EU directive on exchange of information on tax ‘letters of comfort’ due early in 2015

An EU directive on the automatic exchange of information regarding tax rulings – so-called letter of comforts offered by tax authorities to companies – will be unveiled by the first quarter of next year, the European Commission confirmed as the EU’s executive arm pledged to continue its battle against aggressive corporate tax planning.

Confirmation that the directive will be unveiled within the next four months follows a call by Germany, France and Italy for the European Commission to clamp down on corporate tax avoidance. In a letter to the EU's new economics commissioner Pierre Moscovici earlier this week, the finance ministers of the euro zone's three largest economies, urged the European Commission to tighten EU tax rules, according to a report in the Financial Times.

“The lack of tax harmonisation in the European Union is one of the main causes allowing aggressive tax planning, base erosion and profit shifting (Beps) to develop within the internal market,” the three finance ministers wrote.

The Juncker Commission has indicated its intention to tackle the issue of tax harmonisation and revive the controversial Common Consolidated Corporate Tax Base (CCCTB) during its tenure, a move that is likely to be strongly opposed by a number of countries including Ireland.

In Brussels Tuesday, a European Commission spokeswoman said that Commissioner Moscovici was “delighted” at the support from Italy, France and Germany as regards the automatic exchange of information on tax rulings, noting that the three countries had already announced additional measures that could lead to a broader strategy against aggressive tax planning.

“The commissioner welcomed these significant contributions to the work being carried out by the European Commission,” the spokeswoman said. “This is really a crucial subject which is of relevance to the whole of the European Union. An extended debate on this could only be a good thing.”

The planned directive, which would oblige countries to share information regarding the specific tax rulings they offer multinationals, is the cornerstone of the European Commission’s new front against corporate tax avoidance, which was unveiled in the wake of the “Lux Leaks” scandal. The exposé revealed how more than 343 companies slashed their tax bills through specific tax rulings offered by Luxembourg while current European Commission president Jean-Claude Juncker was Prime Minister.

The European Commission is currently investigating tax rulings offered by three countries – Ireland, Luxembourg and the Netherlands – to establish if certain tax deals were in breach of state-aid rules. The result of the Commission's investigation into Apple's tax arrangements in Ireland is expected by the second quarter of next year, the European Commissioner for Taxation Margrethe Vestager said recently.

Mr Juncker said last week that he had tasked Commissioner Moscovici with finding further ways of introducing tax harmonisation across the EU “using all tools available”. He also pledged to reignite the Common Consolidated Corporate Tax Base (CCCTB) a policy that has languished in the EU legislative system having failed to gain the support of a number of member states.