There is increasing attention in Brussels on company reporting, taxation and offshore financial centres. The G20 and some OECD countries have demanded country-by-country (CBC) reporting rules for multinational companies with a turnover over €750m, which is intended to highlight the economic footprint of these companies in low-taxation domiciles. In the UK the requirement came into effect for accounting periods from 1 January 2016.

“What we hear is that listed investors, like insurers, are [already] removing tax havens from their portfolio because they have to do country-by-country reporting, starting in 2017,” says one observer. “We get mixed signals from peers in the area of pension fund management and sovereign wealth funds. Some are preparing, others not yet.”

The focus on tax transparency started with the Alternative Investment Fund Management Directive (AIFMD) of 2011, which set out to regulate hedge funds, private equity, real estate, and other such funds in the EU in the wake of the financial crisis. It makes various disclosures a condition of operation. 

The Commission exerted further pressure in 2014 when it issued a chart listing domains considered to be tax havens. Further tightening of rules has been spurred on by the likes of Luxleaks, and the Panama Papers. 

In September 2015, the Commission initiated a Platform of Tax Good Governance to seek a co-ordinated EU approach on corporate taxation. In January 2016 it presented a communication on an external strategy for effective taxation as part of its anti tax-avoidance package.

The external strategy outlines measures to promote good tax governance internationally and updates the overview of third-country jurisdictions listed by member states for tax purposes. About the same time, the Commission published a call for applications for the selection of non-government members of the Platform for Tax Good Governance. A leading role is now being taken by the Parliament, through its PANA (Panama papers inquiry) committee.

One complication relates to the extension of AIFMD marketing passports to third countries. Here, the Commission’s position is to hold back on acting on advice from the European Markets and Securities Authority (ESMA) concerning Jersey and Guernsey.

ESMA has found that there are no significant obstacles impeding the application of the AIFMD passport to Canada, Japan, and Switzerland. In 2015, Cayman Finance welcomed ESMA’s announcement that it would soon begin an assessment of the Cayman Islands.

In a separate project, the Commission is also seeking to combat companies shifting tax domiciles, which is described as “extra-territorial control” by some critics. However, this point is still subject to an Opinion of the Council Legal Service, as given to a recent parliamentary conference on CBC reporting, which suggested the legislative vehicle selected by the Commission to introduce public CBC reporting in Europe – via amendments to the 2012 Accounting Directive – was “incorrect”. This was to be discussed within Council at attaché level.

The EU and the OECD are working on projects concerning proposed blacklists of tax havens. Valdis Dombrovskis, the EU commissioner for financial stability, financial services and the capital markets union, recently confirmed that member states were working on the EU’s project, with a deadline at the end of 2017. 

Recently, the Commission welcomed the green light given by EU finance ministers for new rules ensuring tax authorities in the EU access data collected under current anti-money laundering rules. This includes important information such as customer due-diligence records and information held in national beneficial ownership registries.

Tax authorities will now be able to identify the owner behind an opaque company or entity, and be able to react quickly to instances of tax evasion and avoidance.