groups there was a wide range of responses regarding this option: who replied to 
this question there was a wide range of preferences with 84% of NGO's (84%), 54% private 
citizens (54%), consultancy/tax advisors (11%) and Trade/business associations (8%).   

8.4.  Material Scope 

(i) Taxes covered 

The question is whether all taxes should be covered or the disclosure requirement should be 
limited to direct tax only. 

(b) 

Direct taxes 

Given that direct and  indirect taxation are structured in  a fundamentally  different fashion, a 
tax planning scheme would normally be aimed to reduce the tax liability in either of the two 
fields but not in both at the same time. It follows that, if the material scope of the envisaged 
initiative were limited to direct taxes, tax planning schemes involving indirect taxation would 
have to be looked at separately, possibly in the context of the VAT Directive. 

Intermediaries 

48 

 
 
 
 
 
 
 

Although intermediaries would benefit from economies of scale and so the obligation to 
disclose  information  in  relation  to  all  taxes  should  not  create  significant  difficulty  to 
them, the prospect for concentrating on the direct tax implications of their cross-border 
schemes would still allow them to process information in a more targeted manner and 
be more precise in the output that they pass to the tax authorities. 

Taxpayers 

 

 

For  taxpayers  of  a  smaller  size  (e.g.  Small  and  Medium  Enterprises),  limiting  the 
disclosure  obligation  to  direct  taxes  would  obviously  facilitate  their  compliance 
obligations significantly. 
Larger taxpayers should be less impacted by the broadness of the disclosure obligation. 
Still  though,  a  disclosure  limited  to  direct  taxes  could  enhance  legal  certainty  as  it 
would  allow  taxpayers  to  develop  a  more  targeted  approach  and  concentrate  on  the 
details of the reportable schemes. 

Tax authorities 

 

 

The fact that tax authorities would receive information limited to direct taxation would 
not  compromise  their  prospects  for  monitoring  compliance  in  the  field  of  indirect 
taxation,  as  they  could  make  use  of  other  mechanisms  to  get  access  to  information  in 
that field (e.g. under VAT legislation). 
The  majority  of  tax  planning  schemes  with  a  cross-border  dimension  is  structured  to 
achieve income and capital tax savings. In indirect taxation, tax optimisation would be 
likely to follow different routes (primarily the VAT Directive or Customs). 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal market. On this premise and considering that most potentially aggressive cross-
border  tax  schemes  involve  direct  taxes,  the  prospect  for  limiting  the  obligation  to 
disclose these schemes to direct taxation is unlikely to create issues. 

Society 

 

The obligation to disclose potentially aggressive cross-border tax planning schemes in 
the field of direct taxes is part of an initiative aimed to respond to the citizens' demand 
for more transparency in tax matters.  

With regard to the Public consultation there was no specific question regarding the material 
scope of the proposal. However, respondents did not propose including indirect taxes within 
the scope of the proposal.  

(ii) Composition of Hallmarks 

(a) 

Generic hallmarks 

Intermediaries 

 

As the scope of these hallmarks would be broad and non-customised to address specific 
schemes,  intermediaries  would  be  in  a  position  to  easily  identify  and  report  to  the 
authorities off-the-shelf products that they have sold to clients. This exercise should not 
involve any additional compliance cost. 

49 

 
 
 
 

However,  if  all  schemes  that  fall  within  generic  hallmarks  had  to  be  reported,  there 
would certainly be a degree of duplication, since essentially the same scheme may have 
been sold to more than one client. 

Taxpayers 

  Where taxpayers are called on to disclose their cross-border tax planning schemes to the 
authorities,  they  certainly  bear  a  compliance  burden.  Yet,  schemes  falling  within  the 
concept  of  a  generic  hallmark  should  be  relatively  straightforward  to  report  on.  The 
taxpayer only needs to review its portfolio of schemes and pass the relevant information 
to the authorities. 
However, it is true that the smaller the taxpayer, the less its resources and the higher the 
cost of disclosure. 

 

Tax authorities 

 

Potentially aggressive cross-border tax planning schemes become subject to disclosure 
if they fulfil some generally construed criteria; for example, if they involve the payment 
of  a  fee  which  is  proportional  to  the  tax  benefit  of  the  taxpayer.  The  fact  that  the 
"gateway" criteria are so general may require more effort by the authorities to prove that 
a certain disclosed scheme actually qualifies as tax avoidance. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal market. On this premise and considering that generic hallmarks are sufficiently 
broad to capture most potentially aggressive cross-border tax schemes, the prospect for 
focussing the obligation to disclose on these schemes would be in line with the internal 
market related objective of this initiative. 

Society 

 

The  obligation  to  disclose  potentially  aggressive  cross-border  tax  planning  schemes 
which fall within the generic hallmarks is part of an initiative aimed to respond to the 
citizens' demand for more transparency in tax matters.  

(b) 

Specific hallmarks 

Intermediaries 

 

 

Specific hallmarks  usually  address customised tax planning schemes  which have  been 
devised to meet the needs of specific clients. Intermediaries should be in a position to 
immediately identify which of this type of schemes they have provided clients with and 
report them to the tax authorities. 
Given that specific hallmarks essentially deal with customised schemes, there would be 
little risk of duplication in the disclosure. 

Taxpayers 

 

Taking  into  account  that  schemes  falling  within  the  specific  hallmarks  can  involve 
elaborate structures, taxpayers may need to process the details of these schemes in order 
to determine whether those are reportable.  

50 

 
 
 
 
 

Although  this  can  be  a  demanding  exercise,  it  should  also  be  considered  that  more 
complex schemes would normally relate to larger taxpayers. For this type of taxpayers, 
the compliance cost would remain low because they have the expertise. 

Tax authorities 

 

 

Tax  authorities  should  be  expected  to  possess  the  expertise  to  deal  with  complex 
schemes. In fact, tax authorities should be expected to have the resources to process the 
disclosed  information,  match  it  with  the  file  of  the  concerned  taxpayer  and  determine 
whether the respective scheme actually qualifies as tax avoidance. 
Considering that specific schemes are not marketed massively, the tax authorities should 
not estimate to receive high numbers of such schemes. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal market. On this premise and considering that some potentially aggressive cross-
border tax schemes may be structured in particularly elaborate fashion, the prospect for 
focussing the obligation to disclose on these schemes would be in line with the internal 
market related objective of this initiative. 

Society 

 

The  obligation  to  disclose  potentially  aggressive  cross-border  tax  planning  schemes 
which fall within the specific hallmarks is part of an initiative aimed to respond to the 
citizens' demand for more transparency in tax matters. 

(c) 

Generic and specific hallmarks 

Intermediaries 

 

 

Generic  and specific  hallmarks would address both  "off-the-shelf" and customised tax 
planning schemes. Intermediaries would need to identify which hallmark, i.e. generic or 
specific, the scheme that they operate corresponds to. This is a significant point because 
each type of hallmark requires that different criteria be fulfilled for its disclosure.  
Generic hallmarks run the risk of being reported twice if almost identical projects were 
sold  to  more  than  one  client.  Regarding  specific  hallmarks,  they  essentially  deal  with 
customised  schemes,  which  imply  that  there  would  be  little  risk  of  duplication  in  the 
disclosure. 

Taxpayers 

  Where taxpayers are called on to disclose their cross-border tax planning schemes to the 

 

 

authorities, they certainly bear a compliance burden.  
Schemes  falling  within  the  concept  of  a  generic  hallmark  should  be  relatively 
straightforward to report on. However, specific hallmarks are likely to involve elaborate 
structures  and  taxpayers  may  need  to  process  the  details  of  these  schemes  in  order  to 
determine whether they are reportable.  
Although  this  can  be  a  demanding  exercise,  it  should  also  be  considered  that  more 
complex schemes would normally relate to larger taxpayers. For this type of taxpayers, 
the compliance cost would remain low because they have the expertise. 

51 

 
 
 
 
 
Tax authorities 

 

 

Tax  authorities  would  be  expected  to  possess  the  expertise  to  deal  with  complex 
schemes.  In  fact,  the  tax  authorities  would  own  the  resources  to  process  the  disclosed 
information match it with the file of the concerned taxpayer and determine whether the 
respective scheme actually qualifies as tax avoidance. 
Considering that specific schemes are not marketed massively, the tax authorities should 
not  estimate  to  receive  high  numbers  of  such  schemes.  On  the  other  hand,  generic 
schemes  are  more  complicated  to  investigate  the  details  of.  This  is  because  the 
disclosure  may  not  give  sufficient  data  on  the  features  of  a  precise  scheme  which  is 
under scrutiny. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal  market.  Although  generic  hallmarks  are  sufficiently  broad  to  capture  most 
potentially  aggressive  cross-border  tax  schemes,  there  are  still  certain  such  schemes 
which  could  escape  the  generic  rule  because  they  are  structured  in  a  particularly 
elaborate fashion. The obligation to disclose schemes that fall within both generic and 
specific  hallmarks  would  be  in  line  with  the  internal  market  related  objective  of  this 
initiative. 

Society 

 

The  obligation  to  disclose  potentially  aggressive  cross-border  tax  planning  schemes 
which fall within either the generic or specific or both hallmarks is part of an initiative 
aimed to respond to the citizens demand for more transparency in tax matters. 

With regard to the Public consultation under Section 4.1 respondents were asked how useful a 
list  of  criteria  were  for  classifying  tax  schemes  as  potentially  aggressive.  These  criteria 
included  both  generic  hallmarks  like  confidentiality  clauses  and  premium  fees,  and  specific 
hallmarks  like  artificial  series  of  arrangements  and  schemes  designed  to  circumvent  the 
Common Reporting Standard. A large majority of respondents  considered that these criteria 
would  be  of  limited  use/very  useful.  The  criteria  which  was  scored  highest  in  the  reply  Not 
useful  at  all  was  the  inclusion  of  a  confidentiality  clause  at  15%  of  respondents.  From  the 
main respondent categories there was limited difference regarding whether this would be not 
useful  at  all:  consultancies/tax  advisors  (25%),  private  citizens  (21%),  trade/business 
associations (11%), and NGO's (5%). 

Member States expressed general support in the meeting of WPIV on 2 March, 2017 on the 
proposal for the EU to include a mixture of generic and specific hallmarks. 

(iii) Timeframe 

(a) 

Only new schemes 

Intermediaries 

 

Intermediaries  would  be  required to  disclose  only  reportable  schemes  introduced  after 
the entry into force of the regime on mandatory disclosure.  

52 

 
 
 
 
 

 

This  is  a  clear  timeframe  which  would  allow  intermediaries  to  take  account  of  the 
content of hallmarks in designing their tax planning schemes. 
Older  schemes  which  are  still  in  operation  and  would  potentially  fall  within  the 
hallmarks (if disclosed) would continue to apply without disclosure. 

Taxpayers 

 

 

Taxpayers would be required to disclose only the potentially aggressive cross-border tax 
planning  schemes  introduced  after  the  entry  into  force  of  the  regime  on  mandatory 
disclosure.  
Taxpayers would continue, without an obligation to  disclose,  with  the implementation 
and/or  operation  of  schemes  that  pre-date  the  entry  into  force  of  the  regime  on 
mandatory disclosure and that could otherwise have been captured by the hallmarks. 

Tax authorities 

 

Although the tax authorities may still benefit from the mandatory disclosure in terms of 
access  to  information  relevant  to  the  "new"  schemes,  they  would  not  have  the 
opportunity to review older schemes with potentially harmful features which remain in 
use within the internal market.  

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal market. Disclosing "new" schemes would provide tax authorities with a good -
although  not  fully  complete  -  picture  of  the  situation,  and  allow  them  to  enact  a 
comprehensive  set  of  counter-measures.  The  disclosure  of  solely  new  schemes  would 
contribute to the objective aimed to be achieved. 

Society 

 

The  obligation  to  disclose  potentially  aggressive  cross-border  tax  planning  schemes, 
even where this is limited to exclusively "new" projects, is in line with citizens' demand 
for more transparency in tax matters. 

(b) 

New and existing schemes 

Intermediaries 

 

 

 

Intermediaries  would  be  required  to  disclose  all  reportable  schemes  which  are  in 
operation,  including  those  which  pre-date  the  entry  into  force  of  the  mandatory 
disclosure regime.  
Some  of  the  "old"  existing  schemes  could  have  been  modified  over  time  and 
consequently certain characteristics of the original scheme would no longer be there.  
In  addition,  it  cannot  be  excluded  that  the  intermediary  who  designed  and  sold  the 
scheme be no longer identifiable.  

Taxpayers 

 

If the obligation to disclose reportable schemes shifts to taxpayers, it would be required 
to  disclose  all  reportable  schemes  which  are  in  operation,  including  those  which  pre-
date the entry into force of the mandatory disclosure regime. 

53 

 
 
 
 
 

 

Some  of  the  "old"  existing  schemes  could  have  been  modified  over  time  and 
consequently certain characteristics of the original scheme would no longer be there.  
Taxpayers would always be in a position to track, and report on, "old" schemes which 
are still in operation. 

Tax authorities 

 

 

Tax  authorities  would  benefit  from  the  mandatory  disclosure  in  terms  of  access  to 
information relevant to "old" and "new" schemes.  
However,  since  some  of  the  "old"  schemes  may  have  been  modified  over  time,  tax 
authorities  would  need  to  ensure  that  the  present  state  of  schemes  has  also  been 
reviewed. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal market. Disclosing both "old" and "new" schemes would provide tax authorities 
with a more complete picture of the situation in the market, so that these authorities can 
focus on enacting comprehensive counter-measures.  

Society 

 

The broader the obligation to disclose potentially aggressive cross-border tax planning 
schemes (i.e. it is not limited to "new" schemes but also includes "old" ones that are still 
in  force), the  closer our alignment  with  citizens' demand for  more  transparency  in tax 
matters. 

The Public Consultation did not include any question specifically asking about the timeframe 
for the proposal. 

8.5. 

(i) 

Exchange of information 

Form and frequency of exchange of information 

(a) 

Spontaneous exchange 

Intermediaries 

 

 

 

 
 

Considering that the disclosure of information on potentially aggressive cross-border tax 
planning  schemes  is  distinguished from the exchange of such  information,  the type of 
exchange,  i.e.  spontaneous,  automatic  or  on  request,  would  not  impact  on  the 
intermediaries' obligation for disclosure. 
The  exchange  of  information  is  a  responsibility  of  the  tax  authorities  –  not  of  the 
intermediaries. It follows that the exchange of disclosed information and/or the method 
used for this exchange does not impact on the intermediaries as such.  
Even in the absence of a specific reference to spontaneous exchange in the text on the 
mandatory disclosure of reportable schemes, Member States' authorities would still bear 
this obligation under the general rules of the Directive on Administrative Cooperation. 
Taxpayers 
Considering that the disclosure of information on potentially aggressive cross-border tax 
planning  schemes  is  distinguished from the exchange of such  information,  the type of 

54 

 
 
 
 

 

exchange, i.e. spontaneous, automatic or on request, would not impact on the taxpayers' 
"fall-back" obligation for disclosure. 
The  exchange  of  information  is  a  responsibility  of  the  tax  authorities  –  not  of  the 
intermediaries. It follows that the exchange of disclosed information and/or the method 
used for this exchange does not impact on the taxpayers as such. 
Even in the absence of a specific reference to spontaneous exchange in the text on the 
mandatory disclosure of reportable schemes, Member States' authorities would still bear 
this obligation under the general rules of the Directive on Administrative Cooperation. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal  market.  The  spontaneous  exchange  of  information  on  disclosed  potentially 
aggressive cross-border tax planning schemes would contribute to this objective. In fact, 
the tax authorities of other Member States would have the opportunity to learn, through 
the  exchanged  information,  about  distortions  in  the  internal  market  and  to  enact 
measures to fix them. 

Society 

 

The  exchange  of  information  about  disclosed  potentially  aggressive  cross-border  tax 
planning  schemes,  even  where  this  exchange  is  only  spontaneous,  is  in  line  with 
citizens' demand for more transparency in tax matters. 

(b) 

Automatic exchange 

Intermediaries 

 

 

Considering that the disclosure of information on potentially aggressive cross-border tax 
planning  schemes  is  distinguished from the  exchange of such  information,  the type of 
exchange,  i.e.  spontaneous,  automatic  or  on  request,  would  not  impact  on  the 
intermediaries' obligation for disclosure. 
The  exchange  of  information  is  a  responsibility  of  the  tax  authorities  –  not  of  the 
intermediaries. It follows that the exchange of disclosed information and/or the method 
used for this exchange does not impact on the intermediaries as such.  

Taxpayers 

 

 

Considering that the disclosure of information on potentially aggressive cross-border tax 
planning schemes  is  distinguished from the exchange  of such  information,  the type of 
exchange, i.e. spontaneous, automatic or on request, would not impact on the taxpayers' 
"fall-back" obligation for disclosure. 
The  exchange  of  information  is  a  responsibility  of  the  tax  authorities  –  not  of  the 
intermediaries. It follows that the exchange of disclosed information and/or the method 
used for this exchange does not impact on the taxpayers as such. 

General economic considerations 

 

The  overarching  objective  of  this  initiative  is  to  ensure  the  proper  functioning  of  the 
internal  market.  The  automatic  exchange  of  information  on  disclosed  potentially 
aggressive cross-border tax planning schemes would contribute to this objective. In fact, 
the tax authorities of other Member States would have the opportunity to learn, through 

55 

 
 
the  exchanged  information,  about  distortions  in  the  internal  market  and  to  enact 
measures to fix them. 

Society 

 

The  automatic  exchange  of  information  about  disclosed  potentially  aggressive  cross-
border tax planning schemes is in line with citizens' demand for more transparency in 
tax matters. 

None of the options available under Exchange of information could be considered as having a 
measurable difference on the administrative burden placed on the taxpayer. 

Regarding the Public Consultation there were no questions regarding the form and frequency 
of  exchange  of  information.  In  the  meeting  of  WPIV  of  2  March,  2017  Member  States 
expressed general support for automatic exchange of information as the form of exchange. 

(ii)  Means for exchange of information 

(a) 

Compulsory publication in the Member State of disclosure 

Intermediaries 
 

Intermediaries  would  be  faced  with  publication  of  aggressive  tax  planning  schemes. 
Such a situation would contribute to establishing a public scrutiny. There would be no 
cost involved for the intermediaries. 
There would be a reputational risk for the intermediary involved which could serve as a 
deterrent  to  the  creation  of  aggressive  tax  planning  schemes  compared  to  non-
publication. 

