DAC6: new EU tax disclosure rules

[Gediminas]

What’s DAC6 all about?

The EU is introducing an additional level of transparency in order to detect potentially aggressive tax arrangements.

The amendment to Directive 2011/16/EU on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6 for short) will have far-reaching consequences for tax advisors, service providers and taxpayers – including organisations and individuals in Switzerland and Lichtenstein.

DAC6 imposes mandatory disclosure requirements for certain arrangements with an EU cross-border element where the arrangements fall within certain "hallmarks" mentioned in the directive and in certain instances where the main or expected benefit of the arrangement is a tax advantage. There will be a mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network (CCN) which will be set-up by the EU.

Although the directive is not effective until 1 July 2020, taxpayers and intermediaries need to monitor their cross-border arrangements already as of 25 June 2018. Therefore the time to act is now.

https://ec.europa.eu/taxation_customs/sites/taxation/files/dac-6-council-directive-2018_en.pdf

 

[hernanday]

Lol, EU gets worse everyday. They will not be happy until they close every loophole. If you live in EU be prepared to pay the 50-70% taxes or leave. I can't imagine it be worth living in such a hell hole where the government changes the law daily to track increasing minutia things of your behaviour.

 

[Gediminas]

Lol, EU gets worse everyday. They will not be happy until they close every loophole. If you live in EU be prepared to pay the 50-70% taxes or leave. I can't imagine it be worth living in such a hell hole where the government changes the law daily to track increasing minutia things of your behaviour.

Well, you don't have to pay 50-70%. It depends which EU country to choose to reside.

Probably a lot of intermediaries/tax advisors will move business outside EU.

 

[KJK]

(...) mandatory disclosure requirements for certain arrangements with an EU cross-border element where the arrangements fall within certain "hallmarks" mentioned in the directive and in certain instances (...) mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network (CCN)

What is this magical newspeak? I'm afraid if I say this out loud, a pixie in a suit will jump out of my a*s and tell me I cannot do business with anyone.

Are there any practical examples for this? I imagine maybe intellectual property, licences etc.

 

[Gediminas]

a pixie in a suit will jump out of my a*s and tell me I cannot do business with anyone.

You can, of course, a pixie in a suit just want to know about it.

 

[hernanday]

Well, you don't have to pay 50-70%. It depends which EU country to choose to reside.

Probably a lot of intermediaries/tax advisors will move business outside EU.

Correct me if I am wrong, but if the EU guy has a company doesn't he have to pay corporate taxes + dividend taxes = 50-70%?

 

[Gediminas]

Correct me if I am wrong, but if the EU guy has a company doesn't he have to pay corporate taxes + dividend taxes = 50-70%?

No, he doesn't. Check out the tax situation in Cyprus.

 

[blockchain4ever]

What’s DAC6 all about?

The EU is introducing an additional level of transparency in order to detect potentially aggressive tax arrangements.

The amendment to Directive 2011/16/EU on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6 for short) will have far-reaching consequences for tax advisors, service providers and taxpayers – including organisations and individuals in Switzerland and Lichtenstein.

DAC6 imposes mandatory disclosure requirements for certain arrangements with an EU cross-border element where the arrangements fall within certain "hallmarks" mentioned in the directive and in certain instances where the main or expected benefit of the arrangement is a tax advantage. There will be a mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network (CCN) which will be set-up by the EU.

Although the directive is not effective until 1 July 2020, taxpayers and intermediaries need to monitor their cross-border arrangements already as of 25 June 2018. Therefore the time to act is now.

https://ec.europa.eu/taxation_customs/sites/taxation/files/dac-6-council-directive-2018_en.pdf
View attachment 998

In some way, I like this. The intermediary is a huge opsec risk today anyways, so they need to be less centralized, maybe eliminated.

