REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Council Directive (EU) 2011/16/EU on administrative cooperation in the field of direct taxation.
Date: 2017-12-18
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, administrative cooperation, application of EU law, direct tax, exchange of information, tax authorities, tax avoidance, tax evasion

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 18.12.2017  COM(2017) 781 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Council Directive (EU)  2011/16/EU on administrative cooperation in the field of direct taxation.  {SWD(2017) 462 final}  
 
 
1. 

INTRODUCTION 

A  deeper  and  fairer  Internal  Market  is  one  of  Europe's  top  priorities.  To  achieve  this 
objective,  the  Union  needs  a  framework  for  effective  and  efficient  cooperation  between  the 
tax  administrations  of  the  Member  States.  The  European  Union  and  its  Member  States  are 
committed to strengthen the fight against cross-border tax fraud, evasion or avoidance and is 
determined to ensure that profits are taxed where they are made. But for policy actions to be 
successful effective implementation on the ground is essential.  

Administrative  cooperation  is  crucial.  Having  28  separate  tax  administrations  working  in 
isolation cannot be an option. While taxation remains still to a great extent a national issue, 
the  economic  environment  has  become  more  globalised,  mobile  and  digital.  Businesses  are 
able  to  shift  profits  across  borders,  taxpayers  can  earn  income  from  abroad  without  being 
taxed, and tax decisions of one Member State can have effects on other Member States' tax 
bases.  To  ensure  all  citizens  and  businesses  contribute  their  fair  share  in  the  correct  state 
Europe needs a high degree of cooperation between Member States.  

Much has been done since the adoption of Council Directive on administrative cooperation in 
the  field  of  taxation  2011/16/EU  (the  Directive  or  DAC).  This  Directive  represents  the  key 
development  in  the  EU  framework  of  cooperation.  It  replaced  the  Directive  on  Mutual 
Assistance 77/799/EEC (MAD).  

The improvements brought by the Directive were especially related to: (i) the enlargement of 
the scope to include all foreseeably relevant information  related not  only to  direct taxes but 
also to all indirect taxes other than VAT and Excise duties, (ii) the alignment of EU standards 
with  Article  26,  par.  4  and  5,  of  the  OECD  Model  Tax  Convention  ensuring  inter  alia  the 
exchange  also  in  the  absence  of  domestic  interest  (iii),  the  reinforcement  of  automatic 
exchange of information, (iv) the provision of time limits, new standard forms and a secure 
channel for the exchange of information and (v) the obligation for the Member States engaged 
in  a  wider  cooperation  with  a  third  country  to  provide  the  same  level  of  cooperation  to  all 
other Member State wishing to enter into such a mutual wider cooperation.  

Since  then,  with  a  view  to  address  specific  challenges  Member  States  tax  administrations 
were  facing,  the  Directive  has  been  amended  four  times  through  amending  Directives,  with 
the  aim  of  strengthening  the  administrative  cooperation  among  Member  States.  Directive 
2014/107/EU  (DAC2)  introduced  automatic  exchange  of  financial  accounts  information; 
Directive 2015/2376/EU (DAC3), on automatic exchange of tax rulings and advance pricing 
agreements;  Directive 2016/881/EU (DAC4), on automatic exchange of country by country 
reports;  Directive  2016/2258/EU  (DAC5)  which,  differently  than  previous  amending 
directives,  does  not  broaden  the  scope  of  automatic  exchange  of  information  but  rather 
ensures tax authorities have access to beneficial ownership information collected pursuant to 
the anti-money laundering legislation. Figure 1 shows the development over time. 

1 

 
 
 
Figure 1: Adoption and application of key provisions for administrative cooperation in direct 
taxation 

2. 

THE REPORT  

Article 27 of the Directive requires a Report on its application every five years from 1 January 
2013.  It  should  be  read  together  with  the  supporting  Staff  Working  Document  (SWD) 
prepared on the basis of information provided by Member States through questionnaires and 
statistical data since 2013. The SWD describes the key findings of the report and outlines the 
main traits of a renewed European approach to administrative cooperation for fair taxation in 
the EU.  