 

Taxpayers 
  Where  the  obligation  to  disclose  potentially  aggressive  cross-border  tax  planning 
schemes is shifted to taxpayers, they would also be faced with publication of aggressive 
tax planning schemes. There would be no cost involved for the taxpayers.   
There is a reputational risk for the taxpayer involved which would serve as a deterrent 
to the use of aggressive tax planning schemes compared to non-publication. 

 

Tax authorities 

 

 

 

Tax authorities would need to publish aggressive tax planning schemes and this would 
require additional resources. 
The increased deterrent effect that one hopes to achieve from the "threat" of publication 
would mean that taxpayers and intermediaries would be less likely to engage in schemes 
that would qualify as tax avoidance and tax evasion. 
How useful this information would be to tax authorities would depend on the timeliness 
of the publication of the aggressive tax planning schemes – if there is a long time period 
for publication after the regime has been notified then other Member States may not be 
able to react with counter-measures against such schemes in a timely manner. 

General economic considerations 

 

An increase in transparency is expected to gradually change national tax practices; 

56 

 
 
 
 
 
 

 

Tax authorities would pay for the publication of aggressive tax planning schemes  and 
not the economy in general; 
The  publication  of  aggressive  tax  planning  schemes  may  discourage  foreign  investment  by 
individuals  and/or  companies  due  to  the  potential  harm  that  publication  may  do  to  their 
reputation if they used reportable schemes. This said, the publication may also limit situations of 
aggressive tax planning. 

Society 

 

 

Publication of aggressive tax planning schemes would lead to greater transparency than 
non-publication  and  contribute  to  better  tax  fairness  and  also  contribute  to  a  level 
playing field for taxpayers. 
Cost for publication  of aggressive tax planning schemes  would be incurred by the tax 
authorities and not society in general. 

(b)  Direct  exchange  between  Member  States  (Option  1  Spontaneous  exchange  and 
Option 2 Automatic exchange) 

Intermediaries 

 

Intermediaries  would  not  be  directly  affected  by  this  option  as  tax  authorities  of  Member 
States would exchange the information with each other. 

Taxpayers 

  Taxpayers would not be directly affected by this option  as tax  authorities of Member States 

would exchange the information with each other. 

Tax authorities 

  Regarding spontaneous exchange of information (Option 1) Member States would be required 
to send information at their discretion to other Member States which would require additional 
resources. 

  Regarding automatic exchange of information (Option 2) Member States would be required to 
send information at fixed intervals to other Member States requiring additional resources. 
In  terms  of  comparison  of  Option  1  and  Option  2,  costs  would  be  similar  but  may  differ 
marginally due to the frequency of exchanges. 

 

  Member States would benefit from receiving this information and be able to react in a timely 
manner  to  address  aggressive  tax  planning  schemes.  Regarding  Option  1  (spontaneous 
exchange) and Option 2 (automatic exchange) how timely Member States could react depends 
on the frequency of sending information under Option 1 compared to Option 2.  

  A  quantification  of  increased  burden  under  Options  1  and  2  does  not  exist  however  current 
evaluations  of  the  UK  DOTAS  schemes  does  not  indicate  that  the  mandatory  disclosure 
regime has caused concerns about an increase in administrative burden for the UK authorities. 

General economic considerations 

  Exchange  of  information  occurs  between  the  tax  authorities  of  Member  States  therefore  the 
means of exchange of information does not affect general economic considerations directly. 

Society 

  Exchange  of  information  occurs  between  the  tax  authorities  of  Member  States  therefore  the 

means of exchange of information does not affect society in general directly. 

57 

 
 
 
 
(c) Indirect exchange through a central directory 

Intermediaries 

  How tax authorities store and provide access to information for other Member States does not 

affect intermediaries directly. 

Taxpayers 

  How tax authorities store and provide access to information for other Member States does not 

affect taxpayers directly. 

Tax authorities 

  Member  States  would  be  required  to  update  a  central  directory  for  aggressive  tax  planning 

schemes which would bring similar costs to that for direct exchange of information. 

  A  quantification  of  increased  burden  for  a  central  directory  does  not  exist  however  current 
evaluations  of  the  UK  DOTAS  schemes  does  not  indicate  that  the  mandatory  disclosure 
regime has caused concerns about an increase in administrative burden for the UK authorities. 
  Member States would benefit from receiving this information and be able to react in a timely 
manner to address aggressive tax planning schemes. As with  direct exchange of information, 
how  timely  Member  States  could  react  would  depend  on  the  frequency  of  update  of  the 
Directory by the Member State concerned to record aggressive tax planning schemes.  

General economic considerations 

  How tax authorities store and provide access to information for other Member States has no 

direct effect on general economic considerations. 

Society 

  How tax authorities store and provide access to information for other Member States has no 

direct effect on society.   

With  regard  to  the  Public  Consultation  opinions  on  the  extent  of  the  disclosure  was  asked 
under  section  7  policy  options  and  their  impacts.  While  the  Public  Consultation  did  not 
specifically  cover  the  means  for  exchange  of  information  respondents  were  asked  about 
Option D which had a wide range of disclosure including publication which was not included 
under  the  other  option  categories.  Overall  47%  of  respondents  rated  Option  D  as 
effective/very  effective  however  there  was  a  wide  divergence  in  the  main  stakeholder 
categories with regard to whether this would be considered as effective/very effective: NGO's 
(89%),  companies  (75%),  private  citizens  (60%),  consultancies/tax  advisors  (25%),  and 
trade/business associations (19%). 

58 

 
 
 
 
 
 
 
 
 
 
9. 

COMPARISON OF OPTIONS  

For assessing the policy options, the following criteria are used: 

  Effectiveness: in terms of achieving the ultimate (indirect) objective of clamping down 
on  tax  evasion  and  avoidance;  the  analysis  will  also  consider  the  direct  specific 
objectives  of  creating  an  environment  of  transparency  and  allowing  for  the  timely 
access  to  information  as  well  as  of  creating  a  deterrent  to  the  design  and  use  of 
aggressive tax planning schemes 

  Efficiency:  the  extent  to  which  the  objectives  can  be  achieved  for  a  given  level  of 

resources or least cost; 

  Coherence:  the  degree  to  which  this  option  would  result  in  a  consistent  application 

across the EU. 

The  summary  tables  indicate  how  the  various  alternative  features  of  the  policy  initiative 
compare  to  the  baseline  scenario,  which  is  about  taking  no  action  and  retaining  the  current 
status quo. If no initiative is taken, the current situation will persist. This would imply that tax 
authorities  will  not  avail  themselves  of  the  opportunity  to  learn  ex  ante  about  potentially 
aggressive  tax  planning  arrangements  which  may  be  found  illegitimate  following  scrutiny. 
The  objectives  of  enhancing  transparency  and  allowing  timely  access  to  information  by  the 
authorities  as  a  deterrent  to  aggressive  tax  planning  practices  will  also  be  compromised. 
Otherwise,  tax  authorities  will  still  be  in  a  position  to  benefit  from  the  results  of  recently 
enacted EU instruments against tax avoidance since these will remain available for Member 
States. 

9.1. 

Personal scope 

Comparison  

9.1.1. 

Single requirement 

(i) Only intermediaries – regardless of whether they qualify as EU or non-EU intermediaries 
under section 7.1.3:  

Under  this  option,  only  intermediaries  would  bear  the  burden  of  the  new  obligations.  Users 
would be given a full waiver. Although this option would allow tax authorities to derive the 
benefits of ex ante mandatory disclosure, it would run the risk of turning out to be of limited 
effectiveness.  Namely,  although  the  obligation  would  equally  burden  both  the  EU  and  non-
EU intermediaries, it would be difficult to enforce compliance against the latter. Considering 
that  users  are  given  a  waiver  and  so,  there  would  be  no  fall-back  solution  to  cater  for  the 
absence of an intermediary, it should be expected that those intermediaries who do not wish to 
disclose information  would organise  their business in such a way as to escape  the reporting 
obligation.  Another  drawback  is  that  schemes  designed  solely  by  taxpayers  (in-house), 
without the assistance of any intermediary, would also escape the reporting obligation under 
this option.  

It follows that this option can  only partially  meet the (direct  and indirect)  objectives of this 
initiative (see chapter 6). 

(ii) Only users: although this option would allow tax authorities to derive the benefits of ex 
ante mandatory disclosure, it would also run the risk of limited effectiveness. This is because 
users may not have the expertise to provide details on how the scheme works. For this reason, 
it  could  be  the  case  that  a  tax  administration  receives  a  larger  amount  of  reports  of  inferior 
quality. Such a prospect would compromise transparency and the timely access to information 

59 

 
and  as  a  result,  would  overall  not  contribute,  as  it  is  expected,  to  the  fight  against  tax 
avoidance and evasion. 

9.1.2.  Double requirement 

Intermediaries  and users: if both intermediaries and users carry the onus of the disclosure 
obligation, the tax authorities should derive the maximum benefits of this exercise in terms of 
transparency and information access but the overall burden of compliance should be expected 
to  increase.  This  would  also  be  the  case  for  tax  administrations  because  they  could  receive 
information on the same scheme at least twice (one report from the intermediary and another 
from  the  user).  In  the  case  of  mass-marketed  schemes,  there  would  even  be  a  risk  of 
multiplication.  However,  Member  States  may  benefit  from  both  intermediaries  and  users 
reporting  such  schemes  as  the  risk  of  non-reporting  or  incomplete  reporting  would  decline 
given that both parties would need to report and could act as a control on one another. It may 
be  worth  noting  that  this  was  the  most  favoured  option  in  the  responses  to  the  public 
consultation with 36% of respondents indicating that both taxpayers and users should report a 
scheme. 

9.1.3.  Primary and secondary requirement 

Under this option, the burden would mostly lie with the  intermediaries as they would bear 
the primary reporting obligation. Users would be involved where there are no intermediaries 
or  where  intermediaries  cannot  be  identified  or  forced  to  comply.  Although  the  occasional 
involvement  of  the  users  (taxpayers)  should  be  expected  to  add  some  more  compliance 
burden, the tax authorities would still benefit from the information received as part of the ex 
ante  mandatory  disclosure.  In  addition,  this  option  would  be  likely  to  generate  significant 
gains in effectiveness. It thus combines the possibility of having a fall-back rule to cater for 
the cases where the intermediary is absent or does not exist with the prevention of duplication 
or  multiplication  of  tasks.  Therefore,  there  would  be  only  one  person  encumbered  with 
compliance each time. 

Options 1(ii) and 2 where users have an obligation to report would mean a higher compliance 
burden  for  taxpayers  and,  given  the  complexity  of  such  schemes,  could  lead  to  sub-optimal 
reporting.  Placing  the  primary  reporting  obligation  on  intermediaries  would  improve  the 
effectiveness  of  the  rules  in  terms  of  enhancing  transparency  and  timely  information  access 
and,  in  terms  of  results,  further  the  fight  against  tax  avoidance.  This  is  because  the 
intermediaries  would  have  the  expertise  to  ensure  that  the  reporting  of  such  schemes  be 
carried out successfully. Furthermore, the overall burden for intermediaries would be reduced 
as they would report on the schemes of multiple clients and so they would be able to benefit 
from economies of scale. 

Table 3:  Comparison – subject of reporting obligation 

Specific 
features 

Subject of 
reporting 
obligation 

Description of options 

Effectiveness 

Efficiency 

Coherence 

0. Baseline scenario – no reporting 

1. Single requirement (only 

intermediaries or only users) 

2. Double requirement (intermediaries 

and users) 

3. Primary and secondary requirement 

(intermediaries or users) 

0 

+ 

++ 

++ 

0 

+ 

+ 

++ 

0 

+ 

+ 

++ 

60 

 
Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing". 

European Commission (2017) 

Conclusion:  

Option  3  follows  the  approach  used  in  existing  schemes  and,  if  well-designed,  it  would 
provide a balanced solution. It is indeed the intermediary who designs and sells the scheme 
that would fulfil the reporting obligations, except in some circumstances where it would fall 
on the taxpayers. In addition, if the primary obligation rest with the intermediary, it could also 
help  avoid  multiple  reporting  of  the  same  scheme  if  this  was  implemented  by  a  number  of 
clients of the same intermediary. Therefore, option 3 would mitigate the risks of non-reporting 
whilst also create a contained overall compliance burden.  

9.2.  Material scope 

9.2.1.  Types of taxes 

Table 4: Comparison – type of taxes covered 

Specific 
features 

Type of taxes 
covered 

Description of options 

Effectiveness 

Efficiency 

Coherence 

0. Baseline scenario – no coverage 

1. All taxes (discarded suboption) 

2. Direct taxes only 

0 

++ 

0 

++ 

0 

++ 

Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing". 

European Commission (2017) 

Conclusion:  

The  option  to  cover  all  taxes  has  been  discarded  in  section  7.2.1.  Consequently,  option  2, 
which  covers,  only  direct  taxes,  has  been  chosen  for  the  final  design  of  the  mandatory 
disclosure regime.  

9.2.2.  Object of reporting (composition of hallmarks) 

Comparison:  

The analysis identifies three options for choosing the hallmarks that should be included in the 
regime. First, the compilation of a list of hallmarks, as compared to the "status quo", where 
hallmarks are missing, is an improvement.  

Generic  hallmarks  are  designed  to  primarily  target  mass-marketed  schemes  or  standardised 
products, provided that the scheme(s) under disclosure potentially promote(s) aggressive tax 
planning  or  award(s)  tax  benefits.  It  follows  that  generic  hallmarks  can  easily  capture  large 
volumes  of  mainstream  off-the-shelf  schemes  but  would  risk  missing  the  customised  ones 
which  would  be  tailor-made  to  fit  either  the  particular  commercial  structures  of  global 
multinationals  or  specific  tax-oriented  objectives  of  corporate  clients  or  even  of  high  net 
worth individuals. What is more, the effectiveness of generic hallmarks could be undermined 
if  the  additional  requirements  of  potential  aggressive  tax  planning  or  aim  to  derive  tax 
benefits are narrowly construed. 

On  the  other  hand,  specific  hallmarks  would  be  effective  in  addressing  the  particular 
characteristics of schemes that differ from what is widely marketed as well as in ensuring that 
tax planning schemes do not take advantage of certain weak features in a national tax system 
such  as  features  resulting  in  double  non-taxation  situations.  Specific  hallmarks  cannot  by 
nature effectively target large volumes of schemes as they are construed to serve a different 

61 

 
 
 
 
function. This said, an inherent drawback of specific hallmarks relates to the fact that due to 
their narrow scope, intermediaries can usually find ways around these types of hallmarks and 
thus avoid reporting. 

A  combination  of  generic  and  specific  hallmarks  would  be  expected  to  capture  the  large 
numbers  of  mainstream  off-the-shelf  schemes  and  also  extend  to  cover  (otherwise  missing) 
bespoke  and  tailored-made  schemes.  Intermediaries  would  be  discouraged  from  designing 
their schemes around specific hallmarks because they would still be likely to fall within the 
scope of the generic ones. It therefore follows that the best way to create a robust set of rules 
that will ensure the widest possible transparency and timely access to information would be to 
bring together generic and specific hallmarks in a combined regime. This option would place 
a compliance burden on to intermediaries to proof-check their marketed tax planning schemes 
against a long list of hallmarks. Yet, in such cases, they would capitalise on increased legal 
certainty in operating their businesses.  

Table 5:   Comparison –composition of hallmarks 

Specific 
features 

Description of options 

Effectiveness 

Efficiency 

Coherence 

0. Baseline scenario – no hallmarks 

Composition 
of hallmarks 

1. Generic hallmarks 

2. Specific hallmarks 

3. Generic and specific hallmarks 

0 

+ 

+ 

++ 

0 

+ 

+ 

++ 

0 

+ 

+ 

++ 

Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing". 

European Commission (2017) 

Conclusion:  

The preferred option is 3, which consists in a combination of generic and specific hallmark.  

This  conclusion  is  also  consistent  with  the  OECD  report  on  BEPS  Action  12,  which 
recommends that mandatory disclosure regimes include a combination of generic and specific 
hallmarks. 

9.2.3. 

 Timeframe for reporting 

Comparison:  

Under  the  first  option,  the  compliance  burden  of  intermediaries  would  be  relatively  limited 
since  they  would  need  to  report  only  schemes  introduced  after  the  entry  into  force  of  the 
regime  on  mandatory  disclosure.  In  such  case,  although  the  tax  authorities  may  still  benefit 
from the mandatory disclosure in terms of access to information, the policy effectiveness of 
this  option  could  prove  limited.  This  is  because  older  schemes  with  potentially  harmful 
features may go unreported while they remain in use within the internal market. In addition, 
the system could prove prone to manipulation in cases where a substantial number of schemes 
be introduced between the time that political agreement on the Directive is reached in Council 
and the entry into force of the act, in order to escape the new reporting obligation. 

The  second  option  requires  to  additionally  report  information  about  schemes  that  generally 
pre-date the introduction of the mandatory disclosure regime. In this regard, it is worth noting 
that some of the "old" existing schemes may have been modified over time and consequently 
certain  characteristics  of  the  original  scheme  may  no  longer  be  there.  Considering  this,  it 

62 

 
 
  
would be necessary to assess  schemes against the  hallmarks by referring to their features at 
present. Accordingly, it would not be excluded that the intermediary who designed and sold 
the  scheme  be  no  longer  identifiable.  This  is  why  it  may  be  disproportionate  that  the 
disclosure obligation captures all existing reportable regimes. 

Table 6:  Comparison - timeframe 

Specific 
features 

Description of options 

Effectiveness 

Efficiency 

Coherence 

0. Baseline scenario – no schemes covered  

Timeframe 

1. Only new schemes  

2. New and existing schemes 

0 

+ 

++ 

0 

++ 

+ 

0 

+ 

++ 

Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing". 

European Commission (2017) 

Conclusion:  

Given that the inclusion of existing arrangements can lead to severe complications, option 1 
should be the preferred one as it offers a more proportionate solution towards achieving a high 
level  of  transparency.  To  reinforce  the  preferred  regime,  it  should  be  proposed  that  the 
Directive develop a limited retrospective effect, confined to capturing schemes that were put 
in place after political agreement on this Directive in Council.  

