The European Commission has proposed two directives aimed at improving cooperation between tax authorities in the field of assessment and recovery of taxes. The final goal of these measures is to combat tax fraud that is facilitated by inefficiencies in information exchange between EU Member States and/or the inability to recover taxes due from fraudsters residing in another EU country, including VAT carousel fraud.
The proposals contain a number of unifying measures, such as common rules of procedure, standard forms and formats, channels for exchanging information and power for tax officials from one Member State to inspect actively on the territory of another Member State.
The most outstanding feature of the Commission’s proposals, however, is that they call for banking secrecy to be abolished in relations between tax authorities. This measure might meet resistance from Member States that still have banking secrecy rules, such as Austria, Belgium and Luxembourg. Luxembourg is expected to oppose these measures and request that Switzerland apply a similar regime before the directives can be adopted.
As the proposed directives require approval by all Member States, they are not likely to enter into force in the near future. Austria, Belgium and Luxembourg have, however, already concluded agreements with the United States that prevent them from invoking banking secrecy when the US tax authorities request information.