Evaluation of Administrative Cooperation in Direct Taxation

Evaluation of Administrative

Cooperation in Direct Taxation

FINAL REPORT

Executive Summary

24 April 2019

EUROPEAN COMMISSION

Directorate-General Taxation and Customs Union

Directorate D – Direct taxation, Tax coordination, Economic analysis and Evaluation

Unit D.2 – Direct Tax Policy and Cooperation

Contact: Kirsi Haapakoski (Ms)

E-mail: kirsi.ha[email protected]uropa.eu

European Commission

B-1049 Brussels

LEGAL NOTICE

The information and views set out in this report are those of the authors and do not necessarily reflect the official opinion

of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the

Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may be made

of the information contained therein.

More information on the European Union is available on the Internet (http://www.europa.eu).

Luxembourg: Publications Office of the European Union, 2019

ISBN 978-92-76-02917-5

doi: 10.2778/865485

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Abbreviations and Acronyms

ACDT

Administrative Cooperation in Direct Taxation

AEOI

Automatic Exchange of Information

CRS

Common Reporting Standard

DAC

Directive on Administrative Cooperation

Director’s Fees

DG TAXUD

Directorate General for Taxation and Customs Union

Income from Employment

EOI

Exchange of Information

EOIR

Exchange of Information on Request

European Union

EUAV

EU Added Value

FATCA

Foreign Account Tax Compliance Act

GDP

Gross Domestic Product

GNI

Gross National Income

Immovable Property

Information Technology

LIP

Life Insurance Products

OECD

Organization for Economic Co-operation and Development

PAOE

Presence in Administrative Offices and participation in administrative Enquiries

PEN

Pensions

Simultaneous Controls

SEOI

Spontaneous Exchange of Information

Evaluation of Administrative Cooperation in Direct Taxation

1 INTRODUCTION

This Evaluation Study was prepared for the European Commission – Directorate General for

Taxation and Customs Union (DG TAXUD) and it is intended to support the forthcoming

Commission Evaluation of the Council Directive 2011/16 on administrative cooperation

in the field of taxation

(hereinafter, the ‘Directive on Administrative Cooperation’, or just the

‘Directive’).

The Study purports to provide a comprehensive assessment of the Directive; more

specifically, the Report pursues the two-fold objective of: (i) assessing the implementation and

results, and (ii) developing recommendations for the amendment of existing provisions, should

they prove inadequate.

2 THE APPROACH TO THE EVALUATION

The Assignment consists of two components, an Implementation Assessment and an

Evaluation ‘proper’. The former includes an assessment of the transposition and the

implementation of the Directive and of the uptake of its tools and mechanisms – i.e. the extent

to which they have been used by the Member States. The latter involves an assessment of the

Directive along the five evaluation criteria commonly used for the assessment of the EU

initiatives, namely: (i) relevance, (ii) effectiveness, (iii) efficiency, (iv) coherence, and (v) EU

added value.

The Study is based on the information derived from documentary sources or obtained during the

consultations with relevant stakeholders:

1) The documentary sources consist primarily of various datasets on administrative

cooperation activities, comprising information provided by the Member States to the

Commission as part of the reporting obligations spelled out in the Directive. The datasets

encompass ‘statistics’, which include information on the number and nature of the exchanges

that have occurred via the Directive mechanisms, and ‘questionnaires’, through which

Member States provide qualitative and quantitative information on the working of the

Directive

2) The datasets made available by the Client were complemented with information from the

analysis of other documentary sources, mostly academic studies and documents from

international organisations and national governments.

3) Overall 39 institutions, organisations and economic operators from 15 Member States were

consulted during the two targeted consultations carried out for the Study, one aimed at

national tax authorities, and another for other stakeholders. For the former, seven tax

authorities were consulted in the early phase of the Assignment, and another round of

targeted consultation was organised, covering ten Member States. All in all, 14 tax authorities

participated to the two phases of the targeted consultation. For other stakeholders, the

consultation targeted financial sector organisations and companies, non-governmental

organisations active in tax transparency themes, and tax advisors. In total, 25 private

stakeholders were consulted, including six European organisations and 19 national entities.