The review covers all key provisions of DAC which are in effect. The more recent provisions 
on  automatic  exchange  of  information  introduced  via  amending  Directives  to  the  original 
DAC (i.e. DAC2 – DAC3 – DAC4) are not covered because at the time of drafting the report 
the exchanges under DAC2 and DAC3 have only just started, and those under DAC4 have not 
yet taken place. The diagram below shows the dates of the first exchanges respectively.   

A second report under Article 8b of the Directive is required before 1 January 2019, and this 
will provide an overview and an assessment of the statistics and information received under 
paragraph 1 of this Article. This covers statistics on the automatic exchanges under Articles 8 
and 8a (i.e. DAC1, and DAC2 and DAC3 exchanges will be covered) on issues such as the 
administrative and other relevant costs and benefits of the automatic exchange of information, 
as well as practical aspects linked thereto. 

The application  of the Directive and the efforts in  enhancing the administrative cooperation 
within  the  European  Union  represent  the  highest  standards  of  cooperation  among  tax 
administrations  worldwide.    But,  some  issues  remain.  There  is  scope  to  further  improve 
administrative cooperation to ensure that Member States and the European Union continue to 
lead the global movement towards a fairer and more transparent tax system.  

3. 

MAIN FINDINGS 

The SWD contains qualitative and quantitative information on the application of the Directive 
2011/16/EU.  It  looks  at  the  key  provisions  of  the  Directive,  in  particular  exchange  of 
information  (EOI)  in  its  various  forms  -  on  request  (EOIR),  spontaneous  (SEOI)  and 

2 

 
 
 
automatic  (AEOI).  It  also  covers  -  other  forms  of  cooperation  such  as  presence  in 
administrative offices and participation in administrative enquiries, simultaneous controls and 
requests  for  notification  and  the  general  conditions  governing  administrative  cooperation  in 
direct taxation. 

It  is  based  on  information  and  data  gathered  through  questionnaires  and  statistics  from 
Member  States  about  their  efforts  in  applying  the  Directive,  as  well  as  on  the  practical 
experiences when cooperating with other Member States.  

From  the  analysis  of  the  information  gathered  from  the  Member  States,  three  key  findings 
emerge in this report: 

  DAC provisions have been implemented but not all of them effectively;  
 

the  application  of  DAC  exchange  of  information  has  resulted  in  a  great 
increase  in  the  amount  of  data  tax  administrations  have  to  handle  –  but  on 
average their capacity to do so has not increased at the same rate;  
the assessment of the benefits of DAC is carried out at a very early stage.  

 

DAC provisions have been implemented but not all of them effectively 

On the basis of the information provided by the Member States overall DAC has been applied 
as  it  should  have  been.  Nevertheless,  the  following  areas  of  improvements  have  been 
identified for the proper application of the Directive:  

Despite efforts to comply with the time limits established by the Directive, the  exchange of 
information  on  request  (EOIR)  is  not  as  timely  as  it  should  be.  The  Directive  sets  time 
limits  for  replying  to  requests  for  information  but  recognises  the  existence  of  special  cases 
where  different  time  limits  can  be  specially  agreed  upon.  Nevertheless,  timeliness  of  the 
replies  is  particularly  important  to  ensure  effective  cooperation.  DAC  provisions  are  very 
clear in this respect: information has to be provided as quickly as possible, as a late reply may 
be less useful for the requesting Member State. As shown in section 5 of the SWD, currently 
not all requests for information are answered within the deadline defined in the Directive.1  

Through  the  spontaneous  exchange  of  information  (SEOI)  Member  States  exchange 
information  which  may  be  relevant  for  another  Member  State's  administration  and 
enforcement  of  the  domestic  tax  laws.    The  information  provided  spontaneously  should  be 
effective  as  it  is  selected  by  tax  officials  relying  on  their  own  practical  experience  and 
expertise in  tax  collection.  However,  as  feedback  is  not  given  regularly  it is  not  possible  to 
assess the effectiveness of the information exchanged. As reported in section 7 of the SWD 
some information has been exchanged spontaneously over the years but SEOI has not been as 
effective as it could have been especially with regard to cross-border tax rulings and advance 
pricing arrangements. The LuxLeaks affair clearly showed that administrative cooperation in 
this  area  was  not  working  and  in  2015  the  Commission  proposed  DAC3  obliging  Member 
States to automatically exchange information on their tax rulings.  