We might see deregulation of intermediaries because of this. For example offshore jurisdictions will allow direct and cheaper registration of companies, intermediaries that don't do the job, but provide more generic information to get outside of the regulation. That can be very good as a lot of the work done by intermediaries today is adding risk. Intermediaries are keeping information they shouldn't, handling data they shouldn't handle, and generally should be less trusted than they are.

Another development could be that intermediaries will be replaced by blockchain solutions that are way superior to the current offshore setups. For example the Seychelles regulations around agents and their company registries would be much better to encode on the blockchain. Huge reductions in opsec, and it's increasingly clear that the opsec of the people in the industry is abysmal.

Instead of gullible people being screwed by intermediaries that leak their information, just cut them out, put it on the blockchain and embrace secure, decentralized systems.

 

[Konstanz]

It's a deal braker for many cases to deal with BIG4 as consulantants. Who would be willing to construct structure and report it to tax authorities? It's nonsense.
I imagine that most smaller will avoid reporting or move services to Dubai or etc

 

[John Andrews]

History repeats itself.

https://www.smithsonianmag.com/hist...their-wealthmaking-it-easier-steal-180968894/

 

[dissident]

You do pay 60% or more in many EU countries, but most of the time you don't even realize because of the inherit complexity of the tax system.
If you do the math, in many western EU countries you end up paying 60% or more of all you make every year to the government, one way or another.

Take this example: you take an apparently generous salary in France earning €50k/year gross.
The total outcome of your work force value production is taxed at 47%, where 27% is taxed on the employee side (13,230€) of €50k and 29% is taxed on the employer side (20,000€) over €70k (€50k gross + employer taxes).
So, the production of value to the company due your job is in reality 70,000€/year, but they only tell you what you are legally accountable for = 50,000€, but at the end your real salary is 70,000€ since it's what your job value produces to the employer business, so 70,000 - (20,000 + 13,230) = 36,770€ is what the poor guy eventually gets in its bank account each year (almost 50% is taken off).
You can check salary taxes here.

Alright, is that all, ain't? Ah! Don't be naive. The party is not over, buddy!

From these 36,700€ the poor guy takes, you still have to pay 20% in VAT in pretty much every purchase do you anywhere in order to get products or services you need to live.
But as the government has not enough stealing from you, they also have a bunch of other hidden taxes to basic services such as electricity, gas, fuel, water... going from 5% to more than 50%.
In case you decide to buy a car, the purchase price will be also increased by 20%, which for a 30,000€ car, you will end up paying 5000€ in VAT taxes to the same government who already stole from you 47%.
There are more taxes, like property taxes, rental taxes, local residency taxes, inheritance taxes, capital gain taxes...

To make things simple, let's take the average life cost of a single person in Paris, which according to Numbeo is 928€/month without rent/loan. 928 * 12 months = 11136€ / year.
Now let's calculate the average goods & services tax, which according to The World Bank in 2017 was 22,7%.
11136 / 22,7% = 2450€ in indirect taxes.

To be more realistic, we will add an extra 300€ / month expenses for non-basic services and goods: streaming services, private insurance, private pension, games, gifts, travels, restaurants, nightlife etc...
300 * 12 = 3600€ / year / 22.7% (VAT) = 817€ in taxes.

Now let's take rental income taxes, assuming the subject lives in a one bedroom apartment in a non-centric area of Paris, which according to Numbeo the average price is 836.35€ / month * 12 = 10032€ / year.
According to rental income taxation in France, the owner pays a minimum of 14% of the rental income, hence, I'm assuming here the owner will externalize that cost to the tenant.
10032€ / 14% = 1404€
Note: there are other local taxes involved here, but for simplicity I'm ignoring them.

Now let's assume the subject has a car and drives 15,000 km per year with an average car that consumes 5.7l/km where price per liter for petrol is 1.6€.
Total cost = 1368€, on which 66% are taxes, hence 1368€ / 66% = 903€ in indirect taxes.
Car registration and circulation taxes also should be added, plus the tall-roads that are across all the country indirectly controlled by the government in an oligopolistic lobby, but calculating this is a bit tricky.

