1. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation OCT-EU cooperation in the tax area State of play and perspectives OCT-EU Forum 4 to 8 September 2006 Nuuk, Greenland Philippe Cattoir DG TAXUD Analyses and Tax policies

2. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation2 Structure of this contribution 1.International context: issues related to « financial, tax and judicial governance » 2.Responses in the tax area EU initiatives OECD initiatives 3.Implications for the OCTs

3. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation3 International context financial, tax and judicial governance

4. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation4 International context Issue: opportunities and limits of globalisation Globalisation brings numerous benefits… …but it also opens up new opportunities for abuses: Money laundering (2-5% of the global GDP) Corporate fraud. Enron ($67bn), Parmalat (14bn) Terrorist financing Tax abuses Tax avoidance estimated at between £25bn and £85bn by UK authorities 1/4 of serious tax fraud cases in UK involved offshore / bank secrecy transactions Oxfam identify a revenue loss of $50 billion to developing countries US IRS estimates it has lost $ 35 billion in tax shelters These malpractices or illegal activities thrive in a climate of secrecy, non-transparency and non-cooperation

5. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation5 International context Response: numerous international initiatives Financial Action Task Force (FATF) Financial Stability Forum (FSF) EU initiatives (money laundering Directives, Savings taxation Directive, Code of conduct for business taxation, etc.) OECD Forum on Harmful Tax Practices, etc. NB: Common features (transparency, cooperation…)

6. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation6 Responses in the tax area

7. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation7 Responses in the tax area In the EU 1.Code of Conduct for business taxation 2.Savings Directive and related agreements 3.Administrative cooperation and mutual assistance Directives In the OECD 1.Harmful tax regimes in OECD countries 2.Tax havens 3.Non OECD Economies OECD Global Forum on Taxation

8. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation8 Responses in the tax area (EU) 1. EU Code of Conduct for business taxation 96 harmful tax regimes identified in 25 EU Member States + OCTs Most eliminated ("rollback") Ongoing monitoring ("standstill") Principles recently endorsed by UKR, MOL, TUN, ISR, JOR, MOR

9. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation9 Responses in the tax area (EU) 2. EU Savings Directive All Member States except BE, LU and AU apply automatic exchange of information since 1/7/2005. BE, LU, AU apply a withholding tax, with increasing rate (15%-35%) during a transitional period. Equivalent measures by Switzerland, Andorra, Liechtenstein, Monaco, San Marino. Same measures in 10 dependent or associated territories: automatic exchange of information in Anguilla, Aruba, Cayman Islands and Montserrat, and withholding in BVI, TCI and Netherland Antilles.

10. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation10 Responses in the tax area (EU) 3.Administrative co-operation, Mutual assistance Directive for mutual assistance in direct taxation (1977, 2004). Regulation on administrative cooperation for VAT (2003) and excise duties (2004). Directive for mutual assistance for recovery of customs, VAT, excise duties, taxes on income and capital (1976, 2002).

11. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation11 Responses in the tax area (EU) EU InitiativesCountries directly concerned Code of Conduct for Business taxation EU-25 Associated and dependent territories EU neighbourhood countries Directive for Savings taxation EU-25 Associated and dependent territories Key third countries Administrative cooperation and mutual assistance EU-25

12. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation12 Responses in the tax area (EU) Despite difficulties due to unanimous decision-taking, the EU has achieved remarkable progress in the past years. Many partners of the EU and its Member States (associated and dependent territories, neighbour countries, competitors in the financial area) cooperate with the EU Member States in the tax area.

13. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation13 Responses in the tax area (OECD) From the OECD Forum on harmful tax practices … 1.OECD member countries. 47 potentially harmful tax measures in 21 OECD countries. Most have been eliminated or amended; 2.Tax havens / Participating partners: 33 jurisdictions committed to transparency and effective exchange of information. List of 5 uncooperative tax havens ; 3.Non OECD economies: contact with major financial centres. … to the OECD Global Forum on Taxation.

14. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation14 Responses in the tax area (OECD) OECD Global Forum on Taxation 33 jurisdictions committed to transparency and effective exchange of information for tax purposes Aruba Cyprus Nether. Antilles Turks & Caicos Islands Antigua Dominica NiueUS Virgin Islands Anguilla Guernsey NauruVanuatu Bahamas Grenada Panama Bahrain Gibraltar Samoa Belize Isle of ManSan Marino Bermuda Jersey Seychelles British Virgin Isl. Malta St. Kitts & Nevis Cayman IslandsMauritiusSt. Vincent Cooks Is MontserratSt. Lucia They cooperate with the OECD countries and key financial centres to develop global standards and achieve a global level playing field.

15. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation15 Responses in the tax area (OECD) Standards developed within the OECD Global Forum Transparency = reliable books and records, beneficial ownership information, access to bank information Exchange of information = EOI upon request. Based on Model Agreement. (confidentiality, taxpayers rights…) NB: Link between transparency and exchange of information.

16. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation16 Responses in the tax area (OECD) Recent survey of 82 countries on transparency and EOI practices: A majority have mechanisms for EOI on criminal and civil tax matters ; A majority can get access to bank information for criminal and civil tax matters. A vast majority have beneficial ownership information. Progress is being made towards a level playing field However, further work is necessary.

17. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation17 Responses in the tax area (OECD) The issue of public recognition: « … changes to improve transparency and to establish effective exchange of information are not always easy...... International bodies may wish to consider providing tangible forms of positive recognition… to countries that implement [these] principles ». (OECD Global Forum – Melbourne report)

18. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation18 Implications for the OCTs (taxation and beyond)

19. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation19 Implications for OCTs The Commission s policy: Responsibility of governments to accept a common cooperation in order to exchange information effectively. Transparency and effective exchange of information are part of the good governance that the EU wishes to promote. Economic and technical assistance, economic partnership agreements and other relevant agreements should reflect the concerns of the EU. NB: this is not only true for taxation.

20. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation20 Implications for OCTs Let's be clear: The Commission indicated that it is willing to grant support to efforts linked to good governance. This is not a one-way street. In the 10th EDF funds will be available for support to good governance in the financial, tax and judicial areas, in particular with regard to transparency and effective exchange of information for tax purpose.

21. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation21 Implications for OCTs Proposal for discussion Additional funding (= on top of the initial territorial allocation)… … commensurate to additional efforts (= a real incentive, to be spend e.g. in focal sector)... … assessed on the basis of roadmaps (= specific objectives and clear timing).

22. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation22 Conclusion

23. European Commission / Taxation and Customs Union 5 September 2006EU-OCT tax cooperation23 Thank you for your attention !