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EU Anti-Tax Avoidance Directive overshoots its mark

The European Commission’s proposed Anti-Tax Avoidance Directive (ATAD) risks overshooting an objective that many would otherwise support and could seriously jeopardize Belgium’s – and the EU’s – competitiveness, as argued by AmCham Belgium in a new position paper.

In January 2016, the European Commission presented an Anti-Tax Avoidance Package. It comprises, among other proposals, the Anti-Tax Avoidance Directive. AmCham Belgium is concerned that this Directive, if adopted without further reflection, would hinder the European Union’s competitiveness and strike a blow against small and open economies, like Belgium. The new position paper elaborates on the concerns laid out in our joint letter drafted with AmCham Luxembourg and AmCham Netherlands.

First, it is important to note that this area of fiscal policy is subject to national law and therefore falls outside of the EU’s core competencies. Many will see the proposed Directive as contradicting the fundamental principles of subsidiarity and proportionality. Additionally, the draft would set a far-reaching precedent that may, in the future, further prevent small economies, such as Belgium, from adapting fiscal policies to their specific needs. The one-size-fits-all approach of the Directive constitutes one of its main stumbling blocks.

Second, the European Commission has not tabled an economic impact assessment. Yet, AmCham Belgium believes that the ATAD will increase the cost of capital, give rise to double taxation, make tax laws more complex and create further administrative burdens for business. This will hamper the EU’s economic objectives of growth, productive investment and employment. Therefore, the Chamber recommends that Belgium produce a transparent study on the economic consequences of the proposed Directive. It must review the comparative disadvantage the Directive could entail for Belgium as well as the possible fallouts it could have on employment, investment, GDP and location of headquarters, among other effects. The Chamber also believes that such far-reaching rules should not be adopted without grandfathering provisions to avoid a further threat to the climate of fiscal security in the EU.

Third, the ATAD oversteps the internationally agreed OECD BEPS Action Plan. The BEPS Action Plan provides flexibility and options for countries in terms of tax legislation and timing, whereas the ATAD is stringent and may harm genuine business operations. Any ATAD adoption should therefore incorporate a regular monitoring process of the state of BEPS implementation in other leading economies to avoid a structural competitive disadvantage for the EU.

Establishing ‘hard’ EU law in taxation can seriously restrict Belgium’s leeway in fiscal policy and structurally handicap its competitiveness. AmCham Belgium, through our Legal & Taxation Committee, is ready to work together with Belgian authorities and their European counterparts to create a fair and transparent tax system, while meeting these concerns.

Download the position paper

With thanks to our BEPS Taskforce.

Photo credit: P-030717/00-03 © European Union, 2016