One Directive, Several Transpositions: A Cross-Country Evaluation of the National Implementation of DAC6?
By Elisa Casi, Xiao Chen, Mark D. Orlic and Christoph Spengel appeared in the World Tax Journal.
Anecdotal evidence from several leaks, including the “Panama Papers” and “Paradise Papers”, highlighted the role of certain intermediaries in actively assisting their clients in reducing their respective tax burdens. Although some complex transactions are entirely based on legitimate motives, others appear to be driven by the singular desire to avoid tax obligations at home. To tackle this issue, in May 2018, the European Commission enacted the Council Directive 2018/288/EU (or DAC6) mandating the reporting of aggressive tax planning arrangements. The overall goal of the directive is to improve the detection and the counteraction of harmful tax practices thanks to the timely access to a comprehensive set of information on currently used tax planning arrangement.
This study offers a cross-country overview of the local implementation of the DAC6 in each EU Member State (including the United Kingdom) by analysing the taxes and the transactions in scope, the list of hallmarks, the definition of intermediaries, the information reporting format, and the penalties for non-compliance. The above-listed aspects of the directive have been selected as the most important one based on practitioners’ insights.
One key result of the analysis is that the detected heterogeneity in the scope of reportable arrangements and the existence of local reporting schema created a substantial burden for the affected industry as it made it necessary for the industry the development of sophisticated digital solutions to adapt to such differences when reporting under DAC6 across EU member states. Moreover, the lack across all EU member states of a low threshold under which transactions are not reportable and/or the development of an “angel list” for clearly non-abusive transactions significantly increase the risk of overreporting under DAC6. Finally, important differences across monetary penalties have been detected with certain countries lacking an adequate level of enforcement.
Casi, E., Chen, X., Orlic, M. D., & Spengel, C. (2021). One directive, several transpositions: a cross-country evaluation of the national implementation of DAC6. World Tax Journal: WTJ, 13(1), 63-81.