4) The Public Consultation carried out by the European Commission, with the Consultants’

support, in order to gather the appreciation of stakeholders and citizens on the working of

the Directive. The consultation was launched on 10 December 2018 and it remained open

until 4 March 2019, for a total of 12 weeks. A total of 30 entities and individuals participated

to the PC, from 10 Member States.

Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing

Directive 77/799/EEC.

Evaluation of Administrative Cooperation in Direct Taxation

3 THE POLICY AT STAKE

Administrative Cooperation in Direct Taxation

In an increasing globalised world, the persistence of significant differences in taxation systems

may negatively affect tax revenue collection, as businesses are able to shift profits across

borders and taxpayers can earn income from abroad without being taxed. This has led to the

development of various cooperation mechanisms among tax authorities, commonly

referred to as ‘Administrative Cooperation In Direct Taxation’ (ACDT).

Access to information on the incomes earned or the assets held abroad via the exchange of

information on taxpayers engaged in cross-border activities is widely regarded as an essential

component of an effective ACDT system. The possible exchanges encompass:

1) the Exchange Of Information on Request (EOIR), which refers to information concerning

specific persons or transactions expressly solicited by the requesting country;

2) the Automatic Exchange Of Information (AEOI), which refers to the exchange of

information in bulk, for all the persons or transactions fulfilling certain criteria, using

predefined formats, secured channels of communication, and at predetermined times; and

3) the Spontaneous Exchange Of Information (SEOI), which refers to the unsystematic,

voluntary furnishing of information that the supplying country may deem to be of interest

for the receiving country.

These exchanges are complemented by other forms of cooperation, including namely the

Presence in Administrative Offices or participation in administrative Enquiries (PAOE),

the carrying out of Simultaneous Controls (SC), and the provision of assistance for the

notification to taxpayers of decisions or instruments regarding their tax liabilities.

The Directive

The Directive on Administrative Cooperation is the fundamental piece of EU legislation on

ACDT, establishing a common approach for the mutual assistance and exchange of information

in the field of direct taxation. The Directive supports the Member States by providing their tax

authorities a legal framework for cooperation, and an Information Technology (IT) environment

and procedures for the safe and secure exchange of information. Its legal basis consists in

Articles 113 and 115 of the Treaty on the Functioning of the European Union (EU). The latter

allows the Council to issue Directives for the approximation of the national legal frameworks

which directly affect the establishment or functioning of the Internal Market, and provides the

basis for the EU to act in the area of cross-border direct taxation. The former allows the Council

to harmonise the legislation concerning, among others, other forms of indirect taxation, which

can include certain levies on capital assets.

The Directive pursues three specific objectives, namely: (i) to improve Member States’ ability to

fight cross-border tax fraud, evasion and avoidance, the latter linked to forms of

aggressive tax planning by multinational enterprises; (ii) to reduce the scope for harmful tax

competition, namely through greater transparency in tax rules; and (iii) to contribute to

enhanced spontaneous tax compliance, through the ‘deterrent effect’ resulting from the

greater ability to detect cross-border incomes and assets.

The major innovation introduced by the original Directive (in short, DAC1) was the introduction

of mandatory AEOI on five categories of incomes and capital (employment income -EI,

pensions -PEN, director’s fees -DF, ownership of and income from immovable property -IP, and

life insurance products -LIP). DAC1 also upgraded the other modalities for enhancing information

exchange among tax authorities, previously regulated by the Mutual Assistance Directive,

including EOIR, SEOI, and SC. It also introduces a new tool, that is the possibility for tax officials

to be present in the administrative enquiries carried out by another tax authority (PAOE).

Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the

Member States in the field of direct taxation.