Note that many other indirect and local taxes where not explicitly listed (alcohol, tobacco...). Not to mention taxes on multiple sources of income such as capital gains or dividends.

Conclusion: as a single modest individual producing value through a company measured at 70,000€/year, the overall simplified tax burden will be:
33,230€ salary + 2450€ basic goods VAT + 817€ non-basic goods VAT + 1404€ rental + 903€ fuel + (optionally, 5000€ VAT for a new car).
The subject ends up paying in total taxes: 38804€ / year (or 43804€ / year if you add the new car).

Net salary after taxes: 36,770€
Indirect taxes on top of the net salary: 5574€ = 15.2% taxes of 36,770€ (no new car)
Total effective tax burden: 33230€ + 5574€ = 38804€ in taxes per year = 47% salary + 8.1% = ~55% in total taxes (no new car)

How much money went to the poor government?
38804€

How much money went to the actual market?
8686€ + 2783€ + 8628€ + 465€ = 20,562€

How much money could be put into a saving account at the end the year?
36,770€ - 20,562€ = 16,208€ of 70,000€
Note that if you invest that money in stock, private pension, buying a property, buying a car, getting some license or whatever, don't forget you will also pay taxes again

As you can see, this example is based on conservative costs and expenses, but very possibly a person with such income will spend more money in goods and services to improve its life of quality.

I don't know you guys, but I can only see an obvious winner in all this mess: the state, and more surprisingly, all thanks to other people work and risk
God dammit, lovely parasites, isn't it? Not even the fucking Louis XIV could even think of such great massive robbery when he was alive lol

 

[blockchain4ever]

@dissident the other side of the coin are the services that the government provide for you when you pay taxes.

Let's assume the government is wasteful and throws away 50% of your tax euros. Further assume you make 2x the average french income, and you care only about your own outcome, not anyone else.

In this case, you only need to reduce your tax burden by 75% and you will get goods and services from the government that is worth what you pay in taxes. So you register your car in Bulgaria, hire an apartment through some company, expense all your personal games etc. You take out a minimal salary and your pension fund is your company savings.

When the tax burden is high, it's much easier to pay net negative taxes than in a low tax environment.

 

[JohnLocke]

Tqxes are not bad compared to what the governments give back. However, they are way too high in some countries and the repeating mismanagement of the tax payments they receive makes people angry. On top of this the total control they want of all of us, that's not right. Things are getting too much out of control for the average joey who don't have the slightest idea of what is going on.

 

[dissident]

@dissident the other side of the coin are the services that the government provide for you when you pay taxes.

Let's assume the government is wasteful and throws away 50% of your tax euros. Further assume you make 2x the average french income, and you care only about your own outcome, not anyone else.

In this case, you only need to reduce your tax burden by 75% and you will get goods and services from the government that is worth what you pay in taxes. So you register your car in Bulgaria, hire an apartment through some company, expense all your personal games etc. You take out a minimal salary and your pension fund is your company savings.

When the tax burden is high, it's much easier to pay net negative taxes than in a low tax environment.

Almost all services governments coactively force you to consume (remember it's a monopoly or oligopoly best case) are overpriced, partially inefficient, don't serve well your interests and/or involves lots of bureaucracy useless crap.

For the majority of the population, having a big government that robs you 50%-65% of your wealth all over your life is not productive at all. And remember those highly taxed are middle class, not the richest, not the poorest. It's fundamentally a massive robbery from middle-class to middle class, but in the meantime all those who live directly from government spending: public employees, politicians, bureaucrats, and all type of lobbies with government influence to take taxpayer money out into its private pocket without clearly serving what the society demands in a free competition solutions offer.

There are lots of toxic issues that a government with such power and stolen money can cause, but I would highlight a perhaps philosophical one: to government never was the servent, despite many people's opinion, but the tyrant, and a quite bully one.
You are its product. You are its source of wealth. It's a parasite and a permanent one during all your life.

