The European Commission begins its long-awaited consultation on regulating tax advice at the same time that the sector is under more intense scrutiny.
The European Commission is holding its consultation on regulating tax advice in the EU at the same time that accounting firm EY is under investigation for its advice to Perrigo.
On July 6, a variety of policy options were made available for public comment. The consultation period will end on October 12. In Q1 2023, the Commission intends to formally adopt the proposal. However, because the consultation process was postponed from May to July, there is less time to formalize and vote on a proposal.
This report is a follow-up to the 2021 proposal to combat the improper use of shell corporations. In particular, intermediaries' tax challenges from non-EU shell entities are addressed. A few of the intermediaries are consultants, attorneys, and accountants.
One international tax partner at a big four London firm says, "The role of advisers on Perrigo is a curious one.
The international tax partner continues, "A lot of commentators see advisers as guilty for pushing these structures, but there were quite a few moments when they tried to reign in their client to adopt more conservative positions and those calls were ignored."
By imposing restrictions on the parties involved in the design and marketing of tax structures, the consultation seeks to address aggressive tax planning. These structures include immaterial entities that are used to take advantage of the variations in national tax systems.
The Commission is considering options like requiring all intermediaries to conduct due diligence. Creating a code of conduct for all intermediaries is another option, as is requiring intermediaries to register in the EU.
Articles 115 and 50 of the Treaty on the Functioning of the EU may serve as the legal foundation for the forthcoming proposal.
According to commission officials, the upcoming proposal will establish precise standards for identifying aggressive tax planning. Additionally, they claim that policies that reduce the administrative burden will be given priority. Under a new system, national tax administrations might have additional duties.
The Commission's consultation and early proposal draft were examined by the subcommittee of the European Parliament dealing with tax issues. Due to a lack of information on how more regulation would affect intermediaries, the subcommittee found it challenging to make recommendations.
The information will come from the most recent tax adviser consultation as well as the most recent consultation on shell companies.
Some market watchers favor mandatory professional insurance as well as increased transparency regarding disciplinary actions taken against advisors. Others support an EU-wide code of conduct for tax advisers and the ability of tax authorities to deal with misconduct.
The Commission will examine the quantity of affected arrangements and intermediaries in an upcoming impact assessment. The analysis will also estimate the costs of compliance for businesses and authorities.
The EU market will soon have higher standards for tax advice. Based on rules governing tax advisers by Q1 2023, there might be incoming compliance regulations that trickle down to in-house teams.
By fLEXI tEAM