According to the consultation documents, between €35bn and €70bn of tax revenue is lost in the EU each year to tax avoidance. To tackle this, the Commission has put forward several possible measures to prevent “enablers” from setting up complex structures in non-EU countries, which erode the tax base of Member States through tax evasion and aggressive tax planning. These are the three key options which could form the basis of an eventual EU Directive:
- a requirement for all enablers to carry out dedicated due diligence procedures;
- a prohibition to facilitate tax evasion and aggressive tax planning, combined with due diligence procedures and a requirement for enablers to register in the EU; and
- a code of conduct for all enablers.
As a member body of the European association of tax advisers, CFE Tax Advisers Europe, ICAEW’s Tax Faculty has been actively involved in providing input into CFE’s response to the Commission consultation with the support of ICAEW’s Brussels Office. A newly released CFE position paper makes several key points, including the following.
- Additional legislative action in this area should not be taken until the Commission has undertaken further analysis of the nature and extent of the problem. This will allow any measures eventually proposed to be better informed and aligned with broader policy priorities.
- Any proposals should not have a disproportionate impact on reputable tax advisers (including those who are members of professional bodies). Additional compliance burdens should not go beyond reasonable due diligence.
- The Commission should consider the CFE paper “Professional Judgment in Tax Planning – An Ethics Quality Bar for All Tax Advisers”, developed with significant support from ICAEW, when refining its proposals.
Director of Tax Policy at CFE, Aleksandar Ivanovski, said:
“CFE supports reasonable and proportionate initiatives at European level to tackle aggressive tax avoidance and tax evasion. Our aim is to support policymakers in achieving their overall aims while ensuring that regulation and reporting obligations are proportionate and do not over-burden taxpayers and their advisers, thereby undermining the policy goals of the SAFE initiative and ultimately the post-pandemic economic recovery. Our paper “Professional Judgment in Tax Planning - An Ethics Quality Bar for All Advisers” seeks to help move the dial forward by setting out a framework to help steer all advisers in the direction of an appropriate balance between the rights and obligations of taxpayers, thereby raising standards in tax advice and reducing incentives for aggressive tax avoidance.”
ICAEW has also been sharing views with Accountancy Europe.
Letter with CIOT
Reflecting the European interest in the regulatory regime applicable in the UK, ICAEW and CIOT have submitted a joint letter to the Commission, providing further feedback on the UK experiences.
The letter focuses on various efforts to tackle tax avoidance in the UK and includes the following key points.
- It would be useful for the EU to conduct a more systematic tax gap analysis to provide a more accurate indication of the extent of tax evasion and aggressive tax planning.
- The Commission is advised to review in detail the Professional Conduct in Relation to Taxation (PCRT) rules devised in the UK by the seven largest professional bodies representing accountants and tax advisers.
- A very clear definition is required when defining the term “enablers”.
- It is very important to ensure any additional burdens are reasonable and proportionate to avoid advisers leaving the market, which could result in taxpayers deciding to “do it themselves” and get it wrong.
Regulation of tax advisers is clearly a hot topic. This is driven by several factors, including the need to close the tax gap and drive out poor behaviours by certain tax advisers.
This year’s Wyman Symposium takes place on 1 November at Chartered Accountants’ Hall and asks whether regulation of the tax profession is the way forward.
The provision of tax services is already regulated in some countries, but whether such regulation is always effective is less clear. In many countries, including the UK, the provision of tax services is unregulated – anybody can set themselves up as a tax adviser, even if they know nothing about tax. This provides scope for unscrupulous advisers to abuse the system and be able to operate with little or no oversight. This damages the effectiveness of the tax system and can undermine the work of professional advisers, such as ICAEW members who do have to comply with extensive professional obligations.
This is an important topic for the future of our profession. The Wyman Symposium is an in-person event but there is an option to join remotely. For further details, including the speakers and booking details, please visit: Wyman Symposium 2022. The Tax Faculty urges as many to register to attend as possible, whether in person or virtually.
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