The  first  (DAC1)  provisions  on  mandatory  automatic  exchange  of  information  (AEOI) 
started  to  apply  from  1  January  2015  for  five  categories  of  income  and  capital,  namely: 
income  from  employment,  directors'  fees,  certain  life  insurance  products,  pensions  and 
ownership  of  and  income  from  immovable  property.  However,  based  on  the  information 
received there is no clear evidence of the actual use of such information. Even if majority of 
the Member States have stated they open the bulk information files when they are received, it 
appears  several  Member  States  are  struggling  to  make  use  of  such  information  for  various 

1 
requests over the period 2013-2016 is nearly 62% 

In average the total number of full replies provided within six months from the date of the receipt of the 

3 

 
                                                 
reasons including lack of resources or lack of automated taxpayer identification processes, as 
shown in section 6 of the SWD.  

The  Directive  defines  ways  to  cooperate  other  than  exchange  of  information.  It  foresees 
the possibility for tax administrations to agree bilaterally on the presence of their officials in 
the territory of another Member State; carrying out simultaneous tax controls by two or more 
Member States on taxpayers of common interest; and tax administrations are able to call upon 
the  cooperation  of  other  Member  States'  tax  authorities  to  make  sure  taxpayers,  no  matter 
where they are located, are notified of decisions and instruments concerning their tax liability. 
Yet, when compared with the extent of cross-border activity in Europe, or the total number of 
audits performed by tax administrations,2 administrative cooperation under these provisions is 
limited, as shown in sections 8 and 9 of the SWD, and could be broader. More cooperation 
would also result in more tax certainty for cross-border taxpayers, if it made more consistent 
and predictable the way different tax administrations audit them.   

DAC exchange of information has resulted in a great increase in the amount 
of data tax administrations have to handle – but their capacity to do so has 
not increased at the same rate 

The amount of information  exchanged under DAC has  been  significant  – and  following the 
actual implementation of additional provisions on automatic exchange of information will be 
even more so. But the resources dedicated to manage this flow have remained limited.  

According  to  information  given  by  Member  States  tax  administrations,  the  number  of  tax 
staff dedicated to EU administrative cooperation in Central Liaison Office (CLO) ranges 
from 1 to 5 officials in most Member States, as shown in section 4 of the SWD. This does not 
represent all the staff working with administrative cooperation, but no significant increase of 
CLO staff has been reported over time, while the administrative cooperation has expanded its 
scope  and  evolved  a  lot  in  a  very  short  period  of  time.  Compared  with  the  overall  staffing 
levels  of  tax  administrations  in  the  Member  States,  these  figures  indicate  a  minimal 
investment in EU administrative cooperation by several Member States.  

The information technology resources (IT) put at use at Member States have been mainly 
engaged with building up the secure environment for the automatic exchanges. The IT work 
to  enable  using  the  received  information  in  an  automated  manner  is  only  just  starting. 
According  to  the  Member  States  as  reported  in  the  SWD  section  6,  the  tax  administrations 
still find it difficult to solve how to automatically match income data obtained via automatic 
exchange of information against their own tax database. 

The  assessment  of  the  benefits  of  DAC  is  still  carried  out  at  a  very  early 
stage 

The aim of DAC is that through improved data availability and cooperation there should be 
less cross-border tax evasion, tax fraud and tax avoidance. However, almost five years since 
its  entry  into  force,  little  is  known  about  the  actual  effects  of  DAC  implementation  in  this 
respect.  

Annually  the  Commission  requests  data  on  the  value  of  accrued  tax  benefits  of  the 
administrative  cooperation,  regardless  of  its  form,  but  few  tax  administrations  are  able  to 
provide, or estimate, such information. There is general agreement that such information, both 
in monetary as well as behavioural terms would be useful if quantified in a reliable manner. 

OECD (2015), Tax Administration 2015: Comparative Information on OECD and Other Advanced and 

2 
Emerging Economies, OECD Publishing, Paris, pp. 221 and 222.  
http://dx.doi.org/10.1787/tax_admin-2015-en 

4 

 
                                                 
However  Member  States  have  difficulty  in  linking  such  data  to  administrative  cooperation, 
rather than for example other national compliance initiatives. Furthermore, the deterrent effect 
of increased cooperation is also difficult to quantify.  

4. 