9.3. 

Exchange of information 

9.3.1.  Form and frequency of exchange of information 

Comparison:  

There  are  two  policy  options  for  shaping  the  exchange  of  information:  spontaneous  and 
automatic  exchange.  Irrespective  of  which  option  is  taken,  the  exchange  brings  forth  some 
added  value,  as  compared  to  the  "status  quo"  scenario.  It  is  envisaged  to  take  place 
exclusively between national competent authorities.  

Already now, tax authorities can exchange information spontaneously. However, spontaneous 
exchanges,  although  they  are  better  than  no  exchange  at  all,  are  often  irregular.  They  leave 
Member States with discretion to decide on the content of what they share as well as on the 
States that they wish to share the disclosed information with. This could mean that aggressive 
tax  planning  information  may  not  reach  all  Member  States,  which  would  compromise  the 
effectiveness  of  the  envisaged  initiative  and  its  objectives  for  establishing  timely  access  to 
information  that  would  deter  future  aggressive  tax  planning  schemes.  Past  experience  in  a 
different  tax  field  shows  that  the  discretionary  element  was  one  of  the  reasons  why  the 
process  proved  ineffective.  It  follows  that  relying  exclusively  on  spontaneous  exchanges  of 
information would not necessarily improve cooperation in the field of tax. 

If,  under  an  automatic  exchange  of  information,  Member  States  share  data  on  reported 
schemes  with  all  others,  more  national  authorities  would  benefit  from  the  communicated 
information. In addition, there would be no discretion as to whom the information should be 
addressed to and therefore States' authorities would not need to invest time in identifying the 
appropriate  recipients.  This  approach  would  therefore  provide  for  a  higher  degree  of 
effectiveness and efficiency. It would also be consistent with the current international trends 
on  the  exchange  of  tax  information,  which  are  structured  on  the  assumption  that  there  is 
automatic exchange. Even reported information that no scheme was reported in a given period 

63 

 
 
would add to transparency. 

In  all  cases,  the  disclosed  information  would  be  shared  with  other  Member  States.  Yet,  the 
overall efficiency of the information exchange would also depend on the means used for the 
exchange  (which  are  discussed  in  the  next  section).  During  the  stakeholder's  consultation, 
there was no particular preference for any of the specific forms for information exchange. 

Table 7:  Comparison – form and frequency of exchange of information 

Specific 
features 

Form and 
frequency of 
exchange of 
information 

Description of options 

Effectiveness 

Efficiency 

Coherence 

0. Baseline scenario – No exchange 

1. Spontaneous exchange 

2. Automatic exchange 

0 

+ 

++ 

0 

+ 

++ 

0 

+ 

++ 

Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing". 

European Commission (2017) 

Conclusion:  

Option  2,  automatic  exchange  of  information  should  be  the  preferred  option  because  it 
effectively supports the objective for more extensive transparency and access to information. 

9.3.2.  Means for exchange of information 

Comparison:  

Options 2 and 3 only pertain to Member States whilst option 1 also concerns the public and 
various groups of stakeholders.  

As a matter of principle, Member States can decide whether and in  what form they wish to 
publish information on a tax planning scheme. Indeed, they sometimes do so with regard to 
selected tax schemes, which they treat as aggressive, and explain why they consider this to be 
so. Member States may also wish to clarify how they envisage to clamp down on tax planning 
schemes or give an outline of the steps towards a necessary regulatory/legislative change in 
the tax field. Although the public could generally gain from receiving this information, it is 
questionable whether the compulsory publication would contribute to the primary objective of 
the  present  initiative,  i.e.  giving  the  tax  authorities  of  Member  States  timely  access  to  tax-
related  information  as  a  deterrent  to  future  aggressive  schemes.  Preparing  material  for 
publication  would  also  require  resources  and  could  lead  to  delays  and/or  an  inefficient 
allocation of capacities.  

A straightforward direct exchange between Member States, including with the Commission, 
would allow sharing disclosed information among tax authorities but would not address other 
functions. The management of this information would be fully left to the recipients.  

The use of a central directory by the Member States and the Commission would secure access 
to the relevant information and provide for additional management tools. In fact, the option of 
a directory would combine the advantages of regular automatic exchange on one side and an 
ad  hoc  early  cooperation  on  the  basis  of  spontaneous  exchange  on  the  other.  This  outcome 
clearly  points  to  an  improved  situation  compared  to  the  "status  quo".  At  the  same  time,  the 
directory can provide tools for facilitating the follow-up cooperation or coordination between 
national  authorities  and  the  Commission.  This  indirect  exchange  through  a  central directory 
would  offer  more  flexibility  and  opportunities  while  maintaining  a  high  overall  efficiency. 
The  involvement  of  the  Commission  is  crucial  for  the  monitoring  of  the  functioning  of  the 

64 

 
exchange of information. 

Table 8:  Comparison – means for exchange of information 

Specific 
features 

Means for 
exchange of 
information 

Description of options 

Effectiveness 

Efficiency 

Coherence 

1. Baseline scenario – No exchange 

1. Compulsory publication in the MS of 

disclosure 

2. Direct exchange between MSs 

3. Indirect exchange through a central 

0 

+ 

+ 

++ 

0 

+ 

+ 

++ 

0 

+ 

+ 

++ 

directory 
European Commission (2017) 

Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing". 

Conclusion:  

Option  3  is  the  preferred  option  because  it  offers  tax  authorities  wider  opportunities  for  an 
efficient collaboration. 

9.4. 

The Preferred Option  

The  preferred  option  reflects  the  conclusions  arising  from  the  evaluation  of  the  options  that 
were  previously  compared  in  the  light  of  the  objectives  that  this  initiative  seeks  to  achieve. 
The  effectiveness  of  this  option  will  be  assessed  by  reference  to  its  prospects  for  creating 
successful disincentives, allowing market transparency and an early detection of tax evasion 
and avoidance. The elements of the preferred option can be summarised as follows: 

Member  States  undertake  to  lay  down  an  obligation  on  intermediaries  and,  as  a 
fallback, on taxpayers to disclose potentially aggressive tax planning schemes with a 
cross-border  element  that  engages  at  least  two  Member  States  and  to  automatically 
exchange the relevant information with other Member States. 

65 

 
 
Table 9:   Assessment of all options overview 
Policy options  
concerning disclosure regime 

Assessment criteria 

Description of options 

Effectiveness 

Efficiency 

Coherence 

Specific 
features 
Baseline 
scenario 

Personal scope 

Subject of 
reporting 
obligation 

Material scope 

Type of taxes 
covered 

Composition 
of hallmarks 

No action 

1. Single requirement (only 

intermediaries or only users) 

2. Double requirement (intermediaries 

and users) 

3. Primary and secondary requirement 

(intermediaries or users) 

1. All taxes (discarded suboption) 

2. Direct taxes only 

1. Generic hallmarks 

2. Specific hallmarks 

3. Generic and specific hallmarks 

Timeframe 

1. Only new schemes 

2. New and existing schemes 

Exchange of information 

Form and 
frequency of 
exchange of 
information 

Means for 
exchange of 
information 

1. Spontaneous exchange 

2. Automatic exchange 

1. Compulsory publication in the 
Member State of disclosure 

2. Direct exchange between Member 

States 

3. Indirect exchange through a central 

directory 
European Commission (2017) 

0 

+ 

++ 

++ 

++ 

+ 

+ 

++ 

+ 

++ 

+ 

++ 

+ 

+ 

++ 

0 

+ 

+ 

++ 

++ 

+ 

+ 

++ 

++ 

+ 

+ 

++ 

+ 

+ 

++ 

0 

+ 

+ 

++ 

++ 

+ 

+ 

++ 

+ 

++ 

+ 

++ 

+ 

+ 

++ 

Source: 
Annotation:  The result of the comparison should be understood as relative to the baseline scenario of "doing nothing".  

Preferred suboptions are marked in bold. 

Under this option there would be a requirement for Member States (i) to lay down an explicit 
obligation  on  intermediaries  (or,  as  a  fallback,  on  taxpayers  who  use  the  scheme(s))  to 
disclose potentially aggressive tax planning schemes with a cross-border element that engages 
at  least  two  Member  States  to  their  national  tax  authorities;  and  (ii)  to  ensure  that  their 
national  tax  authorities  automatically  exchange  this  information  with  the  tax  authorities  of 
other Member States by using the mechanism (central directory) provided for in the DAC. 

The preferred option will consist of the following fundamental features: 

  Only direct taxes are covered; 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intermediaries have the primary reporting obligation and users a secondary; 

 
  There is a broad definition of intermediaries; 
  There  is  a  list  of  generic  and  specific  hallmarks  which  act  as  a  gateway  for 
determining  whether  or  not  a  scheme  shall  be  reported.  The  hallmarks  primarily 
concern features of the (potentially aggressive) tax planning schemes; 

  Only new schemes and schemes that were put in place after political agreement on this 
Directive was reached in Council will have to be reported (limited retrospectively); 
  Automatic exchange of information will ensure the sharing of information between the 

competent national authorities in the Member States; 

  Exchange of information should make use of a central directory. 

Compliance with the principle of proportionality 

The preferred option represents a proportionate answer to the identified problem since it does 
not  exceed  what  is  necessary  for  achieving  the  objective  of  the  Treaties  for  a  better 
functioning of the internal market without distortions. Thus, the common rules on mandatory 
disclosure  and  the  automatic  exchange  of  information  are  limited  to  addressing  potentially 
aggressive tax planning arrangements with a cross-border element within the EU. In this way, 
it  is  ensured  that  EU-level  legislation  does  not  go  broader  than  regulating  the  aspects  that 
affect the functioning of the internal market. In addition, the harmonised approach reaches up 
to  the  point  that  the  competent  national  authorities  come  to  know  about  the  potentially 
aggressive arrangements. Thereafter, it is for Member States to decide how they pursue cases 
of  illegitimate  arrangements.  This  approach  is  further  illustrated  in  the  case  of  penalties  for 
non-compliance.  In  this  regard,  the  national  provisions  that  implement  the  Directive  into 
national law will remain under the sovereign control of Member States. 

10. 

ANALYSIS OF IMPACTS OF THE PREFERRED POLICY OPTION 

The impacts of the preferred policy option are assessed in the light of the objective of creating 
an effective rule which should have a deterrent effect, contribute to transparency and support 
the possibility of early detection.  

As  regards  intermediaries,  the  preferred  option,  which  involves  the  early  disclosure  of 
potentially aggressive  cross-border tax planning schemes  could have a deterrent effect, as it 
would increase the pressure to refrain from the schemes under discussion. As a consequence, 
the incentive to design and market new aggressive tax planning schemes would be reduced. 
Similarly, the life-cycle of existing schemes would be shortened and therefore ultimately the 
corridor  for  profit  margin  would  become  narrower.  The  burden  of  cost  for  intermediaries 
should be limited due to the fact that the reportable information would already be available to 
intermediaries  when  the  schemes  are  designed  and  offered  to  taxpayers  for  use,  namely, 
before they are implemented. Furthermore, ensuring tax compliance is already a main activity 
for  intermediaries  providing  tax  advice/services.  It  is  therefore  envisaged  that  the  burden 
should be accommodated by existing compliance obligations of intermediaries. The preferred 
option  would  also  allow  tax  authorities  to  benefit  from  an  early  detection  of  tax  avoidance 
and/or  evasion  in  any  of  the  Member  States  in  which  the  schemes  operate.  The  mandatory 
disclosure regime could provide more certainty for intermediaries, to ensure that they are tax 
compliant and thus render a higher quality service for clients. The current DOTAS scheme in 

67 

 
 
 
the UK provides a reference number to taxpayers in order to include details of an arrangement 
or a series of arrangements in their tax returns although it does not imply acceptance of the 
arrangement by the tax authorities.  

As regards taxpayers, the preferred option would also work as a deterrence tool. It would thus 
increase  transparency  as  to  what  type  of  arrangement(s)  could  be  acceptable  to  the  tax 
authorities. In this light, taxpayers would be likely to reconsider implementing arrangements 
which  have  been  captured  by  the  hallmarks  as  being  potentially  aggressive  tax  planning.  In 
addition, early disclosure would supply the tax administration with sufficient information for 
determining  the  tax  consequences  of  these  (disclosed)  arrangements.  Another  result  of  the 
disclosure  could  well  be  greater  tax  certainty  for  taxpayers  since  they  would  be  given  an 
incentive to remain tax compliant.  

Given the nature of cross-border tax planning, individuals who are highly mobile and/or high 
net  wealth  individuals  would  be  mostly  affected  by  the  preferred  option.  In  terms  of  tax 
compliance, this type of taxpayer presents risks, as they would have the means to engage in 
tax  avoidance  and  also  conceal  assets/income  from  their  national  tax  authorities  when  the 
income/assets  are  located  in  another  jurisdiction.  In  terms  of  the  compliance  burden  of  the 
preferred option on taxpayers, the preferred option would require the taxpayer to report in a 
limited number of circumstances i.e. where: (i) a non-EU intermediary without any presence 
in  the  EU  has  created  the  scheme;  (ii)  the  scheme  has  been  created  in-house;  or  (iii)  the 
intermediary is protected by legal professional privilege or secrecy rules. 

As regards tax authorities, the preferred option would enhance the effectiveness of their tax 
compliance  activities,  for  example  for  risk  assessment  and  audit  purposes.  They  would  be 
provided with timely information regarding potentially aggressive tax planning arrangements 
and should therefore be in a position to easier identify the intermediaries and users of those 
arrangements. On this premise, tax administrations would be able to quickly react, as a result 
of  the  early  disclosures,  to  arrangements  which  they  assess  as  harmful  through  operational 
measures, legislative or regulatory changes.  

Data from national tax authorities in the EU regarding the volume of both tax evasion and tax 
avoidance is  often  not  publically  available.  Therefore,  it  has  not  been  possible to  gauge  the 
size of the problem and how the preferred option could reduce tax evasion and tax avoidance. 
Nevertheless, in 2009, the UK tax authorities estimated that the DOTAS scheme had proved 
to be highly successful and the Government had used information from DOTAS to introduce 
a range of anti-avoidance measures every year since 2004 – a total of 49 measures, closing off 
over  GBP  12  billion  in  avoidance  opportunities58.  HMRC  noted  that  there  is  considerable 
anecdotal evidence that DOTAS changed the economics of avoidance. 

In  the  public  consultation,  the  respondents  considered  that  the  most  likely  indirect 
consequence of the mandatory disclosure requirements would be an increase in administrative 
burden  for  public  authorities  although  respondents  considered  that  any  benefit  would 
outweigh  such  costs.  In  discussions  with  Member  States  which  currently  have  an  existing 
mandatory  disclosure  regime,  increased  administrative  burden  was  not  cited  as  a  concern. 
Rather, the regime provided an additional tool against tax evasion and avoidance and could be 
dealt with by departments which are already dedicated to this or a similar function.  

It is yet crucial that the design of the regime should be such that the amount of information to 

58   See the speech by Exchequer Secretary to the Treasury, David Gauke MP (2012): "Where next for tackling 

tax avoidance?"  

68 

 
 
                                                 
be  reported  is  proportionate  and  does  not  create  administrative  costs  that  outweigh  the 
benefits. In this respect the preferred option meets these requirements as  it does  not  require 
retrospective reporting of arrangements prior to adoption of the proposal and offers certainty 
for all parties to the regime by having clear tests to ensure that only potentially aggressive tax 
planning arrangements need to be disclosed. 

The  overall  impact  will  -  to  some  extent  -  depend  on  the  capacity  of  national  tax 
administrations  and  the  legislature  to  make  use  of  the  early  detection  and  react  rapidly  in 
order to close down loopholes in national tax laws.  

As  regards  the  possible  impacts  on  fundamental  rights,  the  preferred  policy  option  for 
mandatory  disclosure  is  fully  compliant  with  the  Treaties.  The  envisaged  option  respects 
private data protection rules as the disclosed information will not be made publicly available.  
In addition, the right of intermediaries, legal or natural persons, to provide services will not be 
impaired.  In  this  context,  professional  secrecy  will  be  respected  (e.g.  the  legal  profession 
privilege (LPP)) where this is required by the law. Finally, the preferred option is in line with 
the principle of proportionality since it will be limited to schemes of a cross-border dimension 
that fulfil certain indications of aggressive tax planning ("hallmarks"). 

Regarding societal impact, a majority of respondents to the public consultation, in particular 
NGO's  and  private  citizens,  considered  that  a  mandatory  disclosure  regime,  including  the 
preferred policy option, would generally provide a better and fairer  tax environment, would 
increase taxes collected both in and outside the EU, would deter the use of ATP schemes, and 
would  provide  a  focus  on  wealthy  taxpayers.  The  regime  would  therefore  contribute  to  an 
environment of fairer taxation in the EU. 

As regards Small and Medium Enterprises (SMEs), the impact of the preferred policy option 
would  most  possibly  be  very  limited.  Thus,  only  a  small  number  of  SMEs  make  use  of 
complex  cross-border  tax  planning  schemes.  As  confirmed  by  respondents  to  the  public 
consultation  on  the  indirect  impacts  of  a  proposal,  the  main  benefit  for  SMEs  in  the  longer 
term could be to gradually create a level-playing field between themselves and international 
groups, as the disclosure regime would reduce the attractiveness of aggressive tax schemes to 
the  latter.59  In  addition,  respondents  to  the  public  consultation  considered  that  increasing 
innovation and competitiveness of SMEs compared to large companies would be two of the 
main benefits of a mandatory disclosure regime.  

Regarding  longer-term  economic  impacts,  an  increase  in  transparency  is  expected  to 
gradually change national tax practices. Where tax practices were used in the past to attract or 
keep international groups, it may become less attractive for groups to relocate profits on that 
basis. In the future, some groups might decide to leave again. This could result in a possible 
loss of foreign direct investment or economic activity. On the other hand, Member States that 
were negatively impacted in the past by non-transparent practices of other States could expect 
a flow back of economic activity and a recovery of their tax base. 

