COMMISSION STAFF WORKING DOCUMENT Subsidiarity grid 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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 15.7.2020  SWD(2020) 129 final  COMMISSION STAFF WORKING DOCUMENT Subsidiarity grid 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) 130 final} - {SWD(2020) 131 final}  
 
 
1.  Can the Union act? What is the legal basis and competence of the Unions’ intended action? 

1.1 Which article(s) of the Treaty are used to support the legislative proposal or policy initiative? 

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.  Furthermore,  given  that  the  information 
exchanged under the Directive can be also used in the field of VAT and other indirect taxes, Article 
113 of the TFEU is also quoted as a legal base. 

1.2 Is the Union competence represented by this Treaty article exclusive, shared or supporting in 
nature? 

In the case of direct taxation as far as the proposal relates to the establishment or functioning of the 
internal market, the Union’s competence is shared. 

2.  Subsidiarity Principle: Why should the EU act? 

2.1 Does the proposal fulfil the procedural requirements of Protocol No. 21: 

-  Has there been a wide consultation before proposing the act? 
- 

Is  there  a  detailed  statement  with  qualitative  and,  where  possible,  quantitative  indicators 
allowing an appraisal of whether the action can best be achieved at Union level? 

There  has  been  an  extensive  consultation  process  while  preparing  the  current  proposal.  As  the 
proposed  legislation  amends  existing  provisions  of  the  Directive,  the  “evaluate  principle”  was 
applied.  
• 

Evaluations of existing legislation 

In 2019, the Commission evaluated  the effectiveness, efficiency, relevance, coherence and 
additional value of the Directive on administrative cooperation in the field of direct taxation. 
The evaluation concluded that cooperation brings about important benefits, yet there is still 
scope for improvement. It demonstrated that differences persist in the way Member States 
exploit the  available  tools  of  administrative  cooperation.  The  information  exchanged  could 
be  used  more  efficiently  and  the  benefits  of  cooperation  could  be  analysed  in  a  more 
comprehensive  manner.  Building  upon  the  evaluation,  this  legislative  proposal  presents  a 
limited set of specific interventions to improve the functioning of administrative cooperation. 

The following consultation activities were carried out: 

• 

Stakeholder consultations 

On  10  February  2020  the  European  Commission  launched  a  Public  Consultation  to  gather 
feedback  on  the  way  forward  for  EU  action  on  strengthening  the  exchange  of  information 
framework  in  the  field  of  taxation.  A  number  of  possible  options  were  presented  and 
stakeholders  gave  their  feedback  in  a  total  of  37  responses.  In  addition,  the  European 
Commission  carried  out  targeted  consultations  with national  administrations  and  also  with 
platform operators. There was a consensus on the benefits of having a standardised EU legal 
framework  for  gathering  information  from  platforms,  as  compared  to  several  disparate 
national reporting rules. 

• 

Member States’ consultations 

1 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12016E/PRO/02&from=EN  

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The  European  Commission  carried  out  targeted  consultations  via  a  questionnaire  for  the 
Member  States.  In  addition,  on  26  February  2020,  DG  TAXUD  organized  a  meeting  of 
Working Party IV and Member States had the opportunity to debate a possible proposal for 
an  amendment  to  the  Directive.  The  meeting  focused  on  the  reporting  and  exchange  of 
information on income earned through digital platforms. 

Overall,  broad  support  was  recorded  for  a  possible  EU  initiative  for  the  exchange  of 
information  on  income  earned  by  Sellers  via  digital  platforms.  Member  States  favoured  a 
broad scope for the new legal framework that in addition to income from renting immovable 
property and the provision of personal services, would also include the sale of goods, rentals 
of any mode of transport and crowdfunding services.  

• 

Outcome of consultations 

Both  public  and  targeted  consultations  seem  to  converge  on  the  challenges  that  the  new 
rules  on  digital  platforms  should  aim  to  tackle:  underreporting  in  the  digital  platform 
economy and inefficiencies in the current EU administrative cooperation framework, such as 
in the field of joint audits.  

