The European Commission published the first report on the implementation of the Directive on Administrative Cooperation (“DAC”). The report highlights EU’s improved tax transparency record due to the DAC implementation and the automatic exchange of information (“AEOI”). Notably, only in 2017 Member states have exchanged information on almost 9 million financial accounts with a total balance of nearly €3 trillion. The report also indicates that Member states were able to use such data to increase their tax base due to awareness of potentially taxable foreign income and capital of their tax residents.
By way of conclusions, the report identifies that tax authorities mainly use the AEOI for risk assessment and personal income tax assessment. However, several Member States still make very limited use of the information they receive. The main benefits of AEOI lie in the increased tax compliance and in the deterrent effect for taxpayers. Member States often send information that does not include all necessary identification elements, which would permit an automated matching of this information with the one available nationally. As a way forward, two areas of improvement were identified: enhanced quality of information and better use of data received via AEOI. Such support mechanisms already exist within the FISCALIS programme of the European Union.