Member States which already have mandatory disclosure regimes did not report any negative 
effects from such a regime in terms of reducing their attractiveness as a place for investment. 
In the public consultation, 37 respondents considered that the introduction of a regime would 
not affect the attractiveness of the EU internal market whilst 32 respondents considered that it 

59   For details see Annex 4. 

69 

 
 
 
                                                 
would reduce its attractiveness. In summary, decisions of investment depend on a wide range 
of  factors  other  than  taxation  and  the  effect  of  the  introduction  of  such  a  regime  could 
potentially  increase  tax  certainty  which  could  be  beneficial  for  companies'  investment 
decisions. 

11. 

CHOICE OF THE LEGAL INSTRUMENT 

The  previous  chapter  assessed  various  options  for  the  design  of  a  mandatory  disclosure 
regime  for  intermediaries  resulting  in  the  preferred  option. This  option  can  be  implemented 
via different legal instruments. 

11.1.  Commission Recommendation (non-binding instrument) 

Under this option, the Commission would encourage Member States to introduce a mandatory 
disclosure  regime  for  potentially  aggressive  tax  planning  schemes  and  to  exchange 
information under existing tools for administrative cooperation. The recommendation would 
also  encourage  Member  States  to  refer  the  reported  schemes  to  the  group  of  the  Code  of 
Conduct  on  business  taxation,  which  looks  at  harmful  tax  practices  in  the  EU60.  This  could 
ensure a proper follow up of cases by the Member States. 

However,  a  non-binding  recommendation  would  not  necessarily  ensure  a  sufficient  level  of 
consistent  and  coordinated  implementation  of  the  measure(s)  across  the  internal  market. 
Nevertheless,  it  is  of  primary  importance  to  build  a  coordinated  practice  with  the  aim  to 
achieve  a  coherent  outcome  in  addressing the  identified  problems.  This  consistent approach 
should also be reflected in the practice of tax administrations, intermediaries and taxpayers. 

11.2.  EU Code of Conduct for intermediaries (non-binding instrument)  

Based  on  this  instrument,  the  preferred  option  would  be  implemented  through  a  European 
Code of Conduct for certain regulated professions. The aim would be to discourage members 
of certain professions from entering into aggressive tax planning activities. If they did so, they 
would  be  required  to  report  such  activities  to  the  tax  authorities.  This  instrument  would  be 
directed to certain professions of intermediaries. 

A non-binding solution in the form of a Code of Conduct concerning intermediaries presents 
several shortcomings. Since the personal scope of the initiative should be as broad as possible 
and  thus  also  cover  unregulated  or  non-organised  professions,  any  Code  of  Conduct  for 
regulated professions would be limited to only certain categories thereof. It would therefore 
be difficult to ensure a level-playing field across all intermediaries in the internal market. This 
could  create  new  loopholes  as  well  as  a  disadvantageous  treatment  for  some.  Notably,  new 
business  opportunities  would  possibly  emerge  for  certain  intermediaries  in  the  field  of 
aggressive  tax  planning  (as  they  would  not  be  covered  by  an  EU  Code  of  Conduct),  which 
would  go  against  the  main  objective  of  this  assessment.  Furthermore,  schemes  that  were 
devised without the intervention of an intermediary would not be covered. 

Although  45  respondents  to  the  public  consultation  rated  the  EU  Code  of  Conduct  as 
effective/very  effective,  there  was  wide  divergence  between  the  respondent  categories  in 
terms  of  how  they  rated  the  option:  58%  of  consultancy/tax  advisor  companies  and  69% 
trade/business  associations  considered  it  effective/very  effective  with  only  16%  of  NGO's, 
32% of private citizens and 33% of academics sharing the same view. Respondent categories 

60   More information can be found here.  

70 

 
 
                                                 
that  rated  this  option  as  having  low  effectiveness  considered  that  a  Code  would  be  weak  in 
enforcing the rules and would lack a strong sanction regime. Respondents replying favourably 
to  the  option  noted  that  an  effective  Code  of  Conduct  existed  in  their  jurisdiction  and  that 
intermediaries  already  had  obligations  to  act  in  the  public  interest  and  not  engage  in  tax 
evasion/avoidance.  

11.3.  EU Directive (binding instrument)  

This  instrument  would  require  Member  States  to  introduce  a  mandatory  disclosure  regime 
combined  with  exchange  of  information  through  the  transposition  of  an  EU  Directive  in 
national legislation. 

A  legislative  proposal  could  either  be  a  stand-alone  measure  or  it  could  amend  Council 
Directive  2011/16/EU  on  administrative  cooperation  between  Member  States  in  the  field  of 
taxation (DAC). An advantage of linking this proposal to the DAC would be the opportunity 
to  use  the  IT  tools  and  infrastructure  which  is  already  in  place  therein  (e-forms,  effective 
feedback system, etc.). Such a link would also allow the proposal to come within the scope of 
the  wider  rules  in  DAC  dealing  with  the  organisation  of  information  exchange,  the  use  of 
standard forms and other technical elements. An amendment to the existing DAC would also 
fit  into  the  Commission  initiative  for  better  regulation  and  simplification,  by  limiting  the 
number of legislative documents. 

As with results of the public consultation on the question regarding an EU Code of Conduct, 
there was a divergence of views on whether there was a need to impose mandatory reporting 
obligations  for  aggressive  tax  planning  schemes:  while  95%  of  NGO's  and  68%  of  private 
citizens  considered that there should be a  mandatory  disclosure obligation, only  17%  of the 
consultancy/tax  advisors  and  trade  business  associations  considered  that  EU  mandatory 
disclosure obligations were required.   

In conclusion, a satisfactory level of effectiveness, efficiency and coherence of the preferred 
option in view of addressing the problem identified can only be achieved with an initiative in 
the form of  an EU  Directive. This would allow for a consistent  disclosure of all  potentially 
aggressive tax planning schemes across the EU. 

12. 

MONITORING AND EVALUATION 

The Member States shall provide to the Commission data on exchange of information, in line 
with the existing guidelines for statistics. Such data will provide basis for an analysis of the 
efficiency and transparency of the information exchange. Furthermore, at the end of each year 
Member  States  shall  submit  to  the  Commission  their  assessment  of  the  effectiveness  of  the 
framework for exchange of information as well as the practical results achieved. 

Based  on  the  statistical  data  provided  by  the  Member  States  and  their  assessment  of  the 
effectiveness,  the  Commission  will  prepare  annual  monitoring  reports.  The  reports  will  be 
published and made available to the Member States for the purpose of discussion in the Code 
of Conduct Group. 

Actual information/indicators suggested to be collected depend on the content of the preferred 
option, but should include as a minimum the number of disclosure schemes received in total 
by broad categories to be defined, the number of schemes exchanged between Member States 
(push), and the number of schemes received from other Member States for which they have 
requested  information  (pull).  The  purpose  of  the  collection  of  information  and  of  the 
monitoring report is to determine whether the framework set up for information exchange is 
utilized and to follow the development of the volume of information exchange over time and 

71 

 
across Member States. The information will furthermore feed the retrospective evaluation and 
allow taking lessons learned and identify potential problems to be analysed in more detail in 
the evaluation for the design of further initiatives/suggestions for improvements. 

In terms of operational objectives the analysis and any potential follow up measure should be 
based on the type of schemes reported and the number of reports exchanges. The Commission 
will  have  access  to  this  data  and  can  clearly  monitor  the  developments  in  this  regard.  The 
initiative foresees the possibility to amend the list of hallmarks in order to update the criteria 
that make a scheme reportable. 

Member  States  and  the  Commission  shall  examine  and  evaluate  the  functioning  of  the 
administrative  cooperation  provided  for  in  this  Directive.  To  that  purpose,  Member  States 
shall communicate to the Commission any relevant information necessary for the evaluation 
of  the  effectiveness,  efficiency,  coherence  with  other  interventions  with  similar  objectives, 
and continued relevance of administrative cooperation in accordance with this Directive. The 
Commission  will  prepare  a  retrospective  evaluation  of  the  functioning  of  the  directive  five 
years after entry into force. 

This  monitoring  should  now  be  extended  to  all  cases  of  double  taxation  disputes  in  cross-
border situation for companies covered by the new legal instrument and gathered on a yearly 
basis. The following information collected will enable the Commission to assess whether the 
objectives are met.  

  number of initiated/ closed/ pending across the EU 
  duration of DTDRM including the reasons for not adhering to the timelines foreseen  
  number of instances where access was denied by a MS including justification 
 
  number of instances of arbitration requested 

amounts of tax involved in cases (in general and for those who go to arbitration) 

As statistical data is already collected and should continue to be collected on a yearly basis, it 
is  expected  that  the  costs  of  such  activity  would  remain  unchanged,  for  MS  and  for  the 
Commission.  Annex  L  offers  a  template  to  be  used  for  collection  of  the  above  mentioned 
monitoring data. 

5 years after the implementation of the instrument, the Commission will evaluate the situation 
with  double  taxation  resolution  in  cross-border  situations  for  companies  in  the  EU  with 
respect to the objectives and the overall impacts on companies and the internal market. In this 
context, data will be collected from business on their actual cases of double taxation through 
Commission expert groups or similar consultation. The data collected from stakeholders will 
be mainly information which is not possible to be collected from MS (e.g. in how many cases 
no remedies were taken). The evaluation will consider international multilateral developments 
in the area of dispute resolution, for instance at the level of the OECDi or the UNii.    

72 

 
 
 
 
 
13. 

GLOSSARY 

Advance Pricing Arrangements 

An Advance Pricing Arrangement is any agreement, communication or any other instrument 
or action with similar effects, including one issued, amended or renewed in the context of a 
tax audit, and which meets the following conditions: (a) is issued, amended or renewed by, or 
on  behalf  of,  the  government  or  the  tax  authority  of  one  or  more  Member  States,  including 
any territorial or administrative subdivision thereof, including local authorities, irrespective of 
whether it is effectively used; (b) is issued, amended or renewed, to a particular person or a 
group of persons and upon which that person or a group of persons is entitled to rely; and (c) 
determines  in  advance  of  cross-border  transactions  between  associated  enterprises,  an 
appropriate set of criteria for the determination of the transfer pricing for those transactions or 
determines the attribution of profits to a permanent establishment. 

Aggressive tax planning (see also: Tax planning)   
In  the Commission  Recommendation  on aggressive  tax planning,  aggressive tax  planning is 
defined as “taking advantage of the technicalities of a tax system or of mismatches between 
two or more tax systems for the purpose of reducing tax liability. Aggressive tax planning can 
take a multitude of forms. Its consequences include double deductions (e.g. the same loss is 
deducted  both  in  the  state  of  source  and  residence)  and  double  non-taxation  (e.g.  income 
which is not taxed in the source state is exempt in the state of residence)”. 

A  distinction  should  be  made  between  schemes  that  could  be  deemed  as  aggressive  tax 
planning  and  ordinary  tax  planning.  Aggressive  tax  planning  results  in  an  abuse  of  the  tax 
system  while  ordinary  tax  planning  allows  taxpayers to  exercise their  legitimate  interests to 
plan  their  tax  affairs  according  to  the  national  tax  rules  of  their  state  of  residence.  Indeed, 
some Member States explicitly permit all taxpayers in a similar situation to use products and 
investment  vehicles  which  have  tax  advantages  and  as  such  these  are  not  considered  to  be 
aggressive  tax  planning  schemes  as  they  are  not  used  to  circumvent  the  spirit  of  the 
legislation. The scope of aggressive tax planning should therefore not include such schemes. 

Associated Enterprises 

Associated enterprises means a taxpayer who is related to another taxpayer in at least one of 
the  following  ways:  (a)  A  taxpayer  participates  in  the  management  of  another  taxpayer  by 
being in a position to exercise a significant influence over the other taxpayer; (b) A taxpayer 
participates  in  the  control  of  another  taxpayer  through  a  holding  that  exceeds  20%  of  the 
voting rights; (c) A taxpayer participates in the capital of another taxpayer through a right of 
ownership  that,  directly  or  indirectly,  exceeds  20%  of  the  capital.  If  the  same  taxpayers 
participate  in  the  management,  control  or  capital  of  more  than  one  taxpayer,  all  taxpayers 
concerned shall be regarded as associated enterprises. In indirect participations, the fulfilment 
of  requirements  under  points  (b)  and  (c)  shall  be  determined  by  multiplying  the  rates  of 
holding through the successive tiers. A taxpayer holding more than 50% of the voting rights 
shall  be  deemed  to  hold  100%.  An  individual,  his  or  her  spouse  and  his  or  her  lineal 
ascendants or descendants shall be treated as a single taxpayer. 

Base Erosion and Profit Shifting (BEPS Project)   
Tax  planning  strategies  that  exploit  gaps  and  mismatches  in  tax  rules  to  artificially  shift 
profits  to  low  or  no-tax  locations  where  there  is  little  or  no  economic  activity,  resulting  in 
little or no overall corporate tax being paid. The OECD has developed specific actions to give 
countries  the  tools  they  need  to  ensure  that  profits  are  taxed  where  economic  activities 
generating the profits are performed and where value is created, while at the same time giving 

73 

 
 
enterprises  greater  certainty  by  reducing  disputes  over  the  application  of  international  tax 
rules,  and  standardising  requirements.  More  information  on  the  Base  Erosion  and  Profit 
Shifting project can be found here. 

Beneficial owner 

Defined  in  Article  3(6)  4AMLD  and  means  any  natural  person(s)  who  ultimately  owns  or 
controls the customer and/or the natural person(s) on whose behalf a transaction or activity is 
being  conducted.  It  also  incorporates  those  persons  who  exercise  ultimate  effective  control 
over a legal person or arrangement. 

Beneficial ownership register 

A  register  where  information  on  beneficial  owners  are  accessible  either  to  public  or  to 
interested parties. 

Confidentiality clause  
A  "confidentiality  clause"  is  a  contractual  clause  that  requires  the  intermediary  and/or  the 
client to keep the scheme confidential. 

Cross-border transaction 
A  transaction  or  series  of  transactions  where:  (a)  not  all  of  the  parties  to  the  transaction  or 
series of transactions are resident for tax purposes in one Member State (b) any of the parties 
to the transaction or series of transactions is simultaneously resident for tax purposes in more 
than one jurisdiction; (c) one of the parties to the transaction or series of transactions carries 
on business in another jurisdiction through a permanent establishment and the transaction or 
series of transactions forms part or the whole of the business of the permanent establishment. 
A cross-border transaction or series of transactions shall also include arrangements made by a 
person  in  respect  of  business  activities  in  another  jurisdiction  which  that  person  carries  on 
through a permanent establishment; or such transactions or series of transactions have a cross 
border  impact.  It  includes  a  transaction  or  series  of  transactions  involving  associated 
enterprises which are not all resident for tax purposes in the territory of a single jurisdiction or 
a transaction or series of transactions which have a cross border impact. 

Hallmarks  
In this context, a typical characteristic or feature of an aggressive tax planning scheme. In the 
BEPS  Report,  hallmarks  are  divided  into  two  categories:  generic  and  specific  hallmarks. 
Generic  hallmarks  target  features  that  are  common  to  promoted  schemes,  such  as  the 
requirement for confidentiality or the payment of a premium fee. Generic hallmarks can also 
be  used  to  capture  new  and  innovative  tax  planning  arrangements  that  may  be  easily 
replicated  and  sold  to  a  variety  of  taxpayers.  Specific  hallmarks  are  used  to  target  known 
vulnerabilities  in  the  tax  system  and  techniques  that  are  commonly  used  in  tax  avoidance 
arrangements such as the use of losses. 

Hybrid structures 

Hybrid structures allows taxpayers sometimes to claim a tax deduction for a payment that is 
either untaxed in the country of receipt of that payment, or for which a deduction has already 
been  claimed  in  another  jurisdiction.  These  structures  also  called  hybrid  mismatch 
arrangements are in effect structured transactions, whose purpose is to lower the tax burden 
on cross-border investments by exploiting differences in the tax treatment of instruments or 
entities in different tax jurisdictions. 

Intermediaries who assist in potentially aggressive tax planning schemes  
For the purpose of the public consultation questionnaire, the term "intermediaries who assist 
in  potentially  aggressive  tax  planning  schemes"  refers  to  any  natural  or  legal  person 

74 

 
 
 
 
responsible for the design, marketing, organization or management of a potentially aggressive 
tax  planning  scheme,  or  who  provides  assistance  or  advice  with  respect  to  creating, 
developing,  planning,  organizing,  marketing  or  implementing  such  a  scheme.  The  term 
includes  consultants,  lawyers,  financial  (investment)  advisors,  accountants,  solicitors, 
insurance  intermediaries,  financial  institutions,  and  company-formation  agents  known  as 
Trust and Company Service Providers. 

Non-bank financial corporation  
Financial  institution,  other  than  a  bank,  engaged  primarily  in  the  provision  of  financial 
services and activities auxiliary to financial intermediation, such as fund management. 

Non-bank  financial  corporations  include  the  following  entities:  special  purpose  vehicles, 
hedge  funds,  securities  brokers,  money  market  funds,  pension  funds,  insurance  companies, 
financial leasing corporations, CCPs, unit trusts, other financial auxiliaries and other captive 
financial institutions. They also include any public financial institutions such as development 
banks and export credit agencies. 

Non-financial corporations 

Entity, whose principal activity is the production of market goods or non-financial services. 
Non-financial  corporations  include  the  following  entities:  legally  constituted  corporations, 
branches of non-resident enterprises, quasi-corporations, notional resident units owning land, 
and  resident  non-profit  institutions  that  are  market  producers  of  goods  or  non-financial 
services. 

Panama papers 

The  'Panama  Papers'  consists  of  11.5  million  leaked  documents  from  Panamanian  law  firm 
Mossack  Fonesca,  detailing  how  the  corporate  service  provider  helped  creating  214,488 
offshore entities around the world for its clients since the 1970s. 

Premium fee   
A "premium fee" is a fee payable to the intermediary that is to a significant extent attributable 
to the tax advantage, or to any extent contingent upon obtaining that tax advantage. 

Tax avoidance 
According to the OECD glossary of tax terms, tax avoidance is defined as the arrangement of 
a taxpayer’s affairs in a way that is intended to reduce his or her tax liability and that although 
the arrangement may be strictly legal is usually in contradiction with the intent of the law it 
purports to follow. 

Tax evasion 
According to the OECD glossary of tax terms, tax evasion is defined as illegal arrangements 
where the liability to tax is hidden or ignored. This implies that the taxpayer pays less tax than 
he or she is legally obligated to pay by hiding income or information from the tax authorities. 

