Consensus is emerging among EU finance ministers that the EU Commission’s proposal for automatic exchange of private tax ruling information should be adopted with modifications that provide for more limited information disclosures and a shorter period of retroactive application, Pierre Gramegna, Finance Minister of Luxembourg and ECOFIN Council President, said September 22 at a hearing held by the European Parliament’s Committee on Tax Rulings.
“We are moving in a direction where [we agree that] the Commission can get a lot of information, but not all the information,” said Gramegna, reporting on discussions held September 11 at an informal ECOFIN meeting in Luxembourg.
Many countries are prohibited by law from giving the EU Commission information about private tax rulings, “specifically, also the names” of the parties to the agreement, Gramegna said.
Also, while the Commission’s transparency proposal would require the exchange of still-valid cross-border tax rulings that were issued up to 10 years before the proposed directive takes effect, the ministers are “getting close to consensus on a period of five years,” Gramegna said.
“If we can tackle these two issues, we are going to have a directive very quickly,” Gramegna said. He said he was optimistic that political agreement will be reached at the October 6 ECOFIN meeting and that a directive would be adopted before the end of 2015. Implementation would occur quickly after that, he said.
Committee on Tax Rulings Chairman, Alain Lamassoure, called proposal to limit retroactive application of automatic exchange of tax rulings to five years “absurd.”
“I think we have to take into account all rulings which now now apply. They might have been decided five years ago, ten years ago, 50 years ago, or three centuries ago. It does not matter. What matters is if they still apply,” he said.
Minimum effective corporate taxation
Gramegna also said that finance ministers discussed at the informal ECOFIN meeting the possibility of adopting EU-wide rules on minimum effective corporate taxation. The issue was put on the agenda at the request of a number of member states that wished to discuss the possibility of applying the measure in the context of the interest and royalties directive, he said. Gramegna said it was “a courageous first step to put this on the table,” as many countries oppose it.
He also said that further action on whether to make country-by-country reporting public for all multinationals is awaiting the results of the Commission’s impact assessment and recommendations.
While Gramegna sought to limit discussion at the hearing to his role as ECOFIN President, MEPs nonetheless questioned him extensively about his role as Luxembourg finance minister.
He was asked to explain why Luxembourg was prosecuting “Lux Leaks” whistlelower Antoine Deltour; why Luxembourg was entering into tax treaties with tax havens; whether the huge amounts of foreign direct investment that flow into Luxembourg are the result of the country’s tax policies; and whether Luxembourg is an enabler of multinational tax avoidance.
While not responding directly to any of the questions, Gramegna said that Luxembourg has improved its track record significantly in the last 20 months. He noted that whereas the country has been deemed non-compliant by the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, he said he believed the country would soon be rated “largely compliant.” He also noted that Luxembourg has abolished bank security.
“You should not look at the past to judge the present and the future,” he said.
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