The explanatory memorandum and the impact assessment include a section on the principle 
of subsidiarity, for details see question 2.2 below. 

2.2 Does  the  explanatory  memorandum  (and  any  impact  assessment)  accompanying  the 
Commission’s  proposal  contain  an  adequate  justification  regarding  the  conformity  with  the 
principle of subsidiarity? 

The  proposal  fully  observes  the  principle  of  subsidiarity  as  set  out  in  Article  5  TFEU.  It 
addresses  administrative  cooperation 
includes  certain 
modifications in the rules to improve the functioning of the existing provisions that deal with 
cross-border  cooperation  between  tax  administrations  from  different  Member  States.  The 
proposal also involves extending the scope of automatic exchange of information to platform 
operators  by  placing  an  obligation  on  them  to  report  on  the  income  earned  by  sellers  of 
goods and services who make use of the relevant platforms.  

in  the  field  of  taxation.  This 

The  application  of  existing  provisions  of  the  Directive  has  shown  significant  discrepancies 
among  Member  States.  While  some  Member  States  are  willing  to  fully  cooperate  and 
exchange  information,  other  Member  States  take  a  restrictive  approach  or  even  reject 
exchanges of information. Further, certain provisions have proved insufficient for addressing 
the needs of tax administrations in cooperating with other Member State(s) over time. 
In addition, the increased use of digital platforms for providing services and selling goods has 
led to inconsistent declarations of income by sellers, which poses a high risk of tax evasion. 
While  several  Member  States  have  imposed  a  reporting  obligation  in  their  national  law 
and/or  through  administrative  guidance,  experience  shows  that  national  provisions  against 
tax evasion cannot be fully effective, especially when the targeted activities are carried out 
cross-border. 

Legal certainty and clarity can only be ensured by addressing these inefficiencies through a 
single  set  of  rules  to  apply  to  all  Member  States.  The  internal  market  needs  a  robust 
mechanism to address these loopholes in a uniform fashion and rectify existing distortions by 
ensuring that tax authorities receive appropriate information on a timely basis. Considering 
that  the  reporting  obligation  with  respect  to  the  income  earned  via  the  use  of  digital 
platforms aims to primarily inform tax authorities about activities with a dimension beyond a 
single jurisdiction, it is necessary to embark on any such initiative through action at the level 

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of the EU, in order to ensure a uniform approach to the identified problem.  

Therefore,  the  EU is better placed than individual Member States to address  the  problems 
identified and ensure the effectiveness and completeness of the system for the exchange of 
information and administrative cooperation.. First, it will ensure a consistent application of 
the  rules  across  the  EU.  Second,  all  digital  platforms  in  scope  will  be  subject  to  the  same 
reporting  requirements.  Third,  the  reporting  will  be  accompanied  with  exchange  of 
information  and,  as  such, enable  the  tax  administrations  to  obtain  a  comprehensive  set  of 
information regarding the income earned through a digital platform. 

2.3 Based  on  the  answers  to  the  questions  below,  can  the  objectives  of  the  proposed  action  be 

achieved sufficiently by the Member States acting alone (necessity for EU action)? 

(a)  Are  there  significant/appreciable  transnational/cross-border  aspects  to  the  problems  being 

tackled? Have these been quantified? 

One of the main problems which needs to be addressed with this initiative is under-reporting 
(or lack of reporting overall)  by platform sellers. At present,  a sizeable  amount  of earnings 
obtained  via  digital  platforms  remains  unknown  to  tax  administrations  and  untaxed.  The 
initiative  is  meant  to  improve  the  ability  of  Member  States  to  detect  and  counter  cross-
border tax avoidance and evasion. With respect to the income earned via the use of digital 
platforms,  it  is  possible  to  generalise  and  to  estimate  the  tax  gap  for  the  whole  EU.  The 
impact  assessment  accompanying  this  initiative  estimates  the  tax  gap  in  all  sectors  (goods 
and  services)  in  2018  to  be  between  €2.7  billion  (lower  bound)  and  €7.1  billion  (upper 
bound)2 The trend for the income earned through digital plaforms over the last 5 years has 
been an increasing one.  