Evaluation of Administrative Cooperation in Direct Taxation

The scope of the Directive was progressively expanded through successive amendments,

partly triggered by developments at the international level. A first amendment, adopted in late

2014 (DAC2),

extended the scope of mandatory AEOI to financial accounts held by non-

residents on the basis of the Common Reporting Standard (CRS) format. A second amendment,

adopted in late 2015 (DAC3),

introduced the mandatory exchange of information on certain

decisions adopted by national tax authorities, namely the cross-border advance tax rulings and

advance pricing agreement. A third amendment, adopted in mid-2016 (DAC4),

focused on AEOI

in the area of corporate taxation, and introduced the obligation of Country-by-Country Reporting

for multinational enterprises operating in the EU. Finally, a fourth amendment, adopted in late

2016 (DAC5),

was intended to ensure that tax authorities have access to beneficial ownership

information gathered in the context of the anti-money laundering legislation. The

implementation of the Directive is supported by the Fiscalis programme, an EU spending

programme aimed at enhancing cooperation between Member States’ tax authorities in the field

of tax policy.

4 IMPLEMENTATION ASSESSMENT

Transposition and preparation for implementation

The transposition of the Directive was in part late, but substantively unproblematic,

while the intensity of preparatory activities shows major variations across the various

provisions.

The Directive was generally smoothly transposed, and the few issues encountered concerned

the timing of the transposition rather than the alignment of the national frameworks with the

Directive provisions. On average, some 10 Member States were late in transposing the Directive

and each of its amendments, resulting in 57 infringement procedures. However, 54 of these

procedures have been closed, mostly at the very early stages, and only three remain pending;

in no cases were Member States brought before the Court of Justice of the EU.

For all the Directive provisions, the implementation started about as planned and required a

number of preparatory activities at EU and Member States level, in particular for AEOI. The

implementation focused mainly on IT-related aspects, namely the development of the

infrastructure and the formats for the exchange of data. The development has been managed

by DG TAXUD in close collaboration with the Member States and involved planning activities, the

setting-up of the technical and functional specifications, and the testing and rolling of the AEOI

system. Only limited delays in the start of the various AEOI mechanisms were experienced. In

this respect, the timely start of the DAC2 exchanges, despite the occurrence of last-minute

technical issues, appears particularly positive.

Uptake

The Directive triggered the exchange of a substantial amount of information, covering

significant amounts of taxpayers, incomes and assets, with a growing trend

particularly for AEOI.

In 2016, the exchanges under DAC1 AEOI concerned around 7.5 million taxpayer positions and

some € 50 billion of incomes, mostly concentrated in incomes from employment and pensions.

Even though the exchange of information under DAC2 is in its early stage, in the first six months

of operation information around 8.3 million accounts and € 2,865 billion of value (in terms of

Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic

exchange of information in the field of taxation.

Council Directive (EU) 2015/2376 of 8 December 2015 amending Directive 2011/16/EU as regards mandatory

automatic exchange of information in the field of taxation.

Council Directive (EU) 2016/881 of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic

exchange of information in the field of taxation.

Council Directive (EU) 2016/2258 of 6 December 2016 amending Directive 2011/16/EU as regards access to anti-

money-laundering information by tax authorities.

Evaluation of Administrative Cooperation in Direct Taxation

account balances) were communicated by the Member States. DAC3, which also was only

recently implemented, led Member States to upload some 18,000 tax rulings in the Central

Directory between July and December 2017.

With regards to tools and mechanisms other than AEOI, between 2013 and 2017, an average of

9,000 EOIR requests was sent per year. EOIR is used by all EU Member States, the largest

senders of requests being Poland, France, and Germany. SEOI was also extensively used and

the annual volumes varied from 10,000 to 80,000 messages per year between 2013 and 2017;

however, most of these exchanges originated from a single country (the Netherlands). With

respect to the other forms of administrative activities, their utilisation is uneven across the

Member States. Over the period covered by the analysis, 229 PAOEs and 202 SCs were carried

out, involving tax officials from 15 and 22 Member States, respectively.

