REPORT on the proposal for a Council directive repealing Council Directive 2003/48/EC

16.10.2015 - (COM(2015)0129 – C8‑0086/2015 – 2015/0065(CNS)) - *

Committee on Economic and Monetary Affairs
Rapporteur: Molly Scott Cato
(Simplified procedure – Rule 50(2) of the Rules of Procedure)

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a Council directive repealing Council Directive 2003/48/EC

(COM(2015)0129 – C8‑0086/2015 – 2015/0065(CNS))

(Special legislative procedure – consultation)

The European Parliament,

–  having regard to the Commission proposal to the Council (COM(2015)0129),

–  having regard to Article 115 of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C8‑0086/2015),

–  having regard to Rules 59 and 50(2) of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0299/2015),

1.  Approves the Commission proposal as amended;

2.  Calls on the Commission to alter its proposal accordingly, in accordance with Article 293(2) of the Treaty on the Functioning of the European Union;

3.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

4.  Asks the Council to consult Parliament again if it intends to substantially amend the Commission proposal;

5.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Amendment    1 Proposal for a directive Recital 5

Text proposed by the Commission Amendment (5) Directive 2014/107/EU is generally broader in scope than Directive 2003/48/EC and provides that in cases of overlap of scope, Directive 2014/107/EU prevails. There are still residual cases in which only Directive 2003/48/EC would otherwise apply. These residual cases are a consequence of slight differences in approach between the two directives and of different specific exemptions. Where, in those limited instances, the scope of Directive 2003/48/EC lies outside the scope of Directive 2014/107/EU, the relevant provisions of Directive 2003/48/EC would continue to apply, resulting in dual reporting standards within the Union. The minor benefits of retaining such dual reporting would be outweighed by the costs. (5) Directive 2014/107/EU is generally broader in scope than Directive 2003/48/EC and provides that in cases of overlap of scope, Directive 2014/107/EU prevails. There are still residual cases in which only Directive 2003/48/EC would otherwise apply. These residual cases are a consequence of slight differences in approach between the two directives and of different specific exemptions. Where, in those limited instances, the scope of Directive 2003/48/EC lies outside the scope of Directive 2014/107/EU, the relevant provisions of Directive 2003/48/EC would continue to apply, resulting in dual reporting standards within the Union. Although no specific cost-benefit analysis has been made of a dual reporting system, not even for a temporary transition period between the two standards, it is reasonable to assume that the minor benefits of retaining such dual reporting would be outweighed by the costs.

Justification

While your rapporteur understands the potential burdens of dual reporting she would have appreciated a cost benefit analysis of such a system in order for the Parliament to make as informed a decision as possible.

Amendment    2 Proposal for a directive Recital 11 a (new)

Text proposed by the Commission Amendment (11a) Provisions equivalent to those in Directive 2003/48/EC are at present applied through separate bilateral agreements between the Union and five European countries that are not Member States of the Union (the Swiss Confederation, the Principality of Liechtenstein, the Republic of San Marino, the Principality of Monaco and the Principality of Andorra), as well as between each of the Member States and 12 dependent or associated territories (the Channel Islands, the Isle of Man and the dependent or associated territories in the Caribbean). It is important that all of those bilateral agreements are adapted to the new OECD Global Standard and to Directive 2014/107/EU. It is also crucial that no loopholes or other inadequacies are created in the process of moving from the existing to the new standard. While having a clear mandate for negotiating the changes to the agreements with those five European countries that are not Member States of the Union, the Commission should, within the framework of its expertise, also take an active role in facilitating and promoting the revision of the Member State agreements with the 12 dependent or associated territories. In order to facilitate ease and efficiency, the Commission should, where appropriate, and subject to explicit Member State consent, take charge of such negotiations.

Justification

Concerns have been raised that potential loopholes could be opened if the agreements with the 5 non-EU European countries are not swiftly agreed. Your rapporteur regrets that the Commission does not have a mandate to negotiate with the 12 overseas dependent territories.

Amendment    3 Proposal for a directive Article 1 – paragraph 3 a (new)

Text proposed by the Commission Amendment 3a. The Commission shall, by 1 July 2016, submit a report to the Council and to the European Parliament on the transition of moving from the reporting standard applied under Directive 2003/48/EC to the new reporting standard established by Directive 2014/107/EU. The report shall include, but not be limited to, any risks of creating loopholes or other inaccuracies in reporting that could have opened up for cross-border tax fraud and evasion. The report shall also cover the related process of revising the separate bilateral agreements between the Union and five European countries that are not Member States of the Union (the Swiss Confederation, the Principality of Liechtenstein, the Republic of San Marino, the Principality of Monaco and the Principality of Andorra) as well as between each of the Member States and 12 dependent or associated territories (the Channel Islands, the Isle of Man and the dependent or associated territories in the Caribbean). The Commission shall, by 1 October 2017, submit a follow-up report in order to closely monitor the situation. The reports shall, where appropriate, be accompanied by legislative proposals.

Justification

Your rapporteur has explored the potential for loopholes that could be opened up by a repeal, and while she consents to the repeal, she believes that it is of the utmost importance that the Commission monitors the consequences of this decision closely, and that it reports back to the Council and Parliament.

EXPLANATORY STATEMENT

Introduction

In 2003 the EU Savings Tax Directive was adopted as a measure to ensure that tax is paid on the interest of savings, and the provisions became applicable in 2005. The Directive applied among EU countries and in separate agreements between EU countries and 12 overseas territories (Anguilla, Aruba, British Virgin Islands, Cayman Islands, Curacao, Guernsey, Isle of Man, Jersey, Monserrat, St Martin, Turk & Caicos Islands). In parallel, the European Commission, on behalf of the European Union, negotiated similar bilateral agreements with five non-EU European countries (Switzerland, Andorra, Liechtenstein, Monaco and San Marino.) Such agreements were signed between June and December 2004.

