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Austria's SPÖ Proposes EU Tax Enforcement Actions

Wednesday, May 7, 2014

The Austrian Social Democrat party, led by Chancellor Werner Faymann, has unveiled a five-point plan to combat tax evasion in the European Union through the introduction of tougher rules to tackle profit shifting to low-tax jurisdictions.

First, the SPÖ called on the EU to clamp down on profit shifting by limiting the tax-deductibility of interest and royalty payments made to related parties, which it said should be based on the Austrian model. New rules, applied in Austria since March 1, no longer allow deductions when the income of the recipient company is taxed at an effective rate of less than 10 percent.

Next, the party urged EU member states to apply the latest international tax regulations to prevent double non-taxation, particularly in the area of intellectual property and digital assets.

It said that the automatic exchange of information (AEI) in tax matters should be applied to all financial products, including dividends, and not just restricted to bank account interest, and said there should not be tax recognition of non-transparent letterbox companies and anonymous trusts in Europe.

Further, the group said the EU should draw up a "black list" of jurisdictions with extremely low – or zero – effective rates of taxation, those that allow non-transparent structures, and those that have not implemented AEI. Additionally, the party recommended that EU tax authorities should monitor capital flows into and out of black-listed countries, and impose a tax on money remitted back to the EU.

Finally, the SPÖ underlined the need to end harmful corporate tax competition in Europe, to significantly lower individual income tax rates, and to increase taxes on wealth.