I am sure that all of you have read or heard the BEPS neologism at some point. For those who have been confused at this time in which reality is summed up with increasingly faster clicks, I will say that these four letters are an acronym in English for an international concept that has become fashionable: “ Erosion of Taxable Bases and Transfer of Benefits”. In the world-economy that defines contemporary life, BEPS strategies laminated the nation-state’s fiscal accounts, arose the hit-and-run that persistent cross-border operations. We are not in the presence of fraud or any other illegal conduct, but simply a tax avoidance that some engineers (not of the soul but of cash and finance) create for the enjoyment, almost always exclusive, of the clients who remunerate the best human capital at your service. These contemporary money heroes achieved the success of their unpatented experiments by exploiting loopholes and legal differences between the member states of the European Union (EU). Sometimes they even extract oil from the legal regulation gaps that populate national regulations.
As the BEPS call into question the legitimate general interests (of each nation, separately), some supranational organizations, such as the EU, have adopted certain measures to contain damage defense, alleging, in a hypocritical and fallacious manner, alleged interests common and shared partnerships that only exist in the highly paid fantasy of Union bureaucrats. Because it has been precisely the institutions of the Union -co-opted by the Northern countries- that have paved the way for the most selfish strategies to sprout like autumn mushrooms. If Europe is parasitized by BEPS today, it is mainly due to the continuous encouragement of competition, even unfair, between some partners and others that come out of the toxic offices in Brussels. Europe is a monetary union, not a fiscal union. Only consumption taxes have been subject to harmonization so that the single market works without anomalies. The Union has prevented a balanced tax system within its borders and only in a rhetorical way can the regulations that come out of Brussels or Strasbourg establish a minimum of harmony in the national tax systems (measured as a whole) as long as the Treaty on the Functioning of the Union.
On May 25, 2018, Directive (EU) 2018/822 was approved, on the automatic and mandatory exchange of information (between Member States) in the field of taxation and with respect to the aforementioned cross-border mechanisms. The transposition of the Directive to our legal system was carried out by Law 10/2020, of December 29. Directive (EU) 2018/822, which modifies Directive (EU) 2011/19, regulates the obligation to report on, according to its own nomenclature, potentially aggressive cross-border tax planning mechanisms.
I will go back soon with the measures adopted, but first I must say that the 2018 Directive is a tribute to shamelessness and a lack of self-respect. Already in its preamble we are told that these mechanisms are an unforeseen consequence of the progressive increase in the mobility of people and capital within the Union. In other words, freedom is to blame and not the terrible regulation of the Community’s organs of power. The most unheard of: “…it is intended to fill the existing gaps” in state legislation. And the most astonishing thing: the information of the “fiscal engineers” who have designed the perverse mechanisms with the intention of improving the laws of the States in matters of direct taxation (especially, in Corporate Tax) is coercively required. Directive (EU) 2018/822 is an obscene combination of an inquisitorial auto-da-fe and an attack on intellectual property. Without being saved from burning either, as we will see later, the professional secret.
The best – rather the worst – that can be said about the 2018 Directive was noted in his diary by the unrepeatable poet from Tras os Montes Miguel Torga. Entry of June 6, 1993 (shortly before the entry into force of the Maastricht Treaty): “The only thing that capitalism mends are rags.”
The Directive requires an obligation of exhaustive information to all those who are considered “intermediaries” (according to the definition of the Directive itself) and provide “neutral” advice related to the mechanism. An advice that has the mission, “only”, to “evaluate” the “adequacy” of the mechanism to the applicable regulations. Is it the responsibility of a lawyer to “evaluate” or “neutrally advise” their clients on the “adaptation” of their conduct to the law? Why does the European legislator talk about love when what really worries him is the carnal knowledge of the parish? Are we talking about a lawyer or, rather, an inquisitor, a spiritual confessor, a snitch or a spy at the service of the Government? Please, leave your phone and your nose in a hands-free position: doesn’t the reader’s pituitary already detect a whiff of authoritarianism?
“The intermediaries” -sounds like the name of a musical band from the Torrelodones casino- must provide the Tax Administration of their country:
1) Information on the cross-border mechanisms in which they participate or intervene.
