Transcript: DAC6 Directive: A Closer Analysis of Its “Hallmarks”
Here's the transcript for another heated discussion that took place in Barcelona in October as part of #TLTaxCon19!
This time around, our panel of experts discussed the controversial EU Directive DAC6 and what it implies for financial service providers across Europe.
A huge thank you to our panellists:
- Filippo Noseda, Partner, Mishcon de Reya, and Visiting Professor, King's College, UK
- Dr. Nicholas Ryder, Professor of Financial Crime, UWE Bristol, UK
- Dr. Peter A. Wilson, PB First Global Tax Advisors, UAE
Make sure to download the full transcript below and share with your network.
Here are the panel's main highlights.
What are your general thoughts on DAC6?
Peter Wilson: "It's an overreach. It's ill defined. It's probably unnecessary. It's very difficult to administer. The guidelines put out by the European Union, specific as to what the penalties should be, they seem to allow to be set on a country-by-country basis. Everybody seems to have to report if you're involved in the transaction. And the transactions in respect to which the reporting is required seems to include transactions which don't fit the purpose of being designed to counter tax evasion and probably represents another example of non-proportionality."
Filippo Noseda: "It's a UK idea exported to the EU. We have DOTAS, which has been around for I don't know how many years. And we reached a comical stage where tax minimization and tax planning made by a comedian Jimmy Carr led to a charge by the then Prime Minister David Cameron that tax planning was immoral. And I despise what's in DAC6, not because I'm in favour of reducing taxes or I believe that it's people's right not to pay taxes. None of that, I'm very apolitical about that. But it's a fundamental breach in the social contract that goes on between citizens and governments."
Nicholas Ryder: "It is just another example, I think, of a regime that is going to become disproportionate, it's going to become very bureaucratic for sectors and reporting entities, and I think, if anything, it is going to increase compliance costs again. It's intriguing that one of the former Labour governments' ideas, along with the more recent Conservative government, is to make all these costs proportionate. Clearly, they're failing to achieve that policy goal to make the regime more proportionate."
Do we need to go after the advisors to stop tax evasion and avoidance?
Peter Wilson: "You don't go after the advisors, you go after the promoters. The advisors are giving the advice on whether something is right or wrong. I've been in this business for a long time. As an advisor, I've never introduced something to a client that's confidential, I've never introduced something to a client that I'll get paid a proportionate tax saving or what have you. I'm actually insulted by the inclusion of these reference points in here. It's the promoters. I've seen loads of promoters who pump this rubbish. And I always refuse to market it to my clients. They're going after to the wrong people."
Nicholas Ryder: "HMRC have a rather chequered enforcement strategy and I think you made a valid point about going for the wrong people. So what we found with HMRC recently is that, as opposed to maybe targeting large multinational corporations and so on, they're actually targeting the self-employed. So they're targeting the painter, the decorator and the hairdresser, so they're going for what are going to be small sums of tax revenue. And if you believe the sort of the figures from the British government about the amount of money lost through the VAT, fraud or genuine tax fraud, it's 8 to 10 billion pounds. Well, I think we can add a few more to that from an enforcement perspective. They need to be a little bit more robust and look at the HSBC and that one prosecution out of 1000 investigations."
Is DAC6 et al an understandable response to all the scandals that there have been in recent years?
Filippo Noseda: "I think every action causes a reaction. And my problem, for example, with OECD on the CRS is not on the fact that the US with FATCA, the OECD with the CRS, has come up with an idea. I think it's a brilliant idea, exchange of information, wonderful, they had to do it. What has missed was a debate; there is a democratic deficit. Very often, if I bring into this, if this were a Parliament, this brilliant idea of mine, you're going to destroy it and I realize that my idea is not great and we come out with a compromise and the compromise is because you've got people to the right, people to the left, and then you find a compromise. And all these things that we've seen, it's an understandable reaction in the UK to the industry of promoters who actually were bragging at conferences of how, you know, you could naughtily sidestep the tax. But there hasn't been a debate on this about: What about the rights to privacy? Data protection? What about the social contract? What about the duty to the state to provide good service for taxes? It's been a unilateral debate. And so we went from one extreme to the other and I think where we failed as an industry, in a way, is to try to redress the balance. I don't know, maybe we just were shocked. Maybe like heads in the headlights, we didn't know what to do. But, in reality, in the UK we've seen this stuff coming for many years and we've been unable to come up with arguments. We can complain as much as we want behind closed doors in sessions like this, but nobody has proposed a debate in public against these rules."