There are certainly, logistically and empirically proven things that a government is possibly the best entity to carry the responsibility of, such as things that cannot be effectively given to the free market (just society voluntarily cooperating to solve other people's problems in free competition).
Things like defense, national security (limited to certain types), justice (this can be partially decentralized though) and some sort of public health issues/regulations.

Everything else can be perfectly given to the free market, which will eventually do it better and more efficiently.
If you look at what the government spends on each specific sector, you will find out that as it's today (no efficiency restructurations at all), many EU states spend between 3-5% of its national GDP on justice, defense, security.

The only winner in all this play is always the government and the parasites that directly benefit from all the stoled wealth.
People use to think you get things for free, but in reality, there is nothing free. You pay things and quite expensively.

The large problem I see is the tendency of having every time larger governments with more coactive power to control your life, impose your over-regulations that will impact your life and finances.
Just look at the number of regulations, laws, and bureaucracy the authorities release every year. It's outstanding and crazy. And it only goes one way: increment over time, rarely decrement or revokes complexity. Taxes go the same. They rarely decrease it.

Come on, only with tax regulations and international stuff many lawyers don't know s**t if you barely make things complex with international regulations. It's a mess with exponential complexity no single human can totally control.
Once the government size increases, it's quite hard to reduce it. Lots of parasites that already built its influence network and cash-flowing lobby need to remain operative.

But about the pensions? A Ponzi schema, illegal if you do it in the private sector. Your a*s will depend on the a*****e sitting in the government throne every few years, even after paying all the taxes they forced you all your life.

Can't they sustain the pension system because demography didn't go as expected? No problem, let's add 10% income tax fee on every single fucking employee in the country so we can still keep the faulty system, feed the pensioners and retain millions of votes so we can be stuck in the throne for another 4-5 years. But what about future generations? Politicians and its friends: I don't care, I will be retired, millionaire or dead at that time. Read about the first Ponzi schema pensions system implementation of

Education? Another major issue that it's controlled by the government, imposing nationalism ideas to individuals, not allowing free competition of education models, dictating the full curriculum of knowledge. A major threat against free-thinking now with all the ideologized education movement.

Governments don't have accountability, hence they can literally do whatever mess they want and you still.
Any sort of collectivism is toxic, inefficient over time, unfair, aggressive and totally immoral.

Don't get me wrong, I don't think zero-government is better than government, I simply defend the idea of a minimum government with far lower level of coercion and minimum taxes. Paying 5% taxes should be reasonable in exchange for what a state should give you. Paying +50% is simply tyranny and a massive robbery.

The only acceptable model for a healthy and free society is minarchism. For individuals today, agorism and counter-economy.

Paradoxically, those collectivist and equalitarianism are the most counter-equal ideas because they defend nothing by unequal obligations, costs and responsibilities within the society, such as progressive taxes (totally unfair and immoral).
Think about a company or marketplace where the most productive are charged with higher fees and less salary. Surely it will not survive so long. But today's societies are quite the opposite.


Most people got very bad ideas in their heads. I'm fine with that though, the problem is the system is controlled by these people and they will coactively force you to follow the same rules.

 

[blockchain4ever]

I'm fine with some government functions. The most important government functions in my view are social security and free education. Defense as well, but in this time and age, defense is even more an international issue, not only national or related to taxation or government.

Neither social security nor education needs to be run by the government, but they must be paid for by taxes. The reason for this is that it's the only way to fully exploit the potential of each person. Without social security people become extremely conservative (not politically) and risk averse. Without free education, they don't reach their potential.

Both of these result in much lower productivity than the system funded by taxes.

If you look at the number of billionaires per capita in various countries, excluding the obvious tax havens where people move after having made their fortune, it doesn't seem like minimal government is winning. It seems more like a highly educated workforce and good social security is the better choice.