Tax planning (see also: Aggressive tax planning)   
According to the OECD glossary of tax terms, tax planning is an arrangement of a person’s 
business and/or private affairs in order to minimize tax liability. 

Transfer pricing 

Transfer  pricing  refers  to  the  terms  and  conditions  surrounding  transactions  within  a  multi-
national company. It concerns the prices charged between associated enterprises established 
in different countries for their inter-company transactions, i.e. transfer of goods and services. 
Since the prices are set by non-independent associates within the multi-national, it may be that 
the  prices  do  not  reflect  an  independent  market  price.  This  is  a  major  concern  for  tax 

75 

 
 
 
 
authorities  who  worry  that  multi-national  entities  may  set  transfer  prices  on  cross-border 
transactions to reduce taxable profits in their jurisdiction. This has led to the rise of transfer 
pricing regulations and enforcement, making transfer pricing a major tax compliance issue. 

76 

 
  
Annex 1: 

  PROCEDURAL INFORMATION 

1.  

LEAD DG, AGENDA PLANNING AND WORK PROGRAMME 

The  proposal  for  disincentives  for  intermediaries  to  engage  in  potentially  aggressive  tax 
planning  schemes  was  prepared  under  the  lead  of  Directorate-General  for  Taxation  and 
Customs Union. In the Agenda Planning of the European Commission, the project is referred 
to under item 2017/TAXUD/003. The Commission Work Programme for 2017 includes this 
project under header "1.1. Fight against tax fraud and aggressive tax planning". The project is 
based on the OECD BEPS Package Action 12 "Mandatory disclosure rules". . 

2.  

ORGANISATION AND TIMING 

Work on the preparation of this policy initiative started in April 2016. 

An Inter-services Steering Group assisted DG Taxation and Customs Union in the preparation 
of  this  Impact  Assessment  report  and  included  colleagues  from  the  following  Commission 
services:  

DG Communication Networks, Content and Technology;  

DG Competition;  

DG Economic and Financial Affairs;  

DG Financial Stability, Financial Services and Capital Markets Union;  

DG Grow; 

DG Internal Market, Industry, Entrepreneurship and SMEs;  

DG International Cooperation and Development 

DG Justice and Consumers;  

DG Taxation and Customs Union;  

DG Trade;  

the Commission's Legal Service;  

and the Commission's Secretariat-General. 

The Steering Group met on 7 occasions between May 2016 and May 2017. The last meeting 
of  the  Steering  Group  took  place  on  5  May  2017.  At  each  occasion,  the  members  of  the 
Steering Group were  given the opportunity to provide comments orally or in writing on the 
draft versions of the documents presented. 

3.  

CONSULTATION OF THE REGULATORY SCRUTINY BOARD 

The  impact  assessment  report  was  reviewed  by  the  Regulatory  Scrutiny  Board  on  27  April 
2017.  Based  on  the  Board's  recommendations,  the  impact  assessment  has  been  revised  in 
accordance with the following points: 

  The impact assessment does not clearly explain the context of the initiative, in particular the 
elements  which  are  additional  to  BEPS/OECD  commitments.  How  addressed:  Updated  in 
section 3 Problem definition, drivers and consequences of the impact  assessment and, where 
appropriate,  in  sections  5  (Scope  of  the  impact  assessment,  7  (Policy  options),  and  9 
(Comparison of options) ; 

77 

 
  The impact assessment needs to sufficiently explain and justify the need to act at an EU level 
and EU added value:  How addressed: updated urgency to act in section  1  Introduction, new 
section 2.3 in Policy context, and reinforced argumentation on why EU action is justified in 
section 4 Why the European Union should act; 

  The report does not clearly present the options and baseline. How addressed: updated section 7 
Policy  options  to  justify/clarify  the  choice  of  the  assessed  policy  options,  including  why  a 
different  structure  was  used  from  the  public  consultation.  Furthermore  section  9  (previously 
section  8)  on  Comparison  of  options  has  been  revised  to  clearly  explain  the  comparisons 
between each options assessed and the baseline.  

  The report does not provide a sufficiently detailed analysis of the impacts, including benefits, 
administrative  burdens,  and  compliance  costs  for  the  stakeholders.  How  addressed:  new 
section  8  Analysis  of  impact  added  which  details  impacts  of  the  proposal  on  key  groups 
including an analysis of administrative burdens. Furthermore, section 10 (previously section 9) 
Preferred option has more extensive analysis of the impacts on the preferred option. 

Changes made following the Board's opinion 

  On the context of the initiative, language has been added to section 1. and new section 2.3.1. 

has been included. 

  The  link  to  the  OECD  anti-BEPS  action  12  has  been  clarified  in  the  new  section  2.3.2.  and 

with other changes, e.g. in the section 5, 7.1., 7.2.2.1. and 9.2.2. 

  On  the  urgency  to  act,  language  has  been  added  to  section  1.and  new  section  2.3.  has  been 

included. 

  On the justification of the EU action and the cross-border relevance, language has been added 

to section 4. 

  On the options, new language has been added in section 7. 
  A new section 8 – Analysis of impacts has been included. 
  Section  10  –  Analysis  of  impacts  of  the  preferred  policy  option  has  been  extended  and 

clarified. 

  On  the  question  of  (dis)incentives  and  penalties  a  new  section  2.3.3.  has  been  added  and 

further clarifications included through the analysis of impacts. 

4.  

EXTERNAL EXPERTISE 

Consultation and expertise sought 

The Commission has been consulting widely and has received input from various sources on 
this impact assessment work. 
In November 2016 the Commission launched an Open Public Consultation61 on the internet 
"Disincentives  for  advisors  and  intermediaries  for  potentially  aggressive  tax  planning 
schemes".  

In  November  2016  the  Commission  services  also  participated  in  the  Confédération  Fiscale 
Européenne (CFE) conference on mandatory disclosure rules. 

61   More information on the Open Public Consultation can be found here.  

78 

 
  
 
                                                 
In  December  2016,  the  Public  Consultation  was  presented  to  the  Commission  Platform  on 
Tax Good Governance (PTG). 

In  March  2017  the  Commission  consulted  Member  States  in  the  context  of  a  meeting  of 
Working Party IV (for details see Annex 2). 

According to the OECD BEPS Action 12, not all of the countries with mandatory disclosure 
regimes have collected data on the effectiveness of their regime in terms of these objectives. 
However, the report concludes that, “even though the available data is not comprehensive or 
detailed,  the  feedback  from  those  with  disclosure  regimes  provides  a  reasonably  consistent 
picture that suggests that mandatory disclosure is successful in meeting its objectives.” 
In developing BEPS Action 127, the OECD carried out significant research and analysis and 
issued several studies and reports: 

  Study on the Role of Tax Intermediaries (OECD, 2008); 
  Tackling  Aggressive  Tax  Planning  through  Improved  Transparency  and  Disclosure, 

(OECD, 2011); 

  Co-operative  Compliance:  A  Framework:  From  Enhanced  Relationship  to  Co-

Operative Compliance (OECD, 2013). 

  Stakeholders and Member States, in particular OECD Members, have been consulted 

on the issue during the OECD works on BEPS.  

The Commission services have taken into account all of above-mentioned observations in the 
present impact assessment. 

79 

 
Annex 2: 

  STAKEHOLDER CONSULTATION 

The following contributions were received from stakeholders for the proposal. 

1. PUBLIC CONSULTATION 
On 10 November 2016 the European Commission launched a Public Consultation61 to gather 
feedback on the way forward for EU action on advisers and intermediaries who facilitate tax 
evasion and tax avoidance. The results of this Consultation are in a separate document to this 
Impact  Assessment  'Summary  Report  Responses  received  on  the  Commission's  consultation 
on  disincentives  for  advisors  and  intermediaries  for  potentially  aggressive  tax  planning 
schemes'. 

Overview of responses to the Public Consultation 

Breakdown of responses 

131 responses were received to the public consultation from a broad variety of stakeholders. 
The  largest  share  of  replies  came  from  trade/business  associations/professional  associations 
with 27% of the replies and private citizens with 20% of the replies. Geographically speaking, 
the largest share of responses came from Germany with 24% of the total responses. 

Providing and receiving tax advice 

46 respondents replied that they had received professional tax advice with tax advisors being 
the  largest  professional  group  from  which  tax  advice  were  received  (52%).  30  respondents 
replied  that  they  provided  tax  advice,  and  15  of  them  maintaining  contact  with  the  tax 
authorities. 

Opinions on the objectives of the policy initiative 

The following objectives were deemed the most relevant to classify aggressive tax planning 
schemes:  policy  options  designed  to  address  artificial  arrangements,  preferential  treatment 
under  the  application  of  national  law,  schemes  designed  to  circumvent  the  Common 
Reporting Standard followed by the use of jurisdictions that present difficulties in identifying 
the  beneficial  owner.  With  regard  to  the  most  important  objectives  to  strengthen  the  fight 
against  tax  evasion  and  tax  avoidance  the  most  favoured  option  was  to  facilitate 
administrative  cooperation  between  Member  States  followed  by  the  need  to  improve 
voluntary  compliance.  41%  of  respondents  considered  that  Member  States  should  be  made 
aware of any ATP scheme while 51% considered they should only be aware of such schemes 
if  applied  within  their  jurisdiction.  Respondents  were  split  evenly  between  those  who 
considered that all schemes should be included within the scope of the recommendations and 
those  who  considered  that  only  schemes  with  a  cross-border  should  be  included  within  the 
scope.  Only  21%  of  the  respondents  considered  that  the  future  EU  list  for  third  country 
jurisdictions  that  fail  to  comply  with  tax  good  governance  standards  should  be  used  for 
defining  ATP  schemes  due  to  a  wide  range  of  reasons,  including  other  measures  would  be 
more  suitable  including  hallmarks  and  concern  that  such  a  list  would  be  too  limited  to  be 
effective. 

Tax transparency 

For tax transparency 100 respondents agree/agreed very much that the EU should implement 
the  OECD  recommendations  at  an  international  level  followed  by  implementation  of  a 
mandatory  scheme  alongside  its  global  partners  (82  respondents  agree/agreed  very  much). 
The  least  popular  option  was  that  current  legislation  related  to  potential  ATP  schemes  is 

80 

 
 
sufficient  and  should  be  left  to  Member  States  to  decide  whether  or  not  to  implement  the 
recommendation issued at international level by the OECD.  On the direct impact of no action 
by  the  EU,  82%  of  respondents  considered  the  most  likely  result  would  be  different 
transparency requirements. All stakeholder categories provided high affirmative responses to 
this question. Only 30% of the respondents to the public consultation considered that Member 
States  would  be  likely/very  likely  to  introduce  transparency  requirements  at  all  if  no  EU 
action was envisaged. From the main stakeholder groups who replied to this question 38% of 
consultancy/tax advisors, 32% of private citizens, and 21% of NGO's thought this would be 
the  case..  In  terms  of  indirect  consequences  of  mandatory  disclosure  obligations  the  most 
likely  outcome  according  to  respondents  would  be  an  increase  in  administrative  burden  for 
public  authorities.  The  next  most  likely  indirect  impacts  were  that  there  would  be  a  level 
playing between SME's and large companies in terms of competitive ness, and opportunities 
would be reduced for large companies to take advantage of ATP schemes  

Mandatory disclosure requirements  

25%  of  respondents  have  mandatory  disclosure  obligations  in  their  own  national  legislation 
with 69% of respondents stating that such obligations changed ATP schemes whilst 67% of 
respondents  claimed  that  the  introduction  of  such  obligations  would  change  ATP  schemes. 
21%  of  respondents  replied  that  disclosure  requirements  for  intermediaries  existed  in  their 
own  national  legislation  with  85%  of  respondents  claiming  their  introduction  changed  ATP 
schemes  whilst  69%  indicated  that  the  introduction  of  such  obligations  would  change  ATP 
schemes.  43%  of  respondents  indicated  that  code  of  conduct/ethic  rules  existed  in  their 
national legislation for intermediaries with 30% of respondents stating that such arrangements 
had changed tax advice practice while 68% believe that their introduction would change tax 
advice practice.  

Despite  the  positive  effects  of  mandatory  disclosure  obligations,  only  44%  considered  that 
there  was  need  to  impose  mandatory  disclosure  obligations  at  EU  level.  There  was  a  wide 
divergence between respondent categories on the need to impose obligations: 93% of NGO's 
and 68%  of private citizens replied yes  with  only  17%  of the consultancy/ tax advisors and 
trade business associations considering that mandatory disclosure obligations were required. 
A  number  of  contributors  noted  that  any  proposal  would  need  to  be  carefully  evaluated  in 
terms  of  costs  and  benefits,  have  clear  definitions  and  would  need  to  introduced  with  a 
number of other measures at the same time in relation to tax legislation amendments.  In terms 
of  who  should  be  required  to  follow  such  obligations,  36%  of  respondents  considered 
taxpayers and intermediaries would be required to report whilst 25% of respondents provided 
another  opinion.  From  the  main  stakeholder  groups  there  was  a  wide  range  of  responses 
regarding  whether  both  intermediaries  and  taxpayers  should  report:  NGO's  (84%),  private 
citizens (54%), consultancy/tax advisors (11%) and Trade/business associations (8%).   

In terms of scope of the mandatory disclosure, the following were rated as the most important: 
details  of  potential  ATP  schemes,  details  of  the  provisions/hallmark  that  qualifies  the  tax 
planning scheme as potentially aggressive, identification of the different jurisdictions used in 
the scheme, and description of the tax benefit or advantage. 

Policy options and their impacts 

Regarding how effective the policy options would be, the following options were considered 
almost equally effective: Option C: Disclosure and exchange of information (50%); Option A: 
encourage Member States to use current exchange of information mechanisms (49%); Option 
D:  disclosure  (option  B)  and  exchange  (Option  C)  +  publication  (47%);  and  Option  E:  EU 

81 

 
 
Code  of  Conduct  (45%).There  was  a  wide  divergence  in  respondent  categories  regarding 
whether Option E: EU Code of Conduct would be effective: 58% of consultancy/tax advisors 
and  69%  of  trade/business  associations  considered  it  was  effective/very  effective  with  only 
16% of NGO's, 32% of private citizens and 33% of academics sharing the same view. 

With regard to  Option D which had a wide range of disclosure including  publication which 
was not included under the other option categories there was a wide divergence in the main 
stakeholder categories regarding whether this would be considered as effective/very effective: 
NGO's  (89%),  companies  (75%),  private  citizens  (60%),  consultancies/tax  advisors  (25%), 
and trade/business associations (19%). 

2. HOW THE CONCERNS OF STAKEHOLDERS HAVE BEEN ADDRESSED IN THE PROPOSAL 

The concerns raised on an EU mandatory disclosure regime mainly came from the business 
sector and are outlined in Table 3 below together with how the concern has been addressed in 
the proposal. 

Stakeholder concerns 

Stakeholder concerns 
Tax evasion is a criminal offence and should 
in  an  EU  mandatory 
included 
not  be 
disclosure regime 

The  proposal  would  involve  being  required 
to  define 
largely 
depends  on  national  laws  and  therefore  an 
EU definition would not be possible. 

tax  avoidance  which 

Intermediaries  would  have 
to  observe 
requirements  on  legal  profession  privileges 
and  fundamental  rights  and  thus  would  be 
not  be  able  to  notify  such  schemes  to  the 
national authorities. 
The  introduction  of  an  EU  proposal  would 
lead  to  an  unacceptable  administrative 
burden, 
the  public 
authorities,  which  is  not  justified  by  the 
possible benefits 

in  particular 

for 

How taken into account 
The proposal does not replace national laws 
related to tax crime and how this is defined. 
The  Hallmarks  are  meant  to  signal  a 
potentially  aggressive  tax  scheme  to  the 
authorities and  would  allow  taxpayers  to  be 
informed about possible problems related to 
tax  avoidance  and  tax  evasion  issues  thus 
providing  a  safeguard  to  the  users  of  such 
schemes. 
The  proposal  includes  Generic  and  Specific 
Hallmarks 
tax 
planning scheme and thus does not include a 
definition  of  tax  avoidance  which  is  left  to 
Member States. 
Legal  profession  privileges  would  be 
safeguarded  in  Member  States  where  legal 
profession privileges operate as the taxpayer 
can elect to notify the scheme 

to  define  an  aggressive 

The  Impact  Assessment  does  not  quantify 
the  specific  costs  of  an  EU  mandatory 
disclosure  regime  but  as  outlined  below 
incremental costs would be limited on public 
authorities  as  existing  resources  used  to 
combat tax avoidance and tax evasion could 
be  mobilised.  With  regard  to  intermediaries 
information summaries already prepared for 
for  notification 
clients  could  be  used 

82 

 
 
 
Due to differences in tax legislation between 
EU Member States it is not possible to have a 
set  of  Hallmarks  for  aggressive  tax  planning 
that  would  be  applicable  to  all  Member 
States. 

limited 

therefore 

incremental 
purposes 
administrative costs. With regard to benefits, 
the  UK  scheme  national  DOTAS  scheme 
raised  GBP  12  billion  with  a  total  of  49 
measures during the period 2004-09.  
The  proposal  contains  Generic  Hallmarks 
which  could  be  applicable  to  all  Member 
States  as  it  describes  general  features  of  an 
aggressive tax planning scheme. The Specific 
Hallmarks  cover  a  wide  range  of  possible 
avoidance/evasion  schemes  including  those 
relevant  to  other  EU  tax  instruments  in  this 
field.  However 
is  acknowledged  that 
Member  States  may  have  legislation  that  is 
not  covered  by  these  Hallmarks  and,  where 
appropriate, can introduce their own Specific 
Hallmarks  according 
their  national 
legislation 

to 

it 

Source: European Commission (2017) 

3. ADDITIONAL STAKEHOLDER CONTRIBUTIONS TO THE CONSULTATION 

The  following  contributions  were  received  regarding  the  survey  for  the  public  consultation: 
the Council of Bars and Law Societies of Europe (CCBE), the European Banking Federation 
(EBF), the Law Society of England and Wales (LSEW), the Law Society of Ireland (LSI), and 
PricewaterhouseCoopers UK – Tax (PwC). The text below is a summary of the contributions 
received from these organisations. 

