The European Union is strongly committed to fighting tax planning strategies that while legal, are undesirable and perhaps even aggressive, as well as illegal tax evasion. This fight depends in part on giving tax authorities comprehensive access to information on cross-border transactions that may be associated with tax planning or tax evasion. In addition, tax authorities in EU member states should be able to share this information with each other. Current amendments to the EU’s Mutual Assistance Directive are intended to secure this access to information. The sixth and seventh amendments to the Mutual Assistance Directive (DAC 6, DAC 7) were adopted recently, and DAC 8 is currently in preparation.

DAC 6 – Reporting cross-border arrangements

DAC 6 introduced the obligation to report cross-border tax arrangements to the tax authorities, and was implemented in Austria by the EU Mandatory Reporting Act (EU-Meldepflichtgesetz). Under the provisions of DAC 6, taxpayers or their advisors, banks, and other intermediaries are required to report if certain cross-border transactions lead to tax savings.

DAC 7 – Digital platforms

DAC 7 focuses on the challenges of the digitalization of the economy. Starting in 2023, digital platform operators such as AirBnB, eBay, or Amazon will have to report any companies offering services on their platforms to the tax authorities. This will make tax evasion much more difficult for these third-party providers, who often also offer their goods or services from abroad. If, for example, a private individual rents out their apartment on AirBnB, the tax authorities will automatically be informed that this person (probably) has to pay taxes on the rental income.

In addition, DAC 7 will enable cross-border tax audits, performed jointly by two countries. Austria, for example, generally only checks for compliance with Austrian tax laws. This view is too narrow, however, especially when it comes to multinational corporations that operate across borders and possibly also plan their taxes across borders.

DAC 8 - Cryptocurrencies

A further amendment, DAC 8, is also in the works: With this amendment, tax authorities will receive information about taxpayers who generate income from cryptocurrencies and eMoney. This is also part of the fight against tax evasion. If a person earns income from the profitable sale of BitCoins, for example, the tax authority must be notified immediately to ensure that the income can be taxed appropriately.

Overall, the amendments to the Mutual Assistance Directive, DAC 6, 7, and 8, are suitable measures to help prevent tax evasion. They make sure that fiscal authorities receive more and better information and are allowed to exchange it with each other. One criticism, however, is that this means tax authorities are outsourcing their core responsibility, namely ensuring tax revenue, to private companies, which will also have to bear the costs.

Further information:

Eva Eberhartinger / Kristin Resenig: Und was kommt nach DAC 6? Die neuesten Entwicklungen im Zusammenhang mit der EU-Amtshilferichtlinie, VWT 1/2021, Seite 53

Eva Eberhartinger, Chair Business Taxation Group