Last December, the UK tax office confirmed it will go ahead and issue hefty fines to financial advisers and other professional found guilty of enabling tax avoidance. The sanctions are expected to go live after the UK’s general election on 8 June.
At the same time, the EU published a consultation paper last year looking at whether it should introduce a ‘mandatory disclosure scheme’ that would require intermediaries, such as tax accountants and financial advisers, to red flag schemes that facilitate tax evasion and tax avoidance.
‘Hard law’
According to Bloomberg BNA, Pierre Moscovici, taxation commissioner at the EU, said at a parliamentary hearing last week that the European Commission prefers a “hard law” approach of fines and disciplinary sanctions rather than less stringent measures such as a code of conduct.
The precise sanctions are expected to be finalised by the end of June, when the new rules will be unveiled, added the publication.
“The proposal we will make will have three pillars. They include a scope that covers all intermediaries, all harmful practices and all jurisdictions,” said Moscovici.
He has previously accused advisers of developing “complex financial schemes and opaque corporate structures” into an “art-form”.
“These experts offer their clients the opportunity to aggressively exploit loopholes or to shift their profits so as to substantially reduce their tax bill,” said Moscovici last November.
The tighter rules are a result of last year’s Panama Papers scandal, a leak of more than 11 million documents, which exposed how the rich and powerful around the world use shell companies set up in offshore tax havens to hide their wealth from the taxman.
Import UK model
Speaking to International Adviser, Chas Roy-Chowdhury, head of taxation at the UK’s Association of Certified Chartered Accounts, said a hard law approach is unlikely to succeed and is likely to face serious opposition by member states across the EU.
Instead, he believes the EU will most likely adopt the UK’s “soft law” approach of a code of conduct and ethical standards which would be simpler to implement.
“The EU may consider using the UK’s model approach as a template rather than reinventing the wheel and introducing legislation.
“It would just be a case of transporting what we have in the UK to other European jurisdictions and then allowing the professional bodies in those jurisdictions to reinforce those standards,” he said.
He added that there may be a need a for “second layer of regulation” for those advisers who are either not professionally qualified or not governed by a professional body.