For the mechanisms for which a diachronic comparison is possible, the uptake is on the rise, as

expected. This is definitely the case for DAC1, with a near doubling of volumes between 2015

and 2016, and an expected further increase in 2017 (based on January-June data). In the case

of DAC2, no comparison over time is possible, but the amounts reported have seemingly grown,

when compared with the figures reported under the Savings Directive

. The number of EOIRs

remained roughly stable between 2013 and 2017, but it has significantly increased after the

adoption of the Directive in 2013 and is now about 85% higher than the pre-DAC level. While

the involvement of Member States in SCs has been increasing from 2014 onwards, both in terms

of the number of initiatives and of Member States participating, the involvement in PAOEs and

SEOI follows an oscillating trend, with no clear pattern over time.

5 EVALUATION

Relevance

The Directive was relevant at the time it was adopted, and it still is today, as it tackles

substantial problems by fighting tax evasion, as well as fostering tax compliance by

cross-border operators, increasing transparency of fiscal treatments, and contributing

to the fairness of the tax system and to the proper functioning of the Single Market.

Furthermore, it responds to the needs of Member State authorities and is largely in

line with the EU overarching fiscal policies. Across all these dimensions, the Directive’s

relevance scores well, with the marginal exception of the magnitude of some of the

problems that it intends to tackle, and of the partially changing EU policy priorities

over the last decade.

More in details, the magnitude of the problems addressed appears to be quite large for DAC3

and DAC4, which focus on corporate tax avoidance. Indeed, the estimates of the revenues lost

by the Member States because of this phenomenon reach up to 1.7% of the EU Gross Domestic

Product (GDP). The stakes are also significant with respect to the amount of assets held abroad

that were reported under DAC2. These assets represent nearly 5% of the financial assets held

by EU households and non-financial corporations. In some Member States, especially small- and

mid-sized countries, the share can exceed 20% of these financial assets. On a different note,

the tax base captured by DAC1 AEOI appears more marginal, as it represents a mere 0.3% of

the EU Gross National Income (GNI), without major differences across countries. The

geographical distribution of EI, PEN and IP flows is consistent with migration and investment

patterns, suggesting that DAC1 AEOI is a faithful representation of the underlying economic

reality.

The Directive was well aligned with the needs and priorities of the European Union at its adoption.

DAC measures have been repeatedly mentioned as one of the most important EU tools for

fighting against tax evasion and tax avoidance, foster tax compliance and a fair taxation of all

companies and citizens, and these have been steadily among the top priorities for the

Commission and EU citizens alike. Also through its latest amendments, the Directive remained

Council Directive 2003/48/EC on taxation of savings income in the form of interest payments.

Evaluation of Administrative Cooperation in Direct Taxation

relevant to EU priorities and needs until today. In the last communications from the EU, an

increasing emphasis has been placed on corporate tax avoidance, on fighting aggressive tax

planning, and increasing tax transparency. The inclusion of DAC3 and DAC4 provisions appears

fully aligned to this evolution.

Finally, the appreciation of the fitness-for-purpose of the Directive and its mechanisms and tools

is also positive. The Directive scores very well in terms of its appropriateness to tax authorities’

needs, both overall and considering specific mechanisms. The tax authorities commented that a

single ‘most useful’ tool is difficult to identify; rather, they tend to underline their positive

assessment of the tools on which they are more experienced. Furthermore, the tax authorities

strongly praise the Directive for providing a comprehensive set of tools and mechanisms for the

exchange of information, from which the tool more fit for the purpose at hand can be selected,

and which complement and reinforce each other. With respect to the other general objectives –

improving the functioning of the Single Market and promoting fairness in taxation – the entire

Directive and all its mechanisms are fit in theory, but in practice those targeted at corporate

entities – DAC2, DAC4 and DAC5 – may progressively emerge as more relevant, given that

corporate tax avoidance represents a higher priority for the EU and a larger scale phenomenon

at present.

Effectiveness

The Directive has contributed to an improved ability to fight tax fraud, evasion, and

avoidance, and the limited evidence available suggests that this has already started

translating into incremental tax assessed. While the recent implementation of several

of the provisions does not allow drawing firm conclusions, positive signals were

recorded also as regards the Directive’s potential in increasing spontaneous

compliance through a deterrent effect. No elements have emerged yet as regards the

effects on the reduction in the scope for harmful tax competition.