World rank	Country or dependency	Number of billionaires	Population per one billionaire (thousands)	Richest in the country or dependency	Richest in the country or dependency's net worth in billions USD (year)
43	Monaco	4​	10	Tatiana Casiraghi	2.2 (2018)
54	St. Kitts & Nevis	2​	26	Wu Xu	1.6 (2018)
59	Liechtenstein	1​	38	Christoph Zeller	3.9 (2018)
59	Guernsey	1​	62	Stephen Lansdown	2.4 (2018)
6	Hong Kong	67​	110	Li Ka-shing	37.7 (2018)
37	Cyprus	6​	142	John Fredriksen	7.4 (2018)
13	Switzerland	36​	234	Ernesto Bertarelli	9 (2017)
20	Singapore	21​	267	Robert and Philip Ng	9.7 (2017)
16	Sweden	31​	322	Stefan Persson	18.9 (2017)
59	Iceland	1​	359	Thor Björgólfsson	1.99 (2018)
25	Norway	14​	376	Odd Reitan	4.19 (2017)
23	Israel	18​	484	Eyal Ofer	9.7 (2018)
1	United States	585​	559	Jeff Bezos	113 (2019)
31	Ireland	8​	598	Pallonji Mistry	18.7 (2018)
59	Macau	1​	623	Hoi Kin Hong	1.58 (2018)
4	Germany	114​	726	Beate Heister and Karl Albrecht Jr.	31.1 (2017)
14	Australia	33​	745	Gina Rinehart	17.40 (2018)
16	Taiwan	31​	761	Terry Gou	10.6 (2017)
34	Finland	7​	786	Antti Herlin	4.2 (2016)
10	Canada	39​	950	David Thomson	27.2 (2017)
		​
		​

The reason why this is , which is something a lot of people want to reduce.

 

[Martin Everson]

History repeats itself.

Exactly.

Get out of EU while you still can freely with your wealth. In years to come you will be crawling out of the EU on your hands and knees naked and stripped of all your wealth but grateful to be allowed back in the free world.

 

[Martin Everson]

History repeats itself.

https://www.smithsonianmag.com/hist...their-wealthmaking-it-easier-steal-180968894/

Thats scary reading......this is exactly what Trump is saying to Americans about China . He maybe the new hitler.

----- start quote

Hitler espoused a virulent form of anti-Semitism that offered German citizens an enemy to rally around. He held Jews responsible for Germany’s military humiliation in World War I and also encouraged the belief that Jews grew wealthy through theft from Aryans. “The robbery part [of Hitler’s decree] is embedded in this ideology that these people are parasites who attach themselves to us, and they live by sucking our blood, and we are entitled to punish them and take it all back,”

--- end quote

 

[John Andrews]

Thats scary reading......this is exactly what Trump is saying to Americans about China .

I wouldn't be suprised if the recent Coronavirus targets the Chinese and is engineered at Fort Detrick...

 

[Martin Everson]

I wouldn't be suprised if the recent Coronavirus targets the Chinese and is engineered at Fort Detrick...

It has indeed come at a very coincidental and convenient time for the US . Just while they are trying to find ways to bring American businesses based in China back to home soil which no amount of tax cuts will encourage. Nothing surprises me nowadays.

All we need next is some US pharmaceutical company to magically announce they have found a treatment for coronavirus and charge $2800 a shot .

 

[dissident]

I'm fine with some government functions. The most important government functions in my view are social security and free education. Defense as well, but in this time and age, defense is even more an international issue, not only national or related to taxation or government.

Neither social security nor education needs to be run by the government, but they must be paid for by taxes. The reason for this is that it's the only way to fully exploit the potential of each person. Without social security people become extremely conservative (not politically) and risk averse. Without free education, they don't reach their potential.

Both of these result in much lower productivity than the system funded by taxes.