(b)  Would national action or the absence of the EU level action conflict with core objectives of 

the Treaty3 or significantly damage the interests of other Member States? 

National actions could potentially damage the interest of other Member States. For example, 
if a Member State applies the standards of the administrative cooperation and exchange of 
information stricter than other Member States, this can lead to impaired cooperation among 
the  Member  States.  In  addition,  national  actions  would  not  be  sufficient  to  address  the 
problem  in  its  entirety  as  the  legislative  proposal  introduces  not  only  a  reporting 
requirement for platforms with respect to the income earned through their use, but also the 
mandatory exchange of this information in cross-border scenarios.   

(c)  To  what  extent  do  Member  States  have  the  ability  or  possibility  to  enact  appropriate 

measures? 

Member  States  can  individually  impose  domestic  reporting  measures.  However,  in  some 
Member  States,  there  is  no  legislation  for  self-initiated  third  party  reporting  whatsoever 
while in other countries the current state of legislation does not cover all the platforms from 
where  their  residents  gain  their  income.  In  addition,  there  are  uncertainties  as  to  whether 
reporting  obligations  based  on  domestic  legislation  can  be  enforced  to  platforms  that  are 
neither registered nor have a permanent establishment in the regulating jurisdiction.  
The  Member  States  cannot  unilaterally  impose  the  appropriate  measures  for  exchange  of 
information  and  administrative  cooperation.  Therefore,  the  nature  of  the  measure  is  not 
compatible  with  unilateral  action  at  national  level,  which  would  not  as  such  lead  to 

2 Impact Assessment, p 28.  
3 https://europa.eu/european-union/about-eu/eu-in-brief_en  

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achievement of its objectives.  

(d)  How  does  the  problem  and  its  causes  (e.g.  negative  externalities,  spill-over  effects)  vary 

across the national, regional and local levels of the EU? 

Tax administrations have in several cases  decided to act, on their own, to try to tackle this 
problem by introducing national reporting requirements for platforms regarding the income 
earned  by  sellers  through  the  use  of  these  platforms.  Fragmentation  may  result  in 
unnecessary  burdens  on  digital  platforms.  The  business  environment  becomes  more 
complicated,  with various national  reporting models,  higher  compliance  and  administrative 
costs, without sufficiently tackling the issue. 

(e)  Is the problem widespread across the EU or limited to a few Member States? 

The problem linked to the absence of a reporting obligation of income earned via the digital 
platforms  is  more  emphasized  in  some  Member  States  than  others  as  a  result  of  different 
approaches  to  the  national  regulation  of  the  matter.  However,  the  problem  related  to  the 
lack  of  reporting  is  widespread  across  the  EU  as  the  sellers  are  located  and  active  in  all 
Member  States.  Given  the  flexible  and  cross-border  nature  of  the  subject  matter,  this 
problem  affects  all  other  Member  States  which  cannot  efficiently  cooperate  or  exchange 
information amongst themselves. 

(f)  Are Member States overstretched in achieving the objectives of the planned measure? 

As the proposed legislation improves the existings provisions of administrative cooperation 
and exchange of information, it is expected that the Member State will be required to build 
upon  existing  tools  and  systems.  In  addition,  the  proposed  legislation  adds  a  reporting 
requirement  for  income  earned  via  the  digital  platforms.  Several  Member  States  already 
have domestic legislation and/or administrative guidance in place, but this has proved not to 
be  sufficient  for  achieving  the  desired  goals.  Therefore,  building  upon  existing  tools  and 
making those more efficient while, at the same time, standardizing reporting obligations on 
income earned via the digital platforms, does not overburden the Member States.  

