Proposed Amended Parent-Subsidiary Directive Reveals the European Commission’s Lack of Vision

Source: Issue: IBFD – Bulletin for International Taxation, 2014
(Volume 68), No. 9

Published online: 13 August 2014.

“With the OECD going to great lengths to make international tax law more straightforward, increase fairness and enhance transparency, the European Commission felt that it had to make a contribution to this process. Anticipating the implementation of elements from the OECD Report on Base Erosion and Profit Shifting (BEPS),[1] the Commission submitted proposals to adapt the Parent-Subsidiary Directive (90/435)[2] and make it more fit for the purpose of combating base erosion and profit shifting.

On 25 November 2013, the Commission presented its elaborate views on how to adapt the Parent-Subsidiary Directive (90/435) to the modern-day requirements for sound tax systems (the proposed Parent- Subsidiary Directive (2011/96)).[3] The Commission advocates a provision to counter the abuse of hybrid financing and a general anti-avoidance rule (GAAR), both of which would improve the modern tax world.

Or so one would think after reading the Commission’s Staff Working Document (SWD), which explains why these two points should be introduced into the Parent-Subsidiary Directive (90/435).[4] There is, therefore, a link to the Action Plan to strengthen the fight against tax evasion, published in December 2012.[5] The question is, however, whether or not the proposed amendments are effective and suitable.”