On Wednesday, the EU released a draft law which means that financial advisers and other professionals face heavy fines if they are found guilty of helping individuals cut their tax bills by using ‘aggressive tax planning’ schemes.
Under the new system, advisers will be required to notify EU authorities about schemes that shift a client’s wealth to low-tax countries including the Cayman Islands, Malta and other offshore jurisdictions.
Britain, Ireland and Portugal have already introduced penalties for intermediaries who facilitate tax avoidance but the new law is expected to apply across the EU, with penalties set to be decided at a national level.
At a news conference on Wednesday, EU tax commissioner Pierre Moscovici said the UK’s recently-introduced measure is estimated to have reduced tax avoidance by “over £12bn” (€13.6, $15.2bn).
The move was initially announced in a consultation paper published by Brussels last December looking at whether it should introduce a ‘mandatory disclosure scheme’ that would require professional services to red flag schemes that facilitate tax evasion and tax avoidance.
However, EU officials stressed that this does not automatically mean that these arrangements were illegal.
It is hoped an early warning system will discourage the transfer of wealth in one EU state to other countries or jurisdictions where they would be taxed at much lower rates.
If there is no intermediary, or the tax adviser is located outside the EU, the onus for disclosure would fall on the taxpayer using the arrangement.
The proposal will need the approval of the European Parliament and all EU states to become law.
News source: International Advisor