Accountants face EU clamp-down on aggressive tax planning

By Francesco Guarascio

BRUSSELS, March 13 (Reuters) - Tax advisers in the European Union will risk fines if they help companies cut tax bills by shifting profits to low-tax countries, under proposals that EU finance ministers are discussing on Tuesday.

Under the draft law, proposed by the European Commission in June, tax advisers including the Big Four accounting firms, banks and lawyers, would be required to inform authorities about "potentially aggressive tax planning arrangements" set up for their clients.

"We hope we are able to reach an agreement on rules on tax intermediaries and transparency of potentially aggressive tax schemes which will need to be reported," the commission's vice-president Valdis Dombrovskis told reporters as he arrived at the finance ministers' meeting.

Some EU states, including Britain, Ireland (Other OTC: IRLD - news) and Portugal, have already introduced penalties for intermediaries helping set up aggressive tax schemes. But the new law would apply across the EU.

If the rules are approved, banks and accountants who do not report potentially harmful cross-border tax schemes could face "effective, proportionate and dissuasive penalties," under the draft law.

However, EU states would maintain discretion in setting sanctions or fines at national level.

EU countries have agreed almost all details of the proposal but are still discussing the criteria to define a potentially harmful scheme which tax intermediaries would be obliged to report.

Some states oppose the idea that advisers should automatically report tax schemes to shift profits to jurisdictions with no corporate tax or a zero rate, such as the Bahamas and the Channel Islands, according to a working document seen by Reuters and prepared by the Bulgarian presidency of the EU.

These governments argued that "such a requirement, if not limited in scope, would cause an administrative burden disproportionate to the objectives," of the new rules, the document said.

The Bahamas, together with the U.S. Virgin Islands and Saint Kitts and Nevis, are set to be added to the EU blacklist of tax havens on Tuesday.

Luxembourg, Malta and other smaller states of the EU have been among the most reluctant to introduce stricter rules to prevent tax avoidance, fearing they could harm Europe's competitiveness.

If ministers reach a deal on Tuesday on tax intermediaries' rules, talks will need to begin with the European Parliament to finalise the text before it becomes law. (Reporting by Francesco Guarascio Editing by Andrew Heavens)