(g)  How  do  the  views/preferred  courses  of  action  of  national,  regional  and  local  authorities 

differ across the EU? 

All  Member  States  agreed  that  improvements  in  the  existing  provisions  of  the  Directive 
should  be  done  via  an  amending  directive.  National,  regional  and  local  authorities  have 
expressed  this  concern  during  the  evaluation  and  also  in  the  expert  group  refered  to  as 
ACDT, organized by the Commission, which meets biannually. A broad support was recorded 
also for a possible EU initiative for the exchange of information on income earned by sellers 
via digital platforms. Member States favoured a broad scope for the new legal framework so 
that, in addition to income from renting immovable property and the provision of personal 
services,  it  would  also  include  the  sale  of  goods,  rentals  of  any  mode  of  transport  and 
crowdfunding services. 

2.4 Based  on  the  answer  to  the  questions  below,  can  the  objectives  of  the  proposed  action  be 
better achieved at Union level by reason of scale or effects of that action (EU added value)? 

(a)  Are there clear benefits from EU level action?  

An action at the level of the EU will bring an added value, as compared to individual Member 
State initiatives in the field. First, it will ensure a consistent application of the rules across the 

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EU. Second, all platforms in scope will be subject to the same reporting requirements. Third, 
the reporting will be accompanied with exchange of information and, as such, enable the tax 
administrations to obtain a comprehensive set of information regarding the income earned 
through a digital platform.  

(b)  Are there economies of scale? Can the objectives be met more efficiently at EU level (larger 

benefits per unit cost)? Will the functioning of the internal market be improved? 

The initiative aims at ensuring a fair and consistent functioning of the internal market, where 
everyone  pays  its  fair  share  of  tax.  Lack  of  a  level  playing  field  and  different  reporting 
requirements imposed by Member States at national level may distort the market allocation 
of services and goods provided via digital platforms. By imposing a reporting requirement on 
the digital platforms, the income of sellers will be reported and in such way a level playing 
field  created  between  the  sellers  operating  with  and  those  without  the  use  of  a  digital 
platforms, and across platform operators that will all be subject to the same requirements. 

(c)  What  are  the  benefits  in  replacing  different  national  policies  and  rules  with  a  more 

homogenous policy approach? 

Individual  practices  in  certain  Member  States  have  demonstrated  that  the  standards  are 
applied  too  strictly  and  therefore  the  administrative  cooperation  and  exchange  of 
information  is  impaired.  As  these  are  measures  that  address  procedures  for  which 
cooperation of at least two Member States is required, it is crucial to define these standards 
and rules  in a homogenous way. This will achieve  consistent  application across the EU and 
enable the efficient administrative cooperation and exchange of information.  
Having a harmonized reporting requirement will create a simplified reporting system for the 
platfroms,  and  at  the  same  time,  ensure  reporting  of  the  income  regardless  of  the 
jurisdiction of the platform’s tax residence.  

(d)  Do the  benefits  of EU-level action outweigh the loss of competence  of the Member States 
and the  local and regional authorities (beyond the costs  and benefits of acting at national, 
regional and local levels)? 

Yes, income earned through the digital platform economy is currently under-reported. Better 
reporting  and  exchange  of  information  should  therefore  have  a  positive  impact  on  the 
revenues collected by tax administrations. The estimated benefits in terms of the collection 
of tax revenue and improved administrative cooperation outweight the costs.  

(e)  Will there be improved legal clarity for those having to implement the legislation? 

Yes, the purpose of improving the existing provision of the Directive is to provide legal clarity 
both for tax administrations and taxpayers. The standardized reporting of income earned via 
the digital platforms will provide legal clarity because the platforms will have to comply with 
the same standard across the EU, as defined in the Directive. 

3.  Proportionality: How the EU should act 

3.1  Does  the  explanatory  memorandum  (and  any  impact  assessment)  accompanying  the 
Commission’s proposal contain an adequate justification regarding the proportionality of the 
proposal  and  a  statement  allowing  appraisal  of  the  compliance  of  the  proposal  with  the 
principle of proportionality? 