Undoubtedly, the Directive improved the ability of the Member States to fight against tax fraud,

evasion, and avoidance, with respect to legal and natural persons operating, gaining incomes,

or holding assets across multiple jurisdictions. This is unanimously acknowledged by the tax

authorities, which appreciate especially the ‘menu of options’ that the Directive has created.

Indeed, the various ACDT provisions have resulted in a toolbox, from which the tax officials can

select the most useful tool for the case at hand or the objective to be pursued. Furthermore, the

instruments supported by the Directive complement, trigger, and reinforce each other. This

assessment is undisputed even considering that the quality and timeliness of certain data

exchanges still present some flaws. At the same time, the national tax authorities are still

learning how to best process and use the AEOI data received. The situation is positively evolving,

as Member States are increasingly making use of the AEOI information and their ability to match

it with national taxpayers’ databases has also grown. However, as of 2017, not all Member States

have started employing these data.

The Directive was also intended to contribute to reduce the scope for harmful tax competition,

in particular via the amendments aiming at making the national tax systems more transparent,

i.e. DAC3 and DAC4. On the latter, the first exchanges had just taken place, and hence no

information on their outcomes is available. On the former, the evidence shows that the

transparency of advanced rulings has increased. At the same time, this has so far not affected

the behaviour of tax authorities in granting advanced tax rulings and pricing agreements, nor

the attitude of firms demanding for these rulings.

In addition, the DAC mechanisms in general, and more specifically the AEOI, providing for the

mass exchange of data about taxpayers at large, are expected to have a deterrent effect on

taxpayers, thus increasing the spontaneous compliance with their tax obligations. On this effect,

the evidence is not conclusive, due to the recent implementation of the AEOI mechanisms, and

in particular of DAC2. However, tax authorities are already trying to take advantage of the

deterrence, thus signalling the potential of AEOI in spurring spontaneous tax compliance. In

particular, a number of actions have been launched by various Member States to invite taxpayers

Evaluation of Administrative Cooperation in Direct Taxation

to spontaneously comply when discrepancies are identified between their tax declarations and

the data received via the AEOI. The results have seemingly been positive, although no

quantitative analysis of the outcomes is available yet.

As for its general objectives, the Directive was designed to contribute to safeguard Member

States’ tax revenues. Although the analysis is constrained by the very recent implementation of

several DAC provisions, as well as by the lack of data on benefits, the findings show that both

AEOI and provisions other than AEOI have contributed to achieve this objective. In the six

Member States for which data are available, in 2016 and 2017, DAC1 AEOI generated an

estimated increase in the tax assessed of about € 92 million. The extent to which the additional

tax assessed is going to translate into additional tax collected is unclear, as the exemptions and

deductions applicable under double taxation treaties limit the potential revenues. No information

is available on the additional tax assessed thanks to DAC2, DAC3, and DAC4, due to their recent

implementation. Information on the benefits of activities other than AEOI is also quite limited,

with only a handful of countries providing this information. The total value of benefits for the

period 2014-2017 is in the order of € 532 million, with major differences among Member States.

All in all, the benefits from activities other than AEOI appear much higher than those from AEOI,

possibly also because those activities can be more easily linked to the outcome of an audit or

investigation, and of the longer period covered by the data (four years compared to two for

AEOI).

Very limited findings are available on the achievement of the other two general objectives – that

is increasing tax fairness and promoting the proper functioning of the Single Market, as these

impacts remain more elusive to capture even for informed stakeholders, who, during the

targeted consultations, could hardly comment on these aspects. Notwithstanding the limited

number of replies, from the Public Consultation, it results that the Directive is considered as

having positively contributed to increasing the fairness of the tax systems, so that companies

active cross-border and individuals with incomes from or assets in another Member State are

more likely to pay their fair contribution. In line with this, the Directive’s role in ensuring that

cross-border companies do not enjoy an undue advantage – so that the Single Market functions

more properly – is also praised by the Public Consultation respondents.

