Debate: Rules to prevent the misuse of shell entities for tax purposes
Date: MONDAY, 16 JANUARY 2023
Speaker: Margrethe Vestager
Language: EN

In order to address the third—country dimension of Pandora Papers, the Commission’s services are working on another initiative called Safe. This initiative will address the role of those intermediaries who enable tax evasion and aggressive tax planning. And what they do is that they devise tax arrangements and schemes that include third—country dimensions. That proposal should be ready for the middle of this year. I wish to thank the rapporteur, Ms Pereira, as well as colleague MEPs and EP colleagues who have worked on preparing this EP report on Unshell. Your commitment to Unshell is really important. This Commission and the Parliament are allies when it comes to promoting standards of tax fairness and transparency within the European Union and beyond. In the Commission, we share the key points made in this report. The report stresses the importance of ensuring that Unshell is as clear as possible. This is essential, not only for taxpayers who need to comply with it, but also for the tax administrators who have to implement it. When rules are not clear, they tend to be either avoided or poorly implemented. We don’t want that to happen. Legal certainty is a must. The report stresses the need for having proportional measures which should not interfere with genuine business practices, and of course, in particular, small and medium—sized businesses and digital startups. On the one hand, one should ensure clear, effective and strict tax consequences against shell entities. On the other, Unshell is a balancing act, and I fully share the importance of ensuring that it does its job well. Unshell will need to put an end to entities that are empty of substance. It should not have a negative impact on the real economy. In the unlikely scenario of genuine businesses being captured by the rules, there is a procedure to request an upfront exemption. I also want to reiterate the Commission’s commitment to assist Member States in the implementation of this legislation by any appropriate and useful means. And let me also assure you that the tax consequences as laid down in the proposal for non-compliant entities will not interfere with the existing bilateral tax agreements between Member States and third countries. And that is a key aspect also in the ongoing discussions within the Council. I would like to thank you for your suggestions regarding the definitions of beneficial owner, the minimum economic substance test and the exceptional carve—out of structures that are not used to gain tax advantages. These are indeed key elements of the legal act, and the Commission remains committed to ensuring that these concepts are adequately delineated and clear in legal terms. Finally, let me also thank you for your interesting suggestion of adding the possibility for Member States’ joint tax audits. The tax consequences for shell entities sit at the heart of Unshell, and that final step will be critical for the effectiveness of the directive. Member States are currently debating the framework in Council, and the Commission is in close cooperation with the Presidency in order to contribute in the best possible way to clarifying how the mechanism will work. We look forward to Member States’ agreement on Unshell soon, and we expect such agreements to be ambitious with clear, yet strong and deterrent tax consequences in order finally to put an end to the use of such shell entities for tax purposes within our Union.