Corporate tax avoidance
The Council discussed a draft directive addressing tax avoidance practices commonly used by large companies. After lengthy discussions, it agreed to postpone an agreement on the dossier to its meeting on 17 June 2016.
The draft directive builds on 2015 OECD recommendations to address tax base erosion and profit shifting. It addresses situations where corporate groups take advantage of disparities between national tax systems in order to reduce their tax liability.
"This directive will enable member states to better respond to aggressive tax avoidance practices, and we are confident that we will obtain an ambitious outcome next month", said Jeroen Dijsselbloem, minister for finance of the Netherlands and president of the Council. “We had a constructive debate among ministers today, which allowed us to narrow down the number of key issues to be resolved."
The Council registered progress on two other elements of the Commission's January 2016 package of proposals against corporate tax avoidance. Further to an agreement reached in March, it adopted a directive on the reporting by multinational companies of tax-related information and exchange of that information between member states. This directive transposes the OECD's recommendation on country-by-country reporting by multinationals into a legally binding EU instrument. It covers companies with a total consolidated group revenue of at least €750 million.
The Council additionally adopted conclusions on the third country aspects of the Commission's proposals. Amongst other things, the conclusions refer to the establishment of an EU list of non-cooperative jurisdictions, on which work will start in September 2016.
VAT action plan
The Council adopted conclusions on the Commission's VAT action plan and a special report by the Court of Auditors on VAT fraud.
The conclusions highlight the importance of administrative cooperation, in particular the automatic exchange of information, for preventing VAT fraud. The Council welcomed plans to reduce VAT compliance burdens for businesses, particularly for SMEs, and emphasised the need to simplify cross-border e-commerce. The conclusions welcome the Commission's intention to propose increased flexibility on VAT rates, whilst noting the need for the VAT system to maintain a sufficient level of harmonisation.
The Commission will present a proposal at the latest in 2017 for a definitive VAT system for cross-border trade.
"Today we made only a first step, and proposals from the Commission will be needed to make further progress", Mr Dijsselbloem said. "The modernisation of VAT and the fight against VAT fraud is high on the agenda of the Netherlands presidency."
The Council also adopted a directive maintaining the minimum standard VAT rate at 15% until the end of 2017, pending discussions on definitive VAT rules.