WAY FORWARD 

On the basis of the information gathered and the analysis performed, the Commission believes 
that an improved, more transparent approach is needed in the EU to ensure that administrative 
cooperation contributes, and is seen to contribute, to the overall objective of a fair taxation for 
all. Measures to improve the approach will be based on three pillars:  

Comprehensive and transparent DAC implementation by Member States  

In order meet its objectives, DAC implementation needs to be comprehensive and effective. 
EU decision makers and stakeholders have to be kept duly informed. Article 27 of DAC, as it 
stands  today,  foresees  one  report  by  the  Commission  to  the  Council  and  the  European 
Parliament  every  five  years.  In  addition  Article  8b  of  the  Directive  contains  an  ad  hoc 
provision  for  a  one  off  report  on  automatic  exchange  of  information  "that  provides  an 
overview and an assessment of the statistics and information received, on issues such as the 
administrative and other relevant costs and benefits of the automatic exchange of information, 
as well as practical aspects linked thereto" to be submitted by 1 January 2019.  

Some actions are needed in view of a more transparent and regular reporting: 

  While there is no need to change the Article 27 requirement the Commission 
will examine the possibility of publishing annually some basic statistics, as has 
been done on Mutual Agreement Procedures and Advance Pricing Agreements 
for many years in the context of the Joint Transfer Pricing Forum.  

  The European Parliament staff should be encouraged to accept the invitations 
to  attend  the  Expert  Group  meetings  held  with  Member  States  on  DAC 
implementation.  

Furthermore,  in  order  to  make  the  administrative  cooperation  more  efficient  and  effective 
some further actions are needed: 

 

 

to  automate 

replies.  The  Commission  will  consider  how 

In relation to EOIR, Member States are encouraged to improve the timeliness 
of 
the 
acknowledgements  of  receipt,  the  monitoring  of  the  exchange  workflow  and 
the  production  of  comprehensive  statistical  data  thereby  freeing  up  some 
Member State staff resources. 
In  relation  to  SEOI,  awareness  should  be  raised  on  the  importance  of 
identifying information that is useful for another Member State, together with 
introducing  a  tailored  approach  in  order  to  further  ensure  the  usefulness  of 
SEOI  for  the  receiving  Member  State.  Member  States  should  also  continue 
exchanging  spontaneous  information  through  the  use  of  standard  forms  and 
raise awareness at internal level. 3 

  Member States should increase the use of tools for administrative cooperation 
other  than  the  exchange  of  information,  such  as  presence  in  administrative 
offices and participation in administrative enquiries, simultaneous controls and 
provide  structured  feedback  on  the  information  exchanged  and  on  its 
usefulness.4  The Commission will also consider the opportunity to expand the 

3  
4  

See section 7 of the Staff Working Document 
See sections 8-9- 10- 11-14  of the Staff Working Document 

5 

 
                                                 
e-Forms  to  cover  the  administrative  notification  as  requested  by  the  Member 
States. 

  The  Commission  will  consider  proposing  joint  audits  in  the  field  of  direct 
taxation  (as  currently  planned  for  administrative  cooperation  in  the  field  of 
VAT), together with a common methodology.  

Improved capacity for Member States in EU administrative cooperation  

Without adequate resources at Member States tax administrations, little can be done even with 
more data. If Member States do not have adequate staff to analyse and use data received from 
other  Member  States,  automatic  exchange  of  information  cannot  be  considered  fulfilling  its 
purpose nor to be effective. DAC is not in itself an instrument for tax administration capacity 
building. However, the Commission has identified several other tools at its disposal which can 
improve DAC implementation: 

  The  Fiscalis  2020  Programme  enables  the  Commission  to  support  the 
administrative  capacity  of  the  tax  administrations  of  Member  States  and 
candidate  countries.  Several  workshops  and  other  activities  are  organised 
under  the  Programme  on  various  tax  administration  issues,  including 
administrative cooperation. There is scope to boost the DAC dimension of the 
Programme, by designing a specific series of DAC related activities to support 
the actual DAC implementation. The Commission will examine the possibility 
to set up an EU team of experts on administrative cooperation.5  

  Under  the  same  Programme,  the  Commission  is  developing  a  competency 
framework  for  tax  administrations  in  order  to  enhance  skills  and  raise 
performance  of  the  EU  Member  States  tax  officials.  The  Commission  will 
ensure  that  such  a  framework  contains  training  and  indicators  on  EU 
administrative cooperation. 