3.1. General comments 

The  CCBE  does  not  believe  that  the  suggested  measures  in  the  submission  are  suitable  or 
workable at EU level. The CCBE asserts that tax avoidance is different from tax evasion and 
should have different remedies. Furthermore, OECD BEPS 12 does not include tax evasion in 
its recommendations as these should be addressed by the criminal law and AML legislation. 
CCBE  indicates  that  any  proposal  could  potentially  violate  the  European  Convention  on 
Human  Rights  as  tax  avoidance  by  its  inherent  nature  involves  a  subjective  assessment  and 
does  not  provide  for  legal  certainty  for  taxpayers  The  CCBE  does  not  consider  that  the  EU 
has the right to act and the principle of subsidiarity has not been adequately considered. LSI 
considers that the public consultation document is lacking neutrality and that the questions are 
designed  to  elicit  a  certain  outcome.  Tax  advisors  play  a  crucial  role  in  enabling  tax 
compliance  as  cited  in  the  OECD  report  on  tax  intermediaries.  The  LSEW  considers  the 
consultation as not conductive to providing a representative response on this topic and does 
not adequately take into account the broader impact of the proposal. EBF did not specifically 
address the questions in the consultation but emphasised the role of AML legislation both in 
the  EU  and  globally  in  tackling  tax  evasion.  EBF  supports  the  risk  based  approach,  in 
particular  related  to  offshore/non-cooperative  jurisdictions  and  PEP,  which  helps  target 
information  that  is  actually  required  for  tax  evasion  purposes  rather  than  mass  data.  PwC 
noted  that  tax  competition  plays  a  role  in  creating  very  challenging  perceptions  and  risks 
which will not be dealt with by the proposed options. These broader aspects should be dealt 
with  first.  There  the  proposal  may  have  unhelpful  and  costly  regulation  which  does  not 
address the source of the concerns.  

83 

 
3.2. Objectives of the policy initiative 

From  the  UK  perspective,  the  CCBE  questions  the  evidence  that  mass  marketed  ATP 
schemes now exist and that there are sufficient measures in the EU to address avoidance like 
GAAR's.  CCBE  considers  that  the public  consultation  document  does  not  take  into  account 
the potential impact of the proposal on the taxpayer/ tax adviser relationship. With regard to 
hallmarks the current disclosure regimes in UK, IE, and PT refer to national legislation and it 
would  be  impossible  to  have  an  EU  list  of  hallmarks  that  would  be  capable  of  being 
implemented. CCBE noted that French Constitutional Court rejected the FR proposal because 
the  tax  optimisation  definition  was  too  vague.  CCBE  believes  the  objectives  could  be 
achieved  by  better  policing  of  the  tax  system  and  for  Member  States  to  correctly  draft  tax 
legislation. 

LSEW indicates that the 'mass marketed' schemes are now rare and as such the proposal is no 
longer  relevant.  With  regard  to  subsidiarity  the  proposal  does  not  sufficiently  provide 
arguments on why the EU should act. Instead it is up to Member States to legislate action in 
this  field  according  to  their  national  legislation  and  information  disclosure  provisions. 
Existing measures under the Directive in Administrative Cooperation in direct taxation may 
be sufficient. Indeed there also other transparency and information exchange mechanisms at 
the disposal of Member States which may be adequate. The Consultation makes insufficient 
distinction  between  tax  evasion  which  is  illegal  and  tax  avoidance,  the  latter  which  could 
possibly  include  acceptable  tax  planning  arrangements.  Indeed  the  BEPS  12  initiative  only 
refers  to  tax  avoidance  and  not  tax  evasion  -  other  measures  are  intended  to  address  tax 
evasion like Anti-Money Laundering Legislation.  

PwC believes that tax evasion and tax avoidance should not be mixed and although important 
subjects  for  policy  debate  they  require  different  solutions  and  the  confusion  hinders  both 
clarity and accountability. Regarding tax evasion, amendments to AML legislation are already 
under way and other transparency/exchange of information instruments. The new OECD and 
EU standards will therefore have an impact already on potential ATP schemes in addition to 
forums like the Joint International Tax Shelter Information Centre. The benefits of these and 
other initiatives will take a number of years to come to fruition.  

3.3. Tax Transparency 

LSI considers that the section on direct and indirect impacts of imposing reporting obligations 
on  tax  advisors  and  other  intermediaries  lacks  neutrality.  The  consultation  only  refers  to  4 
negative consequences and does not consider the impact that the proposal could have on the 
proper  functioning  of  the  relationship  between  tax  advisor  and  the  client,  in  particular  with 
regard to legal privilege. Legal privilege is not mentioned in the public consultation – it is an 
essential element of any developed justice system and allows clients to make full disclosure to 
their lawyers so that they can obtain comprehensive legal advice and is not designed to protect 
lawyers. Furthermore, this would result in tax advice being treated differently from any other 
type  of  legal  advice.  Furthermore  legal  professional  privilege  is  also  protected  under  the 
ECHR Convention under Articles 6 and 8 and that legal privilege cannot be used to facilitate 
tax  evasion.  Commission  should  assess  whether  existing  provisions  under  the  Directive  on 
Administrative Cooperation in direct taxation are sufficient.  

LSEW:  legal  privilege  is  designed  to  the  principle  of  the  rule  of  law,  ensure  appropriate 
access to justice and provide legal certainty to taxpayers. These are also protected under the 
European Convention on Human Rights. Therefore appropriate exclusions should be adopted 
to safeguard such rights. 

84 

 
In  terms  of  impact,  CCBE considers that it is  necessary to have  a tax system that  is stable, 
sufficiently  clear  and  fiscally  comparable  to  its  competitors'  tax  systems.  The  mandatory 
disclosure  regime  as  proposed  could  result  in  more  aggressive  advice  being  provided  by 
advisers from outside the EU.  

3.4. Mandatory disclosure requirements 

LSI: the mandatory disclosure regime was introduced in Ireland in 2010 – the Irish rules do 
not seek to override legal professional privilege and are not required to disclose and inform 
according  to  this  right.  Therefore  any  EU  instrument  should  provide  a  carve-out  for  legally 
privileged  information.  LSI  considers  that  mandatory  disclosure  requirements  would  not 
affect  tax  evasion  and  instead  the  focus  should  be  tax  avoidance.  Potentially  aggressive  tax 
planning is not defined in the consultation document and there remains an inherent risk that 
all tax planning may be considered as potentially aggressive tax planning. Any proposal needs 
to have clear definitions in order to ensure the rule of law is not eroded  

CCBE  stressed  that  the  purpose  of  professional  secrecy/  legal  professional  privilege  is  to 
facilitate full and frank disclosure between those who need legal advice and their lawyers and 
safeguarding  this  arrangement  in  the  public  interests  and  also  for  taxpayers  Furthermore 
professional  secrecy  is  an  obligation  that,  in  many  Member  States,  is  protected  under 
sanctions  in  the  criminal  codes,  for  example  Luxembourg,  Belgium,  Germany  and  France. 
Regarding the national systems, in IE the taxpayer can decide whether to waive LPP, in the 
UK LLP can prevent the promotor from providing the information to make a full disclosure, 
and  in  PT  mandatory  disclosure  obligation62  states  that  lawyers  and  law  firms  are  not  be 
considered to be "promotors", and are therefore not subject to disclosure obligations. CCBE 
noted  that  in  the  UK  in  the  vast  majority  of  cases  the  principle  of  legal  privilege  has  been 
maintained whilst HMRC has been able to access the desired information through the uses of 
the scheme.  

3.5. Policy options and their impact 

LSI  is  against  the  proposal  suggesting  that  taxpayers  are  required  to  publish  some  or  all 
information  to  the  tax  authorities.  –  European  Taxpayer's  Code  states  this  is  private 
information. With reference to an EU Code of Conduct, this was rejected in the discussions 
for  the  Service  Directive  as  the  EU  has  limited  competence  in  the  regulation  of  tax  related 
services and Member States should regulate their own professions as they see fit. In this case 
such  a  standard  would  be  unenforceable  as  tax  advisors  are  members  of  a  broad  range  of 
service  providers  depending  on  the  Member  State  and  as  such  any  standard  would  be 
unenforceable.  

PwC provided the following assessment of the options: No action now: unnecessary burden 
will  be  avoided  and  risks  addressed  by  evaluation  of  the  current  measures  already  in  place 
when  they  have  had  time  to  take  effect.  Existing  exchange  of  information  mechanisms: 
adding  other  exchange  of  information  measures  will  be  burdensome  for  national  authorities 
and  agreed  measures  already  in  place  address  intermediaries  albeit  indirectly  through 
particular  structures  and  transactions.  Mandatory  disclosure  requirements:  Action  12  of 
BEPS  is  sufficient  and  contains  adequate  hallmarks.  There  may  be  the  risk  of  different 
interpretations,  inherent  vagueness  and  the  risk  of  over-reporting.  Mandatory  disclosure 
regimes have not been as effective as intended as a disincentive to aggressive tax planning, in 
addition  to  affecting  investment.  Publication  of  disclosures:  would  necessitate  changes  to 

62   Contribution notes that in the first two years 87 communications were made  – recent year statistics are not 

yet publically available. 

85 

 
                                                 
some national laws in the EU to allow this and any public disclosure should only take place 
after  the  proper  legal  safeguards  for  the  individual  have  been  ensured.  PwC  supports  a 
properly drafted Code of Conduct option which is standardised and could be used in all EU 
jurisdictions, an advantage being that a rule based system may not be compatible with every 
national legislation in the EU. As another option the Commission might encourage Member 
States  to  invest  more  in  tax  certainty  through  ruling  and  advance  pricing  agreement  APA 
programs and cooperative compliance programs. 

4. CONSULTATION WITH MEMBER STATES IN COMMISSION EXPERT GROUP WPIV 
The Commission held a meeting with Member States on the 2nd of March in the Commission 
expert  group  WPIV63  to  gather  views  and  comments  from  the  national  experts  on  the 
objectives,  the  scope  and  other  elements  of  a  potential  EU  initiative  concerning 
intermediaries. Main comments received: 
Member States were asked about the need for an EU action and their preferred policy options. 
8 Member States clearly supported a mandatory EU initiative and stressed the need for the EU 
proposal  to  address  the  Panama  scandal  while  other  Member  States  expressed  their 
willingness  for  further  discussion.  3  Member  States  did  not  consider  a  proposal  as  a  high 
priority as they had doubts whether the benefits of any scheme. Some Member States stressed 
that an EU proposal should ensure coherence with the OECD BEPS Action 12, which already 
provides  a  minimum  standard  for  OECD  members  to  implement  in  their  jurisdictions,  and 
should not result in a second layer of legislation. Member States expressed their preferences 
for  a  range  of  options  with  a  majority  being  in  favour  of  mandatory  reporting  including 
exchange of information as a general approach. 
As  regards  the  policy  options,  the  majority  of  MS  expressed  a  preference  for  mandatory 
disclosure obligations imposed on intermediaries/taxpayers, coupled with automatic exchange 
of  information  between  tax  authorities.  However,  it  appears  that  such  option  would  be 
regarded as proportionate only to the extent that it covered aggressive tax planning schemes 
having a cross-border element. MS could be interested in receiving information also on purely 
domestic  schemes  but  for  this  information  other,  less  binding,  forms  of  communications 
would seem to be more appropriate. 

Specific  elements  of  Public  consultation  were  discussed  in  detail  including  the  scope 
(Member  States  requested  a  broad  scope),  definitions,  the  hallmarks  and  sanctions.  Many 
Member States stressed the importance of clearly defining what has to be reported as crucial 
for  the  effectiveness  of  any  proposal.  The  use  of  hallmarks  (combination  of  generic  and 
specific) were confirmed by many Member States as the right approach to take. One Member 
State warned there may be items which would prove difficult for Member States to agree on, 
for  example  defining  what  a  low-taxation  jurisdiction  is,  and  issues  already  covered  by 
ATAD. With regard penalties Member States highlighted the limits of EU law and supported 
the approach with the standard article on them.  
Member  States  were  asked  to  provide  written  contributions  by  17  March.  To  date  no 
contributions have been received. 

63   More information on expert group 953 on direct taxation can be found at the register if Commission expert 

groups here.  

86 

 
 
                                                 
Annex 3: 

  CONSULTATION STRATEGY 

1. BACKGROUND OF THE INITIATIVE 

Introduction and context 

Recent public discussions have shown the crucial role that legal and tax advisors and certain 
intermediaries play in facilitating tax evasion and tax avoidance.  

At international level, the OECD issued last year a set of recommendations as regards the use 
and promotion of potentially aggressive tax planning schemes (Final Report on BEPS Action 
12).  

BEPS Action 12 Report notes the usefulness of disclosure initiatives in addressing the lack of 
comprehensive  and  relevant  information,  available  to  tax  authorities,  on  tax  planning 
strategies. It provides an overview of mandatory disclosure regimes, based on the experiences 
of countries that have such regimes, and set out recommendations for a modular design of a 
mandatory  disclosure  regime  including  recommendations  on  rules  designed  to  capture 
international  tax  schemes.  Furthermore,  the  report  sets  out  a  standard  framework  for  a 
mandatory disclosure regime, to ensure some consistency, but also includes options to provide 
sufficient  flexibility  to  deal  with  country  specific  risks  and  to  allow  tax  administrations  to 
control the quantity and type of disclosure.  

Stakeholders  and  Member  States,  in  particular  those  which  are  members  to  the  OECD,  had 
already the opportunity to respond to the OECD’s discussion draft entitled “BEPS Action 12: 
Mandatory disclosure rules”. In March 2015, the Committee on Fiscal Affairs (CFA) of the 
OECD  invited  interested  parties  to  send  written  comments  on  the  draft.  In  addition,  in 
previous  years,  the  OECD  carried  out  significant  research  and  analysis  and  issued  several 
studies and reports: 

  Study on the Role of Tax Intermediaries (OECD, 2008); 
  Tackling  Aggressive  Tax  Planning  through  Improved  Transparency  and  Disclosure, 

(OECD, 2011); 

  Co-operative  Compliance:  A  Framework:  From  Enhanced  Relationship  to  Co-

Operative Compliance (OECD, 2013). 

2. OBJECTIVES AND SCOPE OF THE COMMISSION’S CONSULTATION 

The EU is considering action concerning disincentives for advisors and intermediaries dealing 
with potentially aggressive tax planning schemes. The Commission carried out consultations 
in the context of such a possible initiative. The purpose of these  consultations was to gather 
views  of  the  different  stakeholders  on  whether  there  is  a  need  for  EU  action  aimed  at 
introducing  more  effective  disincentives  for  intermediaries  facilitating  tax  evasion  and  tax 
avoidance.  

The Commission gathered views in particular on the following aspects: 

  need for EU action; 

  evidence on the size and impacts of the problem; 

87 

 
 
 

the different options identified, in case EU action is appropriate; 

  key design features of a possible disclosure regime; 

 

impacts of the policy options; 

  proportionality aspects. 

3. STAKEHOLDER IDENTIFICATION AND CONSULTATION TOOLS  

The Commission was interested to collect input from the following stakeholders and intends 
to use the following consultation tools: 

Table 10: Stakeholder identification and consultation tools 

Stakeholder group 

Method of consultation 

Consultation period 

Scope of consultation 

Public Authorities in 
Member States 

1) Interviews, committees, 
working groups 

1) Q4 2016 – Q2 2017 

2) Open Public Consultation 

2) Q4 2016 

Economic operators: 
Companies receiving tax 
advice 

1) Interviews, committees, 
working groups 

1) Q4 2016 – Q2 2017 

2) Open Public Consultation 

2) Q4 2016 

Intermediaries providing tax 
advice 

Organisations/associations: 
e.g. EU and national 
organisations of economic 
operators 

Open Public Consultation 

Q4 2016 

1) Interviews, committees, 
working groups 

1) Q4 2016 – Q2 2017 

2) Open Public Consultation  

2) Q4 2016 

Civil society, NGOs 

1) Interviews, committees, 
working groups 

1) Q4 2016 – Q2 2017 

2) Open Public Consultation  

2) Q4 2016 

Citizens 

Open public consultation 

Q4 2016 

All stakeholders 

Other 

tbc 

Source: 

European Commission (2017) 

  Need for EU action. 
  The  different  options 
in  case  EU 

identified, 
action is appropriate. 
  The  key  design  features 
of the reporting regime. 
evidence 

  Data 

and 

collection. 

  Collect  evidence  and 
the  problem 
quantify 
and  the  impact  of  the 
different options 

4. CONSULTATION TOOLS AND LANGUAGE REGIMES 

Table 11: Consultation tools and language regime 

Consultation tool 

Consultation period 

Objective 

Languages covered 

Feedback mechanism 

4 

weeks   During  a  4-week  period,  all 
interested  stakeholders  will 

inception 

The 
Impact 
Assessment  is  available  in 

88 

 
 
 
 
 
 
 
 
 
Consultation tool 

Consultation period 

Objective 

Languages covered 

Q4 2016 

be able to provide feedback 
Impact 
on  the 
Inception 
the 
Assessment  outlining 
initial  structure  and  outline 
of the project.  

English  only.  Feedback 
is 
possible  in  any  of  the  24 
working languages of the EU 

Open Public Consultation 

3 
Q4 2016 

months 

To  ascertain  the  views  of  a 
broad range of stakeholders. 

EN.  

Targeted 
Interviews, 
working groups 

consultation: 
committees, 

Q4 2016 – Q2 2017 

Source: 

European Commission (2017) 

EN 

views 

ascertain 

of 
To 
stakeholders 
with 
experience  of  operating  a 
mandatory 
disclosure 
regime  or  will  be  directly 
affected  by  a  mandatory 
disclosure regime. 

The  different  steps  of  the  consultation  process  and  strategy  require  different  types  of 
consultation activities.  

Depending on the stakeholder group identified, different tools and methods have been used in 
order to conduct the consultation. 

The  information  gathered  with  these  consultations  has  been  analyzed  to  discuss  whether  an 
EU  action  is  needed,  and  if  so,  its  key  features.  A  synopsis  report  will  be  published  that 
summarises  the  consultation  activities  and  the  responses  received,  including  possible 
contributions within the feedback mechanism of the European Commission. 