Let's break some myths: nothing is free in economic terms. If you are not explicitly paying for something, you are doing it indirectly (taxes, where you lose the concept of actual value) or with someone else money that is not making use of it directly. But not free. Indeed, it's quite expensive most of the time because anything controlled and managed by the government has little to zero incentives to become productive and serve better the customer, as that would be translated into less money to feed their selfish interest in whatever sector they are. Public employees the same thing: why would I improve, become more competitive or server better my customer's slaves if: a) I will be paid the same if I work less or not and my job is protected by law. b) If I introduce more competitiveness, I might found out me or my colleagues might become useless, but still, society has to carry with our "privileged law contract".

Social security? It's anti-social and not secure at all. You entirely depend on politicians and bureaucrats that only see their short/mid-term goals and are poisoned by power ego and specific interests, which generally, are far away from your interest as an individual citizen (unless your payslip comes from directly them). Do you know all the mandatory rules work regulations imposes you if you want to get back something from the state, like a pension? First, work more than 30+ years paying them lots of taxes, possibly 35+ years if you want a higher return. Is that social or anti-social? What if that person does not want a pension, or simply wants to a retiree after 15 years but wants to get something back for all the taxes paid for 15 years? What if the government and politicians change the rules overnight and you end up getting 50% of what promised because the system is not sustainable anymore, but what about all the money I have paid for 30+ years? If that was a private company, you can sue them. Since that's the government, you're fucked up. No to mention all the shitty monetary policy, especially across South America where the governments may forbid currency exchange to citizens and you can't even protect your savings against the inflation they artificially inject into fiat currency monopoly they host.

In France, you have many dozens of sectors where workers have great privileges to retire sooner with the max pension return at the expense of all the other sectors who can't, so they should pay for the other group benefits with no choice. Sure, that's might be social, in terms of socializing my cost and benefits with somebody else money and work.

Some services within the badly called "social security contract" might be better than nothing, that's true, but in a very poor society, like a century ago, but nowadays society has enough knowledge, access to information, capacity to operate without all the coercive paternalism of the government like primitive beings.

Pensions distribution "Ponzi scheme" system? Another badly designed system invented by the authoritarianism of the government to steal large amounts of money from people with a future and false premise of security. The first implementor of the current re-distribution pension systems western countries was the authoritarian regime of Bismarck in pre-Germany back in the XIX century. In a biographical book, you will find this sentence regarding the pension system: "The goal of the public pension system is, according to Bismarck, to deceive the working classes and convince them that the State will help them". Source here. Worth looking this too. It was conceived as a total perversion of the system in the first place since life expectancy at that time was 50 years old. Less than 5% of the population lived to get a pension at age 65, and only for a few years after that best case. Now the EU has 80 years old life average expectancy, 83+ in some countries.

The world is changing faster that even in human mankind. Almost everything is changing, adapting and disappearing besides government size and spending. How is it possible that, proportionally, the size of many governments are non-stop growth since the 50s? Remember "proportionally increasing", hence, it's taking more part of the cake of the national economy, not just the same amount considering economic growth and inflation.

You don't need mandatory "free" education controlled by the government since you have now the Internet.
Any child or adult can learn and cheaply/easily to get access to far more information and ofter better quality than ever before in the best university in the country thanks to the Internet.
There are great solutions out there far better than many government education plans that cross nations and can benefit not just the people there, but the whole world. Isn't that great?
Even a communist will say so, but that's counter-productive and against government national goals of control and submission of its customer's slaves.

If you look at all the major benefits society achieved over the last centuries, especially since the industrial revolution, it was primarily due the free society organizing themselves through a voluntarily complex cooperation structures in a so-called capitalism environment, or a free entrepreneurship ecosystem as I prefer to call it, to solve others people or own problems by innovation, smartness, and investment. Any of that came from politicians, bureaucrats, public sector, etc.

Hence, it was not the altruism of the government but the need of having more productive people who pushed forward the society, but the society itself.

If you see macro-economic data, in many western EU countries, you will find that only about 36% of the workforce citizens (free market) are paying to maintain the other 64% (including public employees).