  There  is  evidence  that  some  tax  administrations  are  performing  better  than 
others,  especially  when  it  comes  to  using  and  reporting  about  the  use  of  tax 
information.  The  improvement  efforts  should  start  with  more  automated 
identification  of  taxpayers,  and  matching  of  the  information  received  via 
automatic  exchange  from  abroad  with  information  held  nationally,  and  to  be 
extended  to  the  possible  development  of  a  common  risk  management  tool.  
Together with this report, the Commission is publishing a comprehensive study 
about  potential  improvements  in  the  identification  of  cross-border  taxpayers, 
and  will  consider  organising  a  series  of  DAC  workshops  to  promote  the 
sharing of best practices and experience. 

  The  capacity  to  deliver  DAC  is  also  dependent  on  how  many  tools  the 
Commission  gives Member States to implement the Directive as smoothly as 
possible.  Delivering  on  its  new  eForms  Central  Application,  the  Commission 
will give Member States tools which will enable them to automate fully, or in 
part  certain  DAC  procedures  currently  deemed  burdensome  as  highlighted  in 
the SWD, allowing Member States tax administrations staff to focus on higher 
added value activities. This will also lead to improved and reliable statistics. 

Better  and  more  transparent  data  on  the  implementation  and  benefits  of 
DAC provisions  

Expert teams are structured forms of cooperation between the Member States tax administrations by 

5  
which Member States can pool tax knowledge and expertise. Expert teams can be supported by the Fiscalis 2020 
EU tax cooperation programme. 

6 

 
 
                                                 
Article 8b of DAC as it stands today asks Member States to provide statistics on the benefits 
of automatic exchange of information "to the extent possible" but it is silent when it comes to 
the benefits of other forms of exchange of information or administrative cooperation.  

  The Commission, assisted by the Committee on Administrative Cooperation in 
Taxation  (CACT)6,  has  proposed  an  implementing  regulation  on  DAC 
statistics  and  on  the  yearly  assessment  of  automatic  exchange  of  information 
which  includes  monitoring  of  the  tax  compliance  use  and  effectiveness  of 
automatic exchanges.  

  The  Commission  will  work  with  Member  States  experts  to  identify  common 
ways  to  estimate  the  benefits  of  administrative  cooperation  reliably  and 
comprehensively. 

  By  1  January  2019,  the  Commission  will  prepare  a  report  on  automatic 
exchanges  (under  Article  8b),  covering  also  issues  such  as  the  administrative 
and other relevant costs and benefits of the automatic exchange of information, 
as well as its practical aspects. 

5. 

CONCLUSIONS 

The implementation and functioning of the Directive has implied a significant investment by 
Member  States,  on  an  ongoing  basis,  which  nevertheless  have  made  it  one  of  the  most 
effective tools for administrative cooperation. Assessing its full impact is still a difficult task. 
More than the amounts or number of exchanges, the Commission assumes that this Directive 
has had a significant deterrent effect, which is a key tool in the fight against tax evasion. In 
parallel,  voluntary  disclosure  programs  are,  on  a  sporadic  basis,  put  in  place  by  different 
Member States. The impact of administrative cooperation in the amounts disclosed is difficult 
to quantify, while it is reasonable to expect that if it did not exist there would be no incentive 
for such disclosures.  

However,  as  a  tool  to  fight  tax  avoidance  and  evasion,  this  is  an  unending  work.  After  the 
necessary IT structure and common tools have been built for the administrative cooperation, 
the next step should be an intensified use of all the tools, analysis and use of the data received 
and efforts in improving reciprocally the qualitative content of the data exchanged. In parallel, 
new  forms  of  cooperation  and  improvements  to  the  current  framework  will  be  needed  to 
address  the  dynamic  nature  of  tax  avoidance  and  evasion.  The  EU  Member  States  have 
proven  their  commitment  to  administrative  cooperation  and  will  undoubtedly  follow-up  on 
this field. 

CACT is established to assist the Commission in accordance with Article 26 of the Directive. Agenda 

6  
and summary reports are available here: 
http://ec.europa.eu/transparency/regcomitology/index.cfm?do=search.search 

7