ACCA (The Association of Chartered Certified Accountants)

Stronger EU tax cooperation through crypto-assets, e-money and tailored compliance measures FINAL REMARKS Considering in particular Question 25 (pat II), the simple binary choice of “effective/ineffective” for each measure fails to adequately reflect the reality of deterrent effects on differing populations of non-compliant individuals/entities. Taking each proposal in turn: “A public statement that indentifies [sic] the natural person, institution or company responsible for the infringement and the nature of it in an official journal. This option should respect all redress rights of the parties involved and protect confidential information.” This proposal is an avenue frequently explored in domestic legislation.

…involved and protect confidential information.” This proposal is an avenue frequently explored in domestic legislation. While there are arguments for and against the impact upon the individual (who might in some cases, far from regarding it as a deterrent, instead treat it as a “badge of honour”), one clear benefit of this approach is that it creates and easily searchable permanent record which will be freely available to all other tax authorities and interested parties (such as regulated persons undertaking due diligence checks for the purposes of AML and CTF checks) who might need to be aware of the individuals’ or entities’ status.

…checks for the purposes of AML and CTF checks) who might need to be aware of the individuals’ or entities’ status. “Prohibition of being the beneficiary of any public aid or to participate in any public procurement for a fixed period.” is likely to be of little impact upon many individuals (as those who might be subject to it are unlikely to rely on public aid or necessarily benefit from public procurement contracts). However, it can be a very powerful weapon against larger commercial entities. For many larger businesses, a prohibition from public procurement would amount to a restriction on their activities which would amount to a fundamental restriction on their ability to trade. This being the case, any such measure should also be subject to safeguards to ensure it is not used unless necessary.

This being the case, any such measure should also be subject to safeguards to ensure it is not used unless necessary. “A temporary ban of any member of the management body from exercising management functions in the EU or in a Member State” is unlikely to be a proportionate or effective response. Where the relevant behaviour relates to a small, determinedly non-compliant, entity then the boundary between formal regulated management and informal influence guiding its operations is likely to be blurred. Accordingly the challenges of effectively defining and policing the relevant individuals would be significant.

Accordingly the challenges of effectively defining and policing the relevant individuals would be significant. Conversely for a larger and more effectively regulated entity, the implications of effectively removing the entire management body are unlikely to be proportionate to the relevant behaviour, again amounting to a fundamental restriction on ability to operate with significant implications for all staff, creditors and other stakeholders. “An order requiring the natural or legal person responsible to cease the conduct and to desist from a repetition of that conduct in the EU or a specific Member State” would be an entirely appropriate sanction in all cases, potentially reinforced by significant consequences for breach of the order. Ref.

…appropriate sanction in all cases, potentially reinforced by significant consequences for breach of the order. Ref. Ares(2022)2571434 - 05/04/2022 “Temporary suspension of administrative linceses [sic] or authorisations to provide services within the European Union or a Member State for a fixed period” would, as with exclusion from public procurement/aid regimes potentially destroy the business’s ability to trade. It should also therefore be tempered by safeguards to mitigate the potential risk of disproportionate harm to businesses and their stakeholders. It should be remembered in every case that the effectiveness of sanctions as a deterrent is intrinsically linked to the perception of their likely effective enforcement. This will in turn be predicated on clear legislation and properly funded and resourced enforcement teams.

…enforcement. This will in turn be predicated on clear legislation and properly funded and resourced enforcement teams. While the precise details of transposition will be outwith the Commission’s competence, clarity of drafting in the Directive will aid transposition and implementation by local legislatures. Considering Question 32, the ideal requirement for notifications would be interested Member States and the Commission. Notifying all Member States would risk fatigue on the part of each Member State’s compliance and enforcement executives, who would almost inevitably receive a majority of irrelevant reports. Restricting notifications to Member States identified by the initial investigating State as “interested” would reduce the risk of such fatigue while still ensuring relevant publicity.

State as “interested” would reduce the risk of such fatigue while still ensuring relevant publicity. As regards notifying the Commission, restricting notification to the Commission alone would then result in either interested Member States not being aware of impending proceedings, or in the alternative imposing a burden on the Commission if it were to transmit the information onwards. A further benefit for the notifying country of alerting both Commission and interested Member States would be that in the event of a subsequent dispute between Member States as to whether a particular relevant notification had been made, the notifying country could cite its disclosure to the Commission as a “neutral” reference, without imposing an arbitrary burden on any other Member State, and especially where only one Member State had been notified.

…imposing an arbitrary burden on any other Member State, and especially where only one Member State had been notified. Not notifying the Commission at all would run counter to effective monitoring and coordination, while requiring blanket notification of the Commission and all other Member States would compound the potential fatigue considered above.

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