After evaluation in 2008, the Commission brought forward a revision to tighten certain loopholes, which was finally adopted in 2014. This is due to apply from 1 January 2016.

In the meantime the 2011 Directive on Administrative Cooperation was revised to align with the OECD's global standard on Automatic Exchange of Financial Account Information in Tax Matters and was adopted in 2014. This is also due to apply from 1 January 2016.

Presently, the Commission is re-negotiating with Switzerland, Andorra, Liechtenstein, Monaco and San Marino bilateral agreements to apply the OECD global standards for Automatic Exchange of Information. Progress is most advanced with Switzerland and the Commission hopes to reach an agreement with the other four non-European countries in the months to come.

As part of its March 2015 Tax Transparency Package, the Commission proposed to repeal the 2003 Savings Tax Directive, so that Member States do not have to apply the provisions in both directives, avoiding the inconvenience of double systems of collecting and reporting of data.

This explanatory statement has benefited from the contribution of shadows from the Parliament's political groups, as well as written input from tax experts at DG TAXUD, and oral contributions by independent experts. Your rapporteur has held a formal meeting with political shadows and the aforementioned experts in order to inform her decision.

Scope of the existing legislation

The 2003 Savings Directive requires reporting on interest income on debt claims and similar products, whereas the Directive on Administrative Cooperation has a much wider product scope.

The 2003 Savings Directive applies to a large number of separate bilateral agreements between the EU Member States and overseas territories, as well as between the EU and the five non-EU countries, and reporting has been in place for several years. Currently the Commission is negotiating revised agreements with the five non-EU European countries, using the model of the OECD Global Standard, but negotiation between Member States and overseas territories is not yet underway.

Concerns

The fight against tax avoidance, and the need for fair taxation, is of major concern both at European and global level. While great progress is being made at international level, it is still important to proceed with caution when repealing an existing directive which has been adhered to for several years.

Your rapporteur wishes to avoid a situation of double reporting and unnecessary burden on Members States, or the slowing down of entry into force of the systems designed for reporting under the Directive on Administrative Cooperation; however she does have some concerns about the repeal.

Scope of financial products

The scope of financial products covered by the EU Savings Tax Directive and the Directive on Administrative Cooperation, while generally similar, is not exactly identical. Some products, mostly lows risk depository accounts promoted for savings purposes will not be reported anymore under the Directive on Administrative Cooperation. While there are low risks for tax evasion, your rapporteur believes it is important for the Commission to continue monitoring the repeal does not create loopholes. She suggests the Commission to report to the Parliament once all Member States have produced their lists of national low risk accounts.

Timelines

One of the primary concerns of your rapporteur is about the timings between the repeal coming into force in 2016, and international commitment for Automatic Exchange of Information being for 2017. Despite the progress made at OECD level and commitment to exchange of information from 2017 there is still need for revised bilateral agreements between all jurisdictions, including the 12 overseas territories, and the 28 member states. This could require a transition period of longer than one year for these bilateral agreements to be concluded and ratified. Your rapporteur has been assured that existing agreements would continue to apply. However it has also been raised that information would not be sent from the Member States to the 5 non-EU European countries and the 12 overseas jurisdictions, which could lead to a gap period where tax authorities do not have the information they need to accurately assess tax liabilities. The Commission has assured that this will lead to greater exchange of information.

Third countries and overseas territories

Existing bilateral agreements between the EU and third countries will continue to exist independently of the repeal, however there is concern that if Member States are no longer exchanging information under the Savings Tax Directive these third countries will no longer receive the information needed from financial institutions within EU Member States. Negotiations with the five non-EU European countries are underway and your rapporteur calls for swift conclusion and ratification of these.

Furthermore the Commission has not been given a mandate to negotiate automatic exchange of information agreements with the EU's 12 overseas territories. Your rapporteur regrets such a decision on the part of the Member States, the conclusion of which means that the implementation of the OECD's global standard will have to happen bilaterally with each overseas territory and each Member State. Such agreements could take longer to be agreed and may not be ready by 1 January 2017.

Conclusion

On the basis of the above concerns about the potential for the creation of loopholes, and balancing this against the risk of burdensome double reporting, your rapporteur has had to evaluate how concrete the potential loopholes may be, and whether the burden of double reporting for a year outweighs the need to ensure that such loopholes are not opened up.

Your rapporteur has fully examined the possible loopholes around this repeal, calling on expert advice, and thorough analysis. She consents to the repeal however with three amendments, which demonstrate her concerns and call for the Commission to report on the results of the repeal, with reference to any potential loopholes that may arise. She urges the Commission to act, if necessary by means of legislative proposals, in order to ensure that such loopholes are closed. She believes that these amendments will ensure that the Parliament is playing its role in reducing any potential loss of tax revenue to Member States across the Union.

PROCEDURE – COMMITTEE RESPONSIBLE

Title	Proposal for a Council directive repealing Council Directive 2003/48/EC
References	COM(2015)0129 – C8-0086/2015 – 2015/0065(CNS)
Date of consulting Parliament	31.3.2015
Committee responsible        Date announced in plenary	ECON 15.4.2015
Committees asked for opinions        Date announced in plenary	IMCO 15.4.2015	JURI 15.4.2015	LIBE 15.4.2015
Not delivering opinions        Date of decision	IMCO 20.4.2015	JURI 22.6.2015	LIBE 31.3.2015
Rapporteurs        Date appointed	Molly Scott Cato 28.4.2015
Simplified procedure - date of decision	10.9.2015
Discussed in committee	23.9.2015
Date adopted	15.10.2015
Date tabled	16.10.2015