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The proposal consists of improving existing provisions of the Directive and extends the scope of 
automatic  exchanges  to  certain  specific  information  reported  by  the  platform  operators.  The 
envisaged action does not go beyond what is necessary to achieve the objective of exchanges of 
information  and  more  broadly,  administrative  cooperation.  Considering  that  the  identified 
distortions  in  the  functioning  of  the  internal  market  usually  expand  beyond  the  borders  of  a 
single  Member  State,  EU  common  rules  represent  the  minimum  necessary  for  tackling  the 
problems in an effective manner.  

Thus,  the  proposed  rules  contribute  to  a  clearer,  consistent  and  effective  application  of  the 
Directive  leading  to  better  ways  for  achieving  its  objectives.  The  envisaged  obligation  of 
Platform Operators to report on the revenue earned by their clients, i.e. the Sellers, also offers a 
workable  solution  against  tax  evasion  through  the  use  of  mechanisms  for  the  exchange  of 
information  that  have  previously  already  been  tried  for  amending  Directive  2014/107/EU  and 
amending Directive 2016/881. In this vein, one can claim that the proposed initiative represents 
a proportionate answer to the identified inconsistencies in the Directive and also aims to tackle 
the problem of tax evasion. 

3.2 Based  on  the  answers  to  the  questions  below  and  information  available  from  any  impact 
assessment,  the  explanatory  memorandum  or  other  sources,  is  the  proposed  action  an 
appropriate way to achieve the intended objectives? 

(a)  Is the initiative limited to those aspects that Member States cannot achieve satisfactorily on 

their own, and where the Union can do better? 

Yes. The initiative is limited to improving existing provisions and to add an EU-wide reporting 
obligation  combined  with  mandatory  automatic  exchange  of  information  as  national 
measures  have  proved insufficient for addressing the identified problem. As seen from the 
questionnaire  to  Member  States  on  the  latter,  national  authorities  broadly  support  this 
initiative. 

(b)  Is  the  form  of  Union  action  (choice  of  instrument)  justified,  as  simple  as  possible,  and 
coherent with the satisfactory achievement of, and ensuring compliance with the objectives 
pursued  (e.g.  choice  between  regulation,  (framework)  directive,  recommendation,  or 
alternative regulatory methods such as co-legislation, etc.)? 

The policy intervention in the form of a directive ensures consistency and clarity in the most 
effective  and  simple  way  possible.  It  is  also  proportional  to  achieve  its  objectives.  The 
regulatory option is the most appropriate way for meeting the objectives of EU action. The 
status quo or baseline scenario is the least effective, efficient or coherent option. Differently 
from the baseline scenario, an EU mandatory common standard would ensure that all EU tax 
administrations have the same tools for administrative cooperation and access to the same 
type  of  data.  In  other  words,  an  EU  regulatory  action  would  put  all  tax  authorities  on  an 
equal footing. This also allows for the automatic exchange of information at the EU level on 
the basis of common standards and specifications.  

(c)  Does the Union action leave as much scope for national decision as possible while achieving 
satisfactorily the objectives set? (e.g. is it possible to limit the European action to minimum 
standards or use a less stringent policy instrument og approach?) 

Yes,  the  proposal  is  limited  to  imposing  minimum  standards  and  the  rules  necessary  to 
achieve  the  set  objectives.  This  will  be  done  via  a  proposal  for  a  directive  the  adoption  of 
which requires unanimity in the Council. 

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(d)  Does  the 

initiative  create  financial  or  administrative  cost  for  the  Union,  national 
governments,  regional or local authorities, economic operators or citizens? Are these costs 
commensurate with the objective to be achieved? 