Efficiency

The Directive generated compliance costs and administrative burdens for Member

States, economic operators (particularly financial institutions), and taxpayers. Data

are too limited in order to draw firm conclusions on the cost-effectiveness, although

in the medium term the Directive is estimated to generate net benefits.

The compliance costs quantified for 2015-2017 amount to nearly € 145 million. Most of the costs

come from the AEOI mechanisms, whose deployment and operation required about € 130 million

from national budgets, and an additional € 13 million of EU support. The costs were largely

incurred for the development of the IT systems (about 85% of the costs so far). IT compliance

costs for financial operators to comply with the DAC2 provisions are also likely to be significant,

and some independent sources estimate them at ten times the costs borne by the tax authorities,

although a detailed assessment could not be provided. The fulfilment of the Directive’s reporting

obligations by Member States requires about 12 person/days per year in each country, and the

total annual administrative burden at EU level thus amounts to around € 80,000.

In terms of cost savings, as reported by the tax authorities in the targeted consultation, the

Directive has improved the efficiency of the EOIR mechanisms, because of the standardisation

introduced by the e-forms and the common communication network. These IT tools made

preparing, handling, and processing the requests for information faster and easier, compared

with both the pre-Directive environment, and the mechanisms available under other legal

frameworks. However, no quantification of the efficiency gains for tax authorities was possible,

since the time and effort required to prepare and handle an EOIR and retrieve the information

required vary widely on a case-by-case basis, in particular depending on whether a local tax

office needs to be alerted, whether an interaction with the taxpayer is needed, and through

Evaluation of Administrative Cooperation in Direct Taxation

which modality. Differently, the burden reduction enjoyed by taxpayers tanks to the pre-filling

of tax declarations made possible by the AEOI could be quantified, and are estimated in the

range of € 0.5-1 million per year.

An assessment of the cost-effectiveness of the Directive is complicated, for four reasons: (i) a

temporal hiatus between costs, incurred up-front, and benefits, which are slowly materialising;

(ii) the lack of sufficient data on additional tax assessed, as they are only available from nine

Member States; (iii) the significant variations in reported additional tax base or assessed, which

may indicate the presence of outliers; and (iv) the impossibility to accurately disentangle the

costs for tax authorities and financial institutions due to DAC2 to those generated by the

implementation of the CRS and Foreign Account Tax Compliance Act (FATCA) framework. Hence

it is not yet possible to provide a definitive judgment on whether the outcomes achieved were

commensurate with the costs incurred at EU level.

With all these caveats in mind, the Study does provide an estimation of whether, in the countries

for which benefit data are available, the net benefits that the Directive has generated so far are

positive or not. In all these Member States, the regulatory costs borne by the public authorities

for implementing the DAC are lower than the additional tax assessed. Even when considering

also the likely costs for financial institutions, benefits can be assessed to have overcome the

costs in most cases. It is thus likely that, over the 2015-2017 period, the Directive has generated

positive net benefits, when measured in terms of additional tax assessed.

Since a large share of the costs due to the AEOI systems have already been borne and

considering that the benefits will grow the more the tax authorities effectively use the data

received, over the medium-to-long term the net benefits can be reasonably expected to grow.

At the same time, given that there is yet no information on the extent to which additional tax

assessed will create additional tax revenues, and given this availability of data on benefits, the

degree of uncertainty of this assessment remains significant.

Coherence

No major issues of coherence have emerged from the assessment, both internal to the

Directive and external with respect to other adjacent pieces of legislation.

The good internal coherence of the Directive is noteworthy, given that it has been subject to

repeated and frequent amendments. None of the various definitions and legal standards is a

recurrent cause of impediments to the exchange of information among tax authorities. The

common understanding of the Directive’s provisions and their smooth implementation is also

eased by the common reliance on the Organization for Economic Co-operation and Development

(OECD) explanatory documents. Some minor drawbacks were identified with respect to the

coherence of the Directive with the administrative cooperation in the field of Value-Added Tax,

which becomes particularly evident when the same activity covers both direct and indirect taxes.

No negative interactions were identified with the Recovery Directive.