89 

 
 
Annex 4: 

  WHO IS AFFECTED BY THE INITIATIVE AND HOW 

The objective of this annex is to set out the practical implications of the initiative for various 
parties who will be affected by the proposal 

INTERMEDIARIES/ADVISORS FOR AGGRESSIVE TAX PLANNING SCHEMES 

Under  the  option  chosen  the  intermediary  who  devised  the  scheme  will  have  the  main 
responsibility for reporting the scheme if they are defined as an EU intermediary according to 
the proposal. Intermediaries bound with legal privilege or secrecy rules could ask the taxpayer 
to waive these duties in order for the intermediary to be able to report the scheme instead of 
the user. The mandatory disclosure obligations can be recorded on a standardised form using a 
summary  of  the  information  prepared  for  the  client.  Although  some  Member  States  already 
have mandatory disclosure schemes (IE, PT and UK) intermediaries in other Member States 
will need to create new reporting forms and incur training costs for staff. However, ensuring 
tax  compliance  is  already  a  main  activity  for  intermediaries  providing  tax  advice/services 
therefore  it  is  envisaged  that  the  burden  could  be  accommodated  by  existing  compliance 
obligations of intermediaries.  

USERS OF THE SCHEME – WHEN THE TAXPAYER IS AN INDIVIDUAL  

Given the nature of cross-border tax planning individuals who are highly mobile and/or high 
wealth individuals will be the most affected by the proposal. The user is obliged to report in 
following  situations:  (i)  Non-EU  intermediary  has  created  the  scheme,  (ii)  No  intermediary 
exists for example when the scheme has been created "in-house" and (iii) an intermediary is 
bound  by  legal  professional  privilege  or  secrecy  rules.  Reporting  under  the  mandatory 
disclosure obligations may be difficult for most taxpayers as it would require knowledge and 
experience in the field of taxation, in particular for the application of hallmarks to the scheme. 
However, this burden should be minimal in both scenarios as in (i) the taxpayer could have 
the  non-EU  intermediary  prepare  the  disclosure  requirements,  although  the  taxpayer  would 
remain legally responsible for the reporting of the scheme and for (ii) any individual capable 
of  creating  such  a  scheme  should  have  the  requisite  knowledge  and  expertise  to  ensure  the 
scheme is tax compliant.  

USERS OF THE SCHEME – WHEN THE TAXPAYER IS A BUSINESS ENTITY  

Large companies will be more affected by the proposal than SME's given that they are more 
likely  to  have  cross-border  activities  and  will  therefore  fall  under  the  scope  of  the  scheme. 
According  to  the  Public  Consultation,  one  of  the  most  highly  indirect  impacts  from  the 
proposal expected by respondents would be that there would be a level playing field between 
large companies and SME's as large companies, in particular multinationals, were considered 
as being the main beneficiaries of aggressive tax planning schemes to the detriment of SME's. 
Respondents also noted that the proposal would increase the competitiveness and innovation 
of SME's with respect to large companies. In terms of reporting obligations if the user would 
need to report the scheme the same considerations will apply to companies as to individuals as 
described above in (i), (ii) and (iii).  

TAX AUTHORITIES 

Tax  authorities  will  incur  costs  for  implementing  the  new  system,  notably  on  staff  resource 
allocation  or  hiring  and  staff  training.  Discussions  with  Member  States  which  already  have 

90 

 
national  mandatory  disclosure  obligations  (IE/PT  and  the  UK)  have  indicated  that  the 
increased  administrative  burden  would  be  minimal  and  could  be  accommodated  by  existing 
human  and  IT  resources  used  to  address  tax  avoidance  and  tax  evasion,  in  particular  using 
reporting  applications  already  used  for  information  exchange  purposes,  for  example  under 
Directive  2011/16/EU18  The  main  costs  for  tax  authorities  would  be  to  assess  the  schemes 
and  then  process  the  information  to  be  used  for  exchange  of  information  with  the  national 
authorities  of  other  Member  States.  The  main  benefits  of  the  scheme  would  be  to  act  as  a 
deterrent to tax evasion, in addition to risk management and for audit purposes. Although the 
assessment indicates that the proposal would incur minimal costs and could be accommodated 
by  existing  report  arrangements,  respondents  to  the  public  consultation  considered  that  an 
increase  in  administrative  burden  on  Public  Authorities  was  the  most  likely  impact  of  the 
proposal  while  3  Member  States  in  WPIV  (see  Annex  II  to  the  Impact  assessment)  cited 
cost/benefit as an essential consideration for this proposal.  

91 

 
Annex 5: 
TAXATION (DAC) 

  DIRECTIVE  ON ADMINISTRATIVE COOPERATION  IN  THE FIELD  OF 

EU Member States have agreed that EU tax authorities have to cooperate more closely so as 
to  be  able  to  apply  their  taxes  correctly  to  their  taxpayers  and  combat  tax  fraud  and  tax 
evasion. The essential piece of legislation in this respect is Council Directive 2011/16/EU on 
administrative cooperation in the field of taxation. The 2011 Directive established useful tools 
for better cooperation between tax administrations in the European Union - such as exchanges 
of  information  on  request;  spontaneous  exchanges;  automatic  exchanges;  participation  in 
administrative  enquiries;  simultaneous  controls;  and  notifications  to  each  other  of  tax 
decisions. 
This Directive was recently amended64 by extending the cooperation between tax authorities 
to  automatic  exchange  of  financial  account  information  (Council  Directive  2014/107/EU), 
cross-border 
(Council  Directive 
2015/2376/EU),  and  country-by-country  reporting  by  multinationals  operating  in  the  EU 
(Council  Directive  2016/881/EU).  Another  amendment  to  ensure  access  to  beneficial 
ownership information has been adopted (Council Directive 2016/2258). 

rulings  and  advance  pricing  arrangements 

tax 

The EU has made huge progress on tax transparency in recent years. Existing tax instruments 
available  at  EU  level  do  not  contain  explicit  provisions  requiring  Member  States  to 
automatically exchange information, where relevant, with other Member States on tax evasion 
and tax avoidance schemes that come to their attention. However, the DAC contains a general 
obligation  for  tax  authorities  of  EU  Member  States  to  spontaneously  communicate 
information to the other EU tax authorities in certain circumstances, including the loss of tax 
in a Member State or savings of tax resulting from artificial transfers of profits within groups 
of companies.65 

64   More information on the amendments of Council Directive 2011/16/EU can be found here.  
65   Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and 

repealing Directive 77/799/EEC, Article 9 

92 

 
                                                 
Annex 6: 

  MANDATORY DISCLOSURE RULES: OECD BEPS ACTION 1266 

In  July  2013,  the  OECD  started  its  work  on  the  Action  Plan  on  Base  Erosion  and  Profit 
Shifting (BEPS) directed with the view to ensure the coherence of corporate income taxation 
at  the  international  level.  In  December  2015,  the  G20/OECD  endorsed  the  15  point  OECD 
Action Plan to fight BEPS.   

The problem of aggressive tax planning arrangements is  directly addressed in  BEPS Action 
12 “Mandatory Disclosure Requirements” ("BEPS 12"). BEPS 12 recommends that countries 
require  taxpayers  and  promoters  of  tax  planning  schemes  (tax  advisors,  legal  advisors, 
financial institutions, etc.) to disclose to tax authorities any potentially aggressive or abusive 
tax planning schemes that they use or promote and to identify the users of those schemes. It 
notes  that  to  successfully  design  an  effective  mandatory  disclosure  regime,  the  following 
features need to be considered: who reports, what information to report, when the information 
has to be reported, and the consequences of non-reporting. For example, in the EU context, if 
the promoter is outside the EU, the obligation could then fall to the taxpayer. To date, only a 
limited  number  of  Member  States  (United  Kingdom,  Ireland  and  Portugal)  have  mandatory 
disclosure  rules  in  place.  However,  some  member  States  provide  for  criminal  sanctions  for 
those facilitating tax crimes. 

BEPS  12  makes  a  series  of  recommendations  about  the  design  of  mandatory  disclosure 
regimes, with a view to encouraging maximum consistency between countries' approaches in 
this area. Unlike other BEPS Actions, BEPS 12 is  more about best practices and less  about 
minimum standards. For this reason, it leaves much more room for manoeuvre for countries 
when  setting  up  national  rules.  BEPS  12  makes  clear  that  the  mandatory  disclosure 
recommendations  are  not  a  minimum  standard  and  that  jurisdictions  are  free  to  choose 
whether or not to introduce such a regime. 

In  existing disclosure regimes,  disclosure is often triggered by an arrangement that includes 
certain  features  or  characteristics  (hallmarks).  The  Action  12  Report  recommends  that  the 
existence  of  a  single  hallmark  in  respect  of  a  scheme  should  be  sufficient  to  give  rise  to  a 
disclosure  obligation.  Hallmarks  can  either  be  general  or  specific,  and  the  BEPS  Action  12 
Report  recommends  that  each  country's  hallmarks  should  include  a  mixture  of  both  types. 
General hallmarks should include a promoter's desire to keep the arrangement confidential or 
the requirement of a contingent or premium fee. BEPS 12 indicates that a country may also 
want to adopt additional generic hallmarks such as one applying to standardized tax products. 

In  addition,  BEPS  12  recommends  that  countries  use  specific  hallmarks  designed  for  their 
local circumstances. Examples of specific hallmarks include leasing transactions, transactions 
similar to those included on a black list, those involving use of losses or income conversion 
schemes or transactions with counterparties in low tax jurisdictions. Individual countries are 
left  to  design  the  specific  hallmarks  most  appropriate  to  their  local  circumstances  and  may 
attach a de minimis filter to individual specific hallmarks. 

Consultation and research carried out at OECD level  

Stakeholders  and  Member  States,  in  particular  OECD  Members,  had  the  opportunity  to 
respond  to  the  OECD’s  discussion  draft  (DD)  entitled  “BEPS  Action  12:  Mandatory 

66   http://www.oecd.org/tax/mandatory-disclosure-rules-action-12-2015-final-report-9789264241442-en.htm 

93 

 
 
                                                 
disclosure  rules”.  In  March  2015,  the  Committee  on  Fiscal  Affairs  (CFA)  of  the  OECD 
invited interested parties to send written comments on the DD67. 

BEPS 12 notes the usefulness of disclosure initiatives in addressing the lack of comprehensive 
and  relevant  information  available  to  tax  authorities  on  tax  planning  strategies.  The  DD 
provided an overview of mandatory disclosure regimes, based on the experiences of countries 
that  have  such  regimes,  and  set  out  recommendations  for  a  modular  design  of  a  mandatory 
disclosure  regime  including  recommendations  on  rules  designed  to  capture  international  tax 
schemes. 

The  DD  set  out  a  standard  framework  for  a  mandatory  disclosure  regime,  to  ensure  some 
consistency,  but  also  includes  options  to  provide  sufficient  flexibility  to  deal  with  country 
specific risks and to allow tax administrations to control the quantity and type of disclosure.  

In  developing  BEPS  12,  the  OECD  carried  out  significant  research  and  analysis  and  issued 
several studies and reports: 

  Study on the Role of Tax Intermediaries (OECD, 2008)68; 
  Tackling  Aggressive  Tax  Planning  through  Improved  Transparency  and  Disclosure, 

(OECD, 2011)69; 

  Co-operative  Compliance:  A  Framework:  From  Enhanced  Relationship  to  Co-

Operative Compliance (OECD, 2013)70. 

As regards empirical data, according to the OECD Final Report on BEPS Action 12, not all of 
the countries  with  mandatory  disclosure regimes have  collected data on the effectiveness of 
their  regime  in  terms  of  these  objectives.  However,  the report  concludes  that,  “even  though 
the available data is not comprehensive or detailed, the feedback from those with disclosure 
regimes  provides  a  reasonably  consistent  picture  that  suggests  that  mandatory  disclosure  is 
successful in meeting its objectives.” 

67   http://www.oecd.org/tax/aggressive/public-consultation-beps-action-12-mandatory-disclosure-rules.htm 
68   http://www.oecd.org/tax/administration/studyintotheroleoftaxintermediaries.htm 
69 

http://www.oecd.org/tax/administration/tacklingaggressivetaxplanningthroughimprovedtransparencyanddiscl
osure.htm 

70   http://www.oecd.org/ctp/administration/co-operative-compliance.htm 

94 

 
                                                 
Annex 7: 

  REGIMES  IN  PLACE  IN  IRELAND,  PORTUGAL  AND  THE  UNITED 

KINGDOM 

The existing mandatory disclosure schemes were discussed with officials from IE, PT and the 
UK for the preparation of this impact assessment. 

1. IRELAND’S MANDATORY DISCLOSURE REGIME 

Overview 

Ireland’s  mandatory  disclosure  regime  was  first  introduced  in  2011  with  some  amendments 
made subsequently. 

The regime is intended to act as an early warning mechanism for what the Minister described 
at the launch of the regime as “aggressive tax avoidance schemes”. 

“By  obtaining  information  on  aggressive  tax  avoidance  schemes  at  an  early  stage 
before  a  loss  of  taxation  becomes  apparent,  the  Government  can  decide,  if 
appropriate,  to  close  them  down  before  they  can  do  significant  damage  to  tax 
revenues”71. 

Under  the  Irish  Mandatory  Disclosure  legislation,  any  transaction,  or  proposal  for  any 
transaction,  is  a  disclosable  transaction  and  must,  therefore,  be  disclosed  if  it  meets  the 
following tests and is not specifically excluded the Regulations or Guidelines, 

 

It will, or might be expected to, enable  a person to obtain a tax advantage; 

  The tax advantage is , or might be expected to be, the main benefit or one of the main benefits 

of the transaction, and 

It  falls  within  any  one  of  the  specified  descriptions  i.e.  classes  or  transaction, set  out  in  the 
legislation. 

Who is obliged to report? 

In the majority of disclosable schemes, the reporting obligation falls on the promoter who, in 
most  cases  is  the  tax  adviser,  accountant  or  lawyer  involved  in  the  provision  of  tax  advice. 
The  taxpayer  is  obliged  to  report  the  transaction  where  no  promoter  exists  or  where  the 
promoter is based outside Ireland. “In-house” schemes developed by small or medium sized 
companies  (SME’s)  with  no  promoter  involvement  are  excluded  from  the  UK  regime, 
however, there is no such exclusion in Ireland. 

Legal Professional Privilege (LLP) 

The  Irish  regime  recognises  that  LPP  may  prevent  information  about  a  taxpayer  being 
provided to Revenue by a promoter in certain cases where the information would otherwise 
require  disclosure.  In  such  cases  where  the  taxpayer  is  entitled  to  LPP  and  the  promoter 
cannot provide the information, the taxpayer is obliged to report the transaction themselves. In 
these cases, the promoter must advise the client of their obligation to disclose. 

71   Minister for Finance, Brian Lenihan, 24 March 2010 

95 

 
 
 
 
 
 
                                                 
With  regard  to  the  implementation  of  the  Fourth  Anti-Money  Laundering  Directive,  in 
November 2016 Ireland transposed the first sub-paragraph of Article 30(1) of this Directive 
into statutory regulations, recognising the principle of LPP. 

“(4) Nothing in this Regulation shall be construed as requiring a person to whom a 
notice under it is given to disclose any information in respect of which a claim to legal 
professional privilege could be maintained in legal proceedings.”72 

Hallmarks 

For a transaction to be subject to disclosure under the Irish regime, it must fall within one of 
the general or specific hallmarks. 

Any transaction will be reportable if it meets one of the following hallmarks: 

  A  promotor  may  wish  to  keep  the  transaction  confidential  from  other  promoters  or  from 

Revenue; 

  A premium or contingent fee could potentially be charged for the transaction; 
  Standardised documentation is involved, subject to specified exceptions; or 
  The transaction falls within a “specified type of transaction”. 

The specified types of transactions (often referred to as the “specific hallmarks”) included the 
following: 

  The artificial creation of losses 
  Shifting income into capital 
  Employment schemes (with certain exclusions) 
 

Income into gift schemes 

Specific hallmarks have been chosen based on perceived risks in the Irish tax system and may 
not be the appropriate hallmarks for other Member States. For example, in Ireland there is a 
significant difference between the top rate of income tax (52%) and the capital gains tax rate 
(33%).  Flexibility  for  Member  States  to  identifying  the  appropriate  specific  hallmarks  that 
should apply if they introduce a mandatory reporting regime. 

Day-to-Day Tax Advice 

The Irish regime does not apply to “ordinary day-to-day tax advice” provided by a tax adviser 
to  a  taxpayer.  The  scope  of  exclusion  such  as  this  can  be  unclear  and  Irish  Revenue 
subsequently updated its guidance to clarify the meaning. The exclusion essentially allows for 
advice  to  be  given  on  reliefs  and  exemptions  without  being  reportable  if  they  are  used  in  a 
bona fide manner. 

Clarity on Scope of Reporting 

Ireland believes that any disclosure regime should be as prescriptive as possible as regards its 
application  so  as  to  provide  clarity  on  when  to  report  and  in  order  to  reduce  the  increasing 
administrative  burden  on  taxpayers/advisers  and  believes  that  too  much  information  can 
actually reduce the effectiveness of the regime. 

Timelines for Reporting 

In general, disclosures on reportable transactions must be made within 5 working days of the 
applicable trigger date. The trigger date differs for marketed and bespoke schemes; 

72   SI  560  of  2016  European  Union  (Anti-Money  Laundering:  Beneficial  Ownership  of  Corporate  Entities) 

Regulations 2016 

96 

 
                                                 
  For marketed schemes, the trigger date is the date on which a marketing contact is first made 

and in which steps are taken to market a scheme. 

  For bespoke schemes, the trigger date is the date on which the promoter becomes aware that 
the transaction has been implemented. Where a scheme is disclosed to Revenue, then within 
90 working days, the Revenue must either  

i. 
ii. 

assign a unique transaction number to the transaction, or  
determine that the transaction is not a transaction subject to disclosure. 

If the scheme is disclosable by a promoter, then the promoter must, within 5 working days of 
receipt of the transaction number, give that number to any person to whom the promoter has 
made the scheme available for implementation, or any person who is marketing the scheme on 
behalf of the promoter. 

In addition, a promoter is required to regularly provide the Irish Revenue with information on 
persons (a “client list”) to whom a transaction subject to disclosure has been made available 
for  implementation,  unless  the  promoter  is  satisfied  that  the  taxpayer  has  not  actually 
implemented the scheme. 

  Where the scheme is a marketed scheme, the client list must be provided within  30 working 
days commencing the day after the promoter first makes the disclosed transaction available to 
a person for implementation. 

