Implementing BEPS in the European Union: the prohibition of abuse as a new thriving force of EU tax integration

Traversa, Edoardo [UCL]

In 2013, the OECD, on request by the G20, adopted a 15-point Action Plan to tackle base erosion and profit shifting (BEPS). The BEPS project is a comprehensive package of measures aiming at better coordinating domestic tax systems, at promoting transparency and exchange of information in order to ultimately realign taxation with economic substance and value creation. It targets harmful international tax arrangements taking advantage of the differences between several states legislation (two or more). The outcome of the BEPS action plan, contained in final reports published in October 2015, consists in measures that are of a soft law nature, (3) taking the form of “minimum standards,” “best practices” or “recommendations”. (4) Whilst BEPS is not an EU initiative, 21 of the 28 EU Member States are also OECD members. The EU and its Member States have since the beginning played a leading role in the BEPS initiative and it is crucial for the global effectiveness of the process that the EU continues to exercise this leadership as regards the most delicate step, i.e. the adoption of hard law rules. (5) Nevertheless, considering that the implementation of BEPS has to be done consistently with the current EU legal framework, the EU and its Member States face a particular challenge in respect of the BEPS implementation. The objective of the EU being mostly to ensure mobility of undertakings and other factors of production within the Internal market, it could potentially clash with measures aimed at limiting tax evasion opportunities by making certain cross-border operations more difficult. (6) The present contribution aims at highlighting potential points of friction between the OECD BEPS recommendations and the EU rules applicable to direct taxation such as the freedoms of movements enshrined in the Treaty and the harmonization directives. Among the topics covered, specific attention will be devoted to the proposals and recommendations forming the EU Anti-Tax Evasion Package issued by the European Commission on 28 January 2016, (7) in particular as regards abuse of tax treaties, EU and domestic law. (8)

(eng) In 2013, the OECD, on request by the G20, adopted a 15-point Action Plan to tackle base erosion and profit shifting (BEPS). The BEPS project is a comprehensive package of measures aiming at better coordinating domestic tax systems, at promoting transparency and exchange of information in order to ultimately realign taxation with economic substance and value creation. It targets harmful international tax arrangements taking advantage of the differences between several states legislation (two or more). The outcome of the BEPS action plan, contained in final reports published in October 2015, consists in measures that are of a soft law nature, (3) taking the form of “minimum standards,” “best practices” or “recommendations”. (4) Whilst BEPS is not an EU initiative, 21 of the 28 EU Member States are also OECD members. The EU and its Member States have since the beginning played a leading role in the BEPS initiative and it is crucial for the global effectiveness of the process that the EU continues to exercise this leadership as regards the most delicate step, i.e. the adoption of hard law rules. (5) Nevertheless, considering that the implementation of BEPS has to be done consistently with the current EU legal framework, the EU and its Member States face a particular challenge in respect of the BEPS implementation. The objective of the EU being mostly to ensure mobility of undertakings and other factors of production within the Internal market, it could potentially clash with measures aimed at limiting tax evasion opportunities by making certain cross-border operations more difficult. (6) The present contribution aims at highlighting potential points of friction between the OECD BEPS recommendations and the EU rules applicable to direct taxation such as the freedoms of movements enshrined in the Treaty and the harmonization directives. Among the topics covered, specific attention will be devoted to the proposals and recommendations forming the EU Anti-Tax Evasion Package issued by the European Commission on 28 January 2016, (7) in particular as regards abuse of tax treaties, EU and domestic law. (8)