As far as the anti-money

laundering legislation is concerned, the differences in the legal definitions under the two

frameworks could have limited the potential synergies with DAC2 and DAC5, and caused some

overlapping compliance efforts during the early implementation of DAC2/CRS. Finally, although

the OECD framework and the EU legislation are well aligned, the tax authorities indicated some

burdensome discrepancies, e.g. between the DAC3 and Base Erosion and Profit Shifting

framework, between the technical specifications under DAC2 and CRS, and between the

deadlines for EOIR.

Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field

of value added tax.

Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to

taxes, duties and other measures.

Evaluation of Administrative Cooperation in Direct Taxation

EU Added Value

The EU action in the area of ACDT has generated an added value compared to its

possible alternatives, particularly when DAC1 AEOI and the increased efficiency of

provisions other than AEOI are concerned.

First, the Directive resulted in additional benefits, the EU added Value of which could in part be

quantified. Indeed, the benefits reported for DAC1 derive from an EU intervention which does

not have any counterpart among the international initiatives and would have not been

undertaken by Member States spontaneously. In six Member States for which data are available,

the EU added value of this mechanism amounted to € 92 million of additional tax assessed in

2016 and 2017

Secondly, the Directive has resulted in efficiency gains, concerning DAC1, DAC2, and DAC3

exchanges, which are especially pronounced for DAC1 provisions other than AEOI. With respect

to the latter, the e-forms and common communication network that were introduced to

implement the Directive represents a clear advantage for the EU framework compared to the

other international activities, and these would not have been deployed, had the EU action not

been undertaken.

The additionality of the EU intervention in the area of ACDT is not only due to the Directive, but

also to the EU budget support provided via the Fiscalis programmes, which enhanced the value-

for-money of the expenditures on IT infrastructure and software because of the economies of

scale due to acting at the central level. Secondly, these programmes have also augmented the

capacity of the Member States to participate in SC and PAOE, increasing the instances in which

these tools were deployed.

6 POSSIBLE WAYS FORWARD

There is a limited appetite for further changes to the Directive in the short term, as

none of the revisions discussed with the tax authorities gained a vast support.

During the targeted consultation, the tax authorities were invited to comment on a list of possible

revisions to the Directive, and namely: (i) the mandatory inclusion of the tax identification

number of the residence country in the DAC1 AEOI records; (ii) the removal of the

acknowledgement of receipt for EOIR and SEOI; (iii) the combination of Articles 6 and 11 on

“Administrative enquiries” and “Presence in administrative offices and participation in

administrative enquiries”; (iv) the explicit introduction of “joint audits”; (v) the removal of the

availability clause in DAC1 AEOI (hence making the exchange of data on certain incomes and

assets mandatory); and (vi) the inclusion of new income categories under DAC1 AEOI; (vii) the

need to clarify a number of Directive’s definitions and legal standards, such as the difference

between taxes and fees, the standard of foreseeable relevance, the handling of group requests,

or the possibility to use ACDT information for purposes other than taxation. The tax authorities

and the other stakeholders could also indicate any additional revision that they considered

necessary.

None of these revisions gained vast support among the tax authorities. This is possibly an

unintended effect of the fatigue caused by the repeated amendments introduced since the

adoption of the Directive. Also, as it emerged during the Study, several of the provisions of the

Directive are still relatively under deployed (e.g. PAOE), and their potential remains not fully

exploited. This explains the focus of the authorities on learning and exploiting the mechanisms

currently at their disposal, rather than on modifying them or adding additional ones. The only

revision receiving the support of most of the tax authorities would be the non-mandatory

inclusion of additional income categories in DAC1 AEOI. The Evaluation findings also confirm

that, in the short-term, there are no pressing issues which would require a legislative

intervention.

Evaluation of Administrative Cooperation in Direct Taxation

The tax authorities would also avoid re-opening the Directive to clarify its definitions and legal

standards. Although clarifications would be largely welcomed, should better be introduced by

means of non-binding guidelines. More importantly, any revision or clarification needs to be

coordinated with the framework for administrative cooperation in the field of indirect taxes and

the OECD standards.

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