  Where  the  scheme  is  bespoke,  the  client  list  must  be  provided  within  30  working  days 
commencing  the  day  after  the  promoter  first  becomes  aware  that  the  scheme  has  been 
implemented. 

 The number of mass-marketed schemes in Ireland is low. 

Non-compliance 

Promoters or taxpayers who fail to comply with the mandatory disclosure legislation may be 
liable to a civil penalty, the extent of which will depend on the nature of the offence. 

  For  certain  specified  “lesser”  offences,  there  is  an  initial  civil  penalty  of  up  to  EUR 4 000, 

while a further fixed penalty of EUR 100 per day may also apply. 

  For more serious compliance failures, there is a flexible initial penalty of up to EUR 500 per 
day  and  where  the  failure  continues  after  that  penalty  is  imposed,  a  further  penalty  of 
EUR 500  per  day  applies  for  every  day  that  the  failure  continues.  Revenue  notes  that  the 
purpose  of  the  flexible  daily  penalty  (over  a  fixed  penalty)  is  to  deter  promoters  from 
deliberately delaying disclosure of a scheme. 

As well as these monetary penalties, the prospect of reputation damage for the promoters is 
also a major deterrent. 

The impact of the disclosure regime in Ireland 

Ireland already has a complex General Anti-Avoidance Provision (GAAR) in place when the 
mandatory disclosure provisions were introduced. As part of the GAAR regime, taxpayers can 
opt  to  make  a  “protective  notification”  to  Irish  Revenue  which  can  reduce  the  impact  of 
interest and penalties in the event that Revenue successfully challenges the transaction under 
the  GAAR.  While  the  protective  notification  is  a  separate  requirement  from  mandatory 
disclosure, it is an additional consideration for tax advisers when providing advice. 

The main reason for introducing the regime was to encourage further behavioural change. The 
Irish  Tax  Institute  does  not  have  data  on  the  number  of  disclosures  that  have  been  made  to 

97 

 
Irish Revenue under the regime. However, while this data may be interesting, Ireland would 
caution against over-reliance on the data which cannot be viewed as evidence of the success 
or otherwise of the regime, due to the impact of behavioural change. This is particularly true 
in the case of countries that have strong pre-existing GAAR or other anti-avoidance regimes. 

2. PORTUGAL’S MANDATORY DISCLOSURE REGIME 

Overview 

The  PT  tax  planning  disclosure  regime  (Decree-law  no.  29/2008)  entered  into  force  on  15 
May  2008. The  Decree-Law  deems  tax  planning  as  any  scheme  (defined  as  tacit  or  explicit 
plan, project, proposal, advice instruction or recommendation, materialised or not) or conduct 
(contract,  arrangement,  promise,  commitment,  corporate  structure,  transaction  or  deed)  that 
leads to or is expected to lead to, exclusively or predominantly, to a tax advantage. Secondly, 
one of a number of hallmarks applies – see below. The scope of the PT mandatory disclosure 
regime  covers  corporations  and  individuals.  In  the  case  of  individuals  it  is  the  user  that 
usually reports if an off-shore entity is part of the scheme. 

All  income  and  expenditure is  included  within  the  scope  of  the  proposal  including  property 
taxes,  personal  and  corporate  income  taxes,  value  added  tax,  municipal  tax  on  immovable, 
transfer tax on immovable, and stamp duties. 

Who is obliged to Report? 

The definition of intermediaries (promoters) is broad and covers promotors resident or located 
in  PT  territory  including  certified  auditors,  accountants,  financial  institutions  (bank  secrecy 
does  not  apply)  and  company  services  providers.  Lawyers  are  not  liable  for  disclosure  if 
rendering advice on a scheme or conduct: (a) when analysing the legal position of a client; (b) 
in the context of a legal consultation; (c) when defending or representing a client in a judicial 
proceeding, or  in relation to  judicial proceedings, including advice  on how to  commence or 
prevent them or any other activities exclusive to lawyers. In such a case if the scheme comes 
within  the  scope  of  the  mandatory  disclosure  regime  the  taxpayer  would  need  to  report  it. 
However, when a lawyer approaches a person to "sell" a scheme, the lawyer is not considered 
as being protected by legal professional privilege.  

If  no  Portuguese  intermediary  is  involved  with  the  scheme  then  the  liability  for  disclosure 
falls  with  the  beneficiary.  In  such  cases  the  obligation  to  disclose  applies  only  to  schemes 
involving the participation of entities located in low-tax jurisdictions. 

Hallmarks 

For a transaction to be reportable under the PT scheme, one of the following hallmarks should 
apply :i) participating entity subject to a special regime or tax exempt, ii) (hybrid) financial 
instruments and derivatives, iii) use of tax losses. 

What needs to be disclosed? 

The information which must be provided to the tax authorities includes the following items:  

 

a detailed description of the scheme, including a description of the agreements, the corporate 
structures, the operations and the transactions used, as well as the type of tax advantage;  
indication of the applicable law; and  

 
  name, domicile, and tax identification number of the promotor of the scheme.  

98 

 
 
Regarding  the  detailed  description  of  the  scheme,  the  tax  authorities  can  request  further 
information.  Apart  from  when  the  user  is  obliged  to  report,  intermediaries  do  not  need  to 
reveal the name of the clients to whom the scheme has been proposed. 

Non-compliance with disclosure 

Fines  for  non-compliance  vary  between  EUR 1 000-100  000.  Furthermore,  the  loss  of  tax 
benefits and the official publication of the penalty at the expense of the breaching party may 
also be imposed. The promotors of the scheme will still continue to be required to disclose the 
relevant  information  whenever  possible.  The  tax  authorities  can  also  publish  details  of  the 
scheme on the internet. 

The impact of the disclosure regime in Portugal 

PT  authorities  received  almost  100  reports  on  tax  schemes  from  intermediaries  (promoters) 
since the introduction of mandatory disclosure regime until now, with the peak between 2009 
and 2011. Around 25% of reports were made by the users. The users are obliged to report in 
the following circumstance: when the promoter is not PT resident, is prevented by the rules of 
the profession (e.g. lawyers), or is an in-house scheme. Statistics on sanctions are not known. 

3. THE UK'S MANDATORY DISCLOSURE REGIME 

Table 12: HM Revenue and Customs - Disclosure statistics 

Financial year 

Financial(1) 

01/08/04 - 31/03/05 

01/04/05 - 31/03/06 

01/04/06 - 31/03/07 

01/04/07 - 31/03/08 

01/04/08 - 31/03/09 

01/04/09 - 31/03/10 

01/04/10 - 31/03/11 

01/04/11 - 31/03/12 

01/04/12 - 31/03/13 

340 

94 

29 

2 

0 

0 

0 

0 

0 

Employ-
ment(1) 
163 

28 

7 

0 

0 

0 

0 

0 

0 

Main 
regime 
0 

(NI 
hallmark)(2) 
(0) 

IHT 

SDLT(3) 

AETD 

0 

0 

0 

0 

0 

0 

0 

Less than 5 

Less than 5 

Less than 5 

0 

485 

185 

70 

28 

61 

21 

13 

18 

10 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

Less than 5  Less than 5 

(0) 

(0) 

(23 N) 

(Less than 5) 

(6 N) 

(11 N) 

(17 N) 

(7 N) 

(7 N) 

0 

0 

125 

205 

102 

116 

97 

116 

59 

28 

0 

01/04/13 - 31/04/14 
01/04/14 - 30/09/14(4) 
Source:  
Annotations: Data for period from 01/08/2004 to 30/09/2014 

HMRC website 

0 

0 

0 

Less than 5 

(1) Financial and employment categories have been replaced since 01/08/2006  
(2) Data for SDLT commenced on 01/08/2005   
(3) N = Number of hallmarked disclosures reported under the NIC Regulation  
(4) Provisional date for period 01/04/2014-30/09/2014 

The DOTAS regime introduced in 2004 essentially requires promoters of certain types of tax 
avoidance schemes, or in some cases users of the schemes, to disclose them to HMRC. The 
regime has been subject to several changes since its introduction. The scope of the regime has 
been  broadened  gradually  so  it  now  covers  the  whole  of  Income  Tax,  Corporation  Tax, 
Capital Gains Tax, and certain arrangements relating to Stamp Duty Land Tax and Inheritance 
Tax.  The  regime  also  applies,  with  necessary  modifications,  to  National  Insurance 
contributions and Value Added Tax. In the March 2015 Budget, the Government announced a 
package of measures to ensure that the DOTAS regime keeps pace with the current avoidance 
market.  As  part  of  this  the  Government  launched  a  consultation  on  the  detail  of  changes  to 

99 

 
 
 
 
 
strengthen  the  DOTAS  hallmarks  and  the  results  were  published  in  February  2016.  New 
changes are expected in regards to Indirect Tax Avoidance Disclosure Regime and penalties 
for enablers of abusive tax planning arrangements in line with measures recently published on 
5 December 2016. 

There are 2 different disclosure regimes, one for VAT and one for Direct taxes and National 
Insurance contributions: 

Direct taxes and National Insurance contributions 

The disclosure of tax avoidance schemes (DOTAS) regime covers Income Tax, Corporation 
Tax,  Capital  Gains  Tax,  Stamp  Duty  Land  Tax,  Inheritance  Tax,  and  the  Annual  Tax  on 
Enveloped Dwellings and National Insurance contributions. 

Who has to report?  

UK  imposes  the  primary  obligation  to  disclose  on  the  promoter.  Who  is  a  promoter?  (FA 
2004, s. 307) 

A person is a promoter if, in the course of a relevant business, they: 

  are to any extent responsible for the design of a scheme, 
  make a firm approach to another person with a view to making a scheme available for, 

implementation by that person or others, 

  make a scheme available for implementation by others, or 
  organise or manage the implementation of a scheme. 

However, the scheme user may need to make the disclosure where: 

 
 

 

the promoter is based outside the UK,  
the promoter is a lawyer and legal professional privilege prevents him from providing 
all or part of the prescribed information to HMRC, or  
there is no promoter, such as when a person designs and implements their own scheme 
or there is an in-house counsel.  

Where a lawyer is  ‘marketing’  a scheme, as  described at paragraph 14.3, the lawyer cannot 
assert legal privilege. This means that such marketing is subject to the disclosure obligations 
and  the  lawyer  should  disclose  the  scheme  (providing  the  other  conditions  are  met)  to  the 
Counter-Avoidance Directorate in the normal way. 

DOTAS  addresses  many  other  categories  of  people  involved  in  the  scheme  however  the 
obligation to disclose is not directly imposed on them.  

What has to be reported?  

The UK adopts a multi-step approach meaning there is a threshold that the scheme needs to 
satisfy before it is assessed against the hallmarks. The arrangement only needs to be reported 
on  if  it  has  an  impact  on  the  UK  tax  base  of  the  taxes  included  under  DOTAS.  Therefore 
arrangements  that  affect  non-UK  tax  bases  are  not  included.  HMRC  has  recently  launched 
initiatives  to  target  offshore  tax  evasion/avoidance  by  UK  taxpayers73.  A  tax  arrangement 
should be disclosed where: 

 

it will, or might be expected to, enable any person to obtain a tax advantage and  

73 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/546589/Strengthening_Tax_A
voidance_Sanctions_and_Deterrents-discussion_document.pdf 

100 

 
                                                 
 

tax advantage is, or might expected to be, the main benefit or one of the main benefits of the 
arrangement. 

Transaction  needs  to  be  disclosed  if  it  falls  within  the  hallmarks  prescribed  in  the  relevant 
regulations. The  UK  targets  confidentiality,  premium  fee,  and  standardised  tax  product  as  a 
generic hallmark. As for specific hallmarks there are 8 hallmarks aimed at new and innovative 
schemes, marketed schemes and targeting specific schemes, for example loss schemes. 

What has to be disclosed?  

The name of the promoter, the clients of the promoter, what kind of reportable transaction was 
entered into, a description of the transaction, and the expected tax benefits. 

Scope of DOTAS 

DOTAS applies to both natural and legal persons. In terms of the split between corporate and 
individuals, the amount of tax under consideration (in ongoing audits) is one-third corporation 
tax, and two-thirds income tax, capital gains tax and property tax (Stamp Duty Land Tax). 

Some  of  the  mass-marketed  personal  tax  issues  involve  many  hundreds  of  users  in  very 
complex  schemes  which  take  a  long  time  to  investigate  and  litigate.  Corporate  tax  may 
involve higher amounts of tax per user but tend to be more bespoke in nature and, potentially, 
quicker to resolve. 

It covers different taxes (including VAT, although the name/regime is different). 

There is a special regime for SME: they are exempted from reporting obligations when there 
is no intermediary and the scheme is developed "in-house". 

When is reporting required?  

Disclosure is required when the promoter makes a scheme available for implementation. The 
promoter must disclose a scheme within five working days of making a scheme available for 
implementation by another person.  

The due date for making a disclosure, where the user is required to make the disclosure, is by 
reference  to  the  first  transaction  forming  part  of  the  scheme.  Where  there  is  no  promoter 
(other than in the case described in paragraph 14.5 of Guidance) the user must disclose within 
30 days of the scheme being implemented. 

Process  

1.  Promoter  discloses  scheme  to  the  UK  tax  administration,  usually  within  five  days  of 
scheme being made available to clients (see above). 

2.  The  UK  tax  administration  issues  a  Scheme  Reference  Number  (SRN)  to  the  Promoter. 
Issuing an SRN does not mean that HMRC approves the scheme. Disclosure regime is not a 
clearance procedure.  

3. Promoter must pass the SRN to clients who implement the scheme. 

4.  Promoter  provides  quarterly  report  to  the  UK  tax  administration  of  clients  who  have 
implemented the scheme. 

5. Clients must report the SRN on a return affected by the use of the scheme. 

Penalties 

The penalties for failure to comply with a DOTAS obligation without reasonable excuse fall 
into three categories: 

101 

 
  Disclosure penalties – apply to failure to disclose a scheme.  
 

Information penalties – apply to all other failures to comply with DOTAS except for 
some 

  User penalties – apply to failure by a scheme user to report a scheme reference number 

to HMRC. 

Disclosure penalties and Information penalties involve an initial penalty and a further penalty 
if  non-compliance  continues.  The  initial  penalty  is  determined  by  a  Tribunal  and  is  up  to 
GBP 600 a day. If this is not considered to be sufficient deterrent the penalty may be of up to 
GBP 1 million.  If  the  user  of  a  tax  avoidance  scheme  fails  to  report  the  scheme  reference 
number to HMRC the penalty is up to GBP 5 000 the first time the intermediary fails to do 
this. If the intermediary fails to report a scheme reference number again the intermediary may 
have to pay a penalty of up to GBP 7 500. On the third and future occasions he may have to 
pay a penalty of up to GBP 10 000 for each failure. Current initiative in the form of the draft 
Finance  Bill  2017  contains  the  proposed  new  power  for  HMRC  to  levy  a  penalty  on  those 
(referred to as ‘enablers’) who facilitate abusive tax avoidance arrangements. 

Evaluation of the scheme 

Although there is no publically available evaluation of the scheme, the HMRC stated in 2009 
that  the  DOTAS  scheme  had  proved  to  be  highly  successful  and  the  Government  had  used 
information from DOTAS to introduce a range of anti-avoidance measures every year since 
2004 – a total of 49 measures, closing off over GBP 12 billion in avoidance opportunities58 
HMRC  noted  that  there  is  considerable  anecdotal  evidence  that  DOTAS  has  changed  the 
economics of avoidance.  

In 2012 the Oxford Centre for Business taxation analysed the DOTAS regime considering its 
claims  to  success  in  the  light  of  the  evidence  that  was  then  available74.  The  review 
acknowledged  the  difficulties  of  measuring  a  scheme  like  DOTAS  in  particular  due  to  the 
deterrent  effect  in  estimating  the  tax  collected  because  arrangements  were  not  undertaken 
required  a  number  of  assumptions  to  be  made.  Regarding  compliance  the  review  notes  the 
following: 

  Of schemes disclosed before May 2005 where no users were known to have reported a 
SRN, research has shown that around 25% of those schemes did in fact have users; 
  By  the  December  2006  HMRC  had  identified  over  100  entities  where  here  was 
evidence of involvement in promoting schemes of a type that it would have expected 
to be disclosed but had not been; 

  Analysis  carried  out  in  September  2007  for  the  tax  year  2005/06  in  relation  to  a 
sample  of  Limited  Liability  Partnerships  indicated  that  around  40%  of  individual 
partners who have been issued with a SRN by the promoter did not report it correctly. 
In other cases the number is reported, but not in the specified box on the return or the 
number  may  be  transposed.  Other  analysis  indicates  that  SRN  reporting  failures  are 
not confined to individuals but extend to corporate users; 

74   The  National  Audit  Office  commissioned  the  Oxford  University  review  the  Disclosure  of  Tax  Avoidance 
Schemes  regime  and  the  tax  avoidance  landscape.  The  study  is  published  as  Oxford  University  Centre  for 
Business Taxation – OUCBT (2012): "The disclosure of tax avoidance schemes regime"  

102 

 
 
                                                 
  At April 2008 there were around 12 500 known users of disclosed schemes of whom 
around 80% are individuals carrying on a business as sole proprietors or partners. In 
2007 between 5 000 and 6 000 of the reported a SRN (with some users reporting two 
or more); 
In  2008  the  compliance  rate  of  scheme  users  recording  their  SRNs  as  required  was 
estimated at 60%; 

 

  As at May 2008, HMRC received disclosures from, and issued SRNs to, a pool of 50 

promoters, all of which it described as “businesses”; 

  Between  01/05/2010  and  19/10/  2011:  78  promoters  disclosed  schemes  under 

DOTAS. 

The review concluded that while some figures for the impact of DOTAS could be estimated 
others  could  not  unless  certain  assumptions  were  made.  In  order  to  validate  the  GBP  12.5 
billion collected as a result of DOTAS the assumptions on which this figure were based would 
need to be known. However the review noted that estimating the tax collected as a result of 
certain interventions, such as challenging schemes on the ground that they fall foul of the law, 
should  present  less  difficulties  in  estimating  and  would  useful  to  assess  the  impact  of  the 
regime.  

i OECD BEPS Action 14 "Making dispute resolution more effective" and follow up action.  
ii UN Tax Committee (2015) 

103