COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Tax fraud and evasion – better cooperation between national tax authorities on exchanging information Accompanying the document Proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation
Date: 2020-07-15
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, administrative cooperation, digital economy taxation, exchange of information, fraud, tax avoidance, tax evasion, tax law

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   EUROPEAN COMMISSION  Brussels, 15.7.2020  SWD(2020) 130 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Tax fraud and evasion – better cooperation between national tax authorities on exchanging information     Accompanying the document Proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation {COM(2020) 314 final} - {SEC(2020) 271 final} - {SWD(2020) 129 final} - {SWD(2020) 131 final}  
 
 
Impact  assessment  on    Tax  fraud  and  evasion  –  better  cooperation  between  national  tax  authorities  on 
exchanging information 

Executive Summary Sheet 

A. Need for action 

Why? What is the problem being addressed?  
The  problems  are  a)  limited  reporting  of  money  earned  via  digital  platforms;  b)  inefficiencies  in  cooperation 
between tax administrations. As the digital economy expands and is  expected to grow in the coming  years,the 
problems  are  expected  to  grow  worse  in  the  absence  of  EU  intervention.  The  evaluation  of  the  Directive  on 
Administrative  Cooperation  pointed  out  that,  while  the  framework  is  robust  overall,  not  all  Member  States  are 
exploiting the tools in the same way. Providing clarifications for targeted features of administrative cooperation 
(foreseeable  relevance  definition,  joint  audits,  group  requests)  is  expected  to  improve  the  efficiency  and 
effectiveness of administrative cooperation. The digital and global nature of the digital platform economy, linked 
with  a  fragmentation  of  income  gained  through  various  platforms  and  differences  in  reporting  requirements 
across countries, pose a challenge in terms of the proper reporting  of money earned through  digital platforms. 
Member States consider that limited reporting is rather frequent. Different implementation and use of information 
make cooperation inefficient. Digital platforms and tax administrations are the most affected stakeholders. 

What is this initiative expected to achieve?  
The  main  objectives  are  ensuring  a  fair  and  consistent  functioning  of  the  internal  market,  while  safeguarding 
Member  States’  and  EU    revenues.  It  is  expected  that  the  intervention  may  lead  to  more  than  €30  billion  of 
additional tax revenues, overall in the EU, by 2025.  

What is the value added of action at the EU level?  
Member  States’  actions  do  not  provide  an  efficient  and  effective  solution  to  problems  that  are  transnational  in 
their  essence:  digital  platforms  enable  buying  and  selling  goods  and  services  over  the  internet  irrespective  of 
borders or jurisdictions, allowing sellers to earn income from potentially “everywhere” other than their country of 
tax  residence.  Inefficiencies  in  administrative  cooperation  also  demand  transnational  solutions,  as  cooperation 
by definition has to take place across borders to be effective.  

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
The  following  options  have  been  considered:  a)  non-legislative  guidelines;  b)  legislative  intervention  with  sub-
options  in  terms  activities,  platform  operators  and  sellers  in  scope;  c)  legislative  intervention  to  strengthen 
administrative  cooperation.  The  preferred  choice  is  a  legislative  intervention  to  strengthen  administrative 
cooperation  and  cover  all  platforms  and  sellers  to  ensure  the  broadest  possible  results  in  terms  of  tax 
compliance and level playing field.  

Who supports which option?  
A  majority  of  Member  States  have  expressed  support  for  the  preferred  choice.  The  targeted  consultation  of 
platform  operators  concurred  to  favour  a  legislative  intervention,  with  as  little  distortions  as  possible  across 
platform operators. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?                                        
The  intervention  is  expected  to  have  significant  direct  economic  benefits.  It  will  have  a  positive  impact  on  tax 
collection,  with estimated additional tax revenues of circa €30 billion (higher bound estimate). Those revenues 
will  allow  funding  Member  States’  economic  and  social  policies.  The  initiative  is  also  expected  to  level  the 
playing field for platform operators and for those who use platforms to sell their goods and/or services. It will also 
contribute to greater fairness as trust in the tax system, with a fair burden-sharing across taxpayers.  

What are the costs of the preferred option (if any, otherwise main ones)?  
By  analogy  with  previous  reporting  requirements,  the  costs  for  tax  administrations  can  be  estimated  at  circa 
€200 million of one-off development costs and up to €30 million of recurrent costs. The costs for platforms are  

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estimated overall at €875 million one-off costs and circa €100 million of recurrent costs. Costs are estimated for 
all  platforms  and,  on  average,  would  be  in  tens  of  thousand  of  euro  per  platform  (recurrent  costs).  These 
estimate are however based on a number of assumptions and extrapolations and should be used with caution. 

How will businesses, SMEs and micro-enterprises be affected?  

The intervention is expected to have an impact on small and medium sized businesses, as all digital platforms 
and sellers are covered by the initiative irrespective of size. While the initiative will bring compliance costs, it may 
be more favourable to SMEs than the current patchwork of reporting requirements across the EU. The initiative 
should also level the playing field across players, which should benefit SMEs. 

Will there be significant impacts on national budgets and administrations?  
There will be additional costs for tax administrations in developing IT systems to enable reporting, store and use 
data, estimated, for all 27 EU tax administrations, at circa €200 million of one-off development costs and up to 
€30 million of recurrent costs. The benefits for national budgets in terms of additional tax revenues are estimated 
in tens of billion of euro (upper bound estimate: circa €30 billion).  

Will there be other significant impacts?   
The intervention will comply with the General Data Protection Regulation and therefore will not impact negatively 
the fundamental right to protection of personal data.  

D. Follow up 

When will the policy be reviewed?  
The  intervention  will  be  monitored  through  information  collected  via  yearly  surveys  and  discussions  with  tax 
administrations.  A  more  comprehensive  assessment  will  take  place  in  2023,  when  the  Commission  is  due  to 
present a report to the European Parliament and the Council on the functioning of the Directive administrative 
cooperation in direct taxation.  

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