The  benefits  clearly  outweigh  the  costs  as  the  analysis  from the  impact  assessment  report 
has  shown.  The  costs  are  in  line  with  the  objectives  of  the  initiative.  See  below,  a  short 
summary of the costs and benefits. It should be noted that these estimations are based on a 
number  of  assumptions  and  extrapolations  that  are  explained  in  details  in  the  impact 
assessment. 
Costs: 

  According to the estimates, the one-off, substantive compliance costs for platforms 
vary EU-wide between approximately EUR 250 million in the case of a limited scope 
to EUR 875 million in case of a full scope. These costs  are estimated for the whole 
estimated  population  of  sellers.  The  cost  estimates  per  platform,  on  average,  are 
circa  EUR  400  000.  The  recurrent  administrative  costs  for  platforms  would  vary 
between EUR 30 million in the case of a limited scope  to about  EUR 100 million in 
case  of  a  full  scope.  These  costs  are  estimated  for  the  whole  population  of  sellers. 
The administrative costs per platform, on average, would range at 50 000 per year.  
  One-off costs for all tax administrations are estimated at between EUR 54 million to 
€189 million, depending on the scope of reporting. That means EUR 2 million to €7 
million  per  tax  administration,  on  average.  The  recurrent  costs  of  the  system  are 
estimated approximately between EUR 6 million (limited scope) and EUR 21 million 
(full  scope)  per  year,  or  approximately  EUR  200  000  to  EUR  800  000  per  Member 
State. These estimates are extrapolated from the costs incurred by Member States in 
operating  the  system  for  the  automatic  exchange  of  information  of  financial 
accounts  (DAC2).  In  addition  to  the  costs  of  running  the  system  and  keeping  it 
operational  (i.e.  ensuring  the  actual  exchange  of  data),  tax  administrations  would 
incur (labour) costs for exploiting the data, which can be referred to as enforcement 
costs.  Overall,  recurrent  enforcement  costs  would  vary  between  EUR  3  million  to 
more  than  EUR  10  million,  or  about  EUR  100  000  to  EUR  400  000  per  tax 
administration. 

it 

is 

likely  that  the  Commission  would 

  The  Commission  would  also  bear  costs.  In  any  legislative  option,  on  the  basis  of 
current  and  past  experience, 
incur 
development costs, for defining the common, EU specifications of the new system of 
data collection and for setting up or adapting the existing EU systems to enable the 
exchange  of  information  to  take  place.  The  one-off  costs  for  the  Commission  are 
estimated at EUR 1.1 million for the development and first five years of operations of 
the  system.  The  recurrent,  administrative  costs  are  estimated  at  about  EUR  0.2 
million per year. 

Benefits: 
 

Implementing  the  limited  scope  would  logically  yield  the  smallest  tax  revenues 
(between  EUR  1.1  and  3.8  billion),  as  it  would  be  applied  to  a  subset  of  activities, 
whereas  the  full  scope  option  (goods  +  all  services)  would  yield  the  largest  tax 
revenues (between EUR 2.7 billion and EUR 7.1 billion). By comparison, the total tax 
revenue  arising  from  direct  taxes  was  EUR  1.7  trillion  in  2017  in  the  EU-27,  which 
means  that  the  additional  tax  benefits  would  vary  between  0.07%  (limited  scope, 
lowest estimate) and 0.41% (full scope, highest estimate) of total direct taxes. 

  The  fiscal  benefits  of  an  EU  intervention  are  much  larger  in  case  of  reporting 
obligation applying to all services and sale of goods. In 2025, additional tax revenues 
are  estimated  to  range  approximately  between  EUR  11  and  33  billion  while  they 
would range between EUR 3 and 10 billion, if only a subset of services was covered 

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by  the  initiative.  The  estimation  suggests  that  by  2025,  the  effects  of  the  various 
options on tax revenue would be significantly higher, as the platform economy grows 
in importance across the EU. 

(e)  While  respecting  the  Union  law,  have  special  circumstances  applying  in  individual  Member 

States been taken into account? 

Not applicable. 

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