2) Information on the updating of tradable cross-border mechanisms.
3) Information on the use in the corresponding State of aggressive tax planning cross-border mechanisms.
Who has the status of “intermediaries”? Pay resigned attention to the following litany: “any person who designs, markets, organizes, makes available for execution a cross-border mechanism subject to communication of information, or who manages its execution.” If you have survived legal torture, prepare for the best (by devilish extension). Likewise, any other person who is suspected of having agreed to provide help, assistance or advice related to the aforementioned behaviors (design, marketing, organization and blablabla…) will also be considered an “intermediary”. The European Union or the Soviet Union? Will James Bond or Lavrenti Beria return?
But what is a cross-border mechanism? Be careful, here is the Manneken Pis hose:
“A mechanism that affects more than one Member State or a Member State and a third country when at least one of the following conditions is met:
a) not all participants are resident for tax purposes in the same jurisdiction.
b) one or more of the participants are simultaneously resident for tax purposes in more than one jurisdiction.
c) one or more of the participants carry out an economic activity in another jurisdiction through a permanent establishment, and the mechanism constitutes part or all of the economic activity of that permanent establishment.
d) one or more of the participants carry out an activity in another jurisdiction without being a resident for tax purposes or without creating [en esa jurisdicción] a permanent establishment.
e) said mechanism has possible consequences on the automatic exchange of information or the identification of beneficial ownership”. The hen!
And, to close the circle with which the Brussels bureaucrats want to stifle European cosmopolitanism, it is appropriate to ask one last question. What quality does the cross-border mechanism have to be the object of information to the competent authority (military, of course)? Answer: “the potential risk of tax avoidance”.
Should all the “intermediaries” kneel in front of the confessional – “Father, I have sinned, because of me, because of my very great fault!” – or does some fortunate person have the right to conscientious objection? Yes but no. Article 8 bis ter of Directive 2011/16, modified by Directive 2018/2022, recognizes (section 5) the right to waive the obligation to inform when it violates professional secrecy. However, immediately afterwards, the same precept launches this notice for navigators: “In these circumstances, each member of the State will adopt the necessary measures to require intermediaries to notify any other intermediary without delay of their information obligations…”.
Two associations of Flemish lawyers went to the Justice of their country arguing that Directive (EU) 2018/822 violated professional secrecy. The communication of their obligation to inform other “intermediaries” is -according to the Flanders jurists- incompatible with the Charter of Fundamental Rights of the EU. The matter came to the table of the Constitutional Court of Belgium, which, before issuing a sentence, raised a preliminary ruling on December 17, 2020 before the Court of Justice of the European Union (CJEU).
It seems obvious that lawyers should only provide and receive information from their clients. Any external interference in that relationship of trust negatively affects the private life of the latter. This harmful consequence occurs if the lawyer is coerced by the public powers to share with third parties information that he knows in the framework of the exercise of his profession, even outside of legal proceedings and within the legal advice provided to his client. On the other hand, any legal obligation that imposes on a lawyer the disclosure to third parties and, in particular, to the Tax Administration, of the facts known in the performance of his profession is incompatible with the confidential nature that binds the professional to his client. General interests deserve protection, but not at any price, like the “garzonadas” of an Andalusian judge who believes he is Saint-Just and confused the National Court with the Public Health Committee. Confidentiality is especially protected by the European Convention on Human Rights (article 8). To which should be added the mandate of article 7 (“Respect for private and family life”) of the Charter of Fundamental Rights of the EU, which states: “Everyone has the right to respect for their private and family life, their domicile and its communications. An exhaustive mandate that the CJEU (Grand Chamber) echoes in its judgment of December 8, 2022 when it expresses: “…even supposing that the notification obligation established in article 8 bis ter, section 5, effectively allows contributing to the fight against aggressive tax planning and the prevention of the risk of tax avoidance and evasion, it should be noted that, however, it may not be strictly necessary to achieve said objectives or, in particular, to guarantee that the information related to the two subject mechanisms The communication is transmitted to the competent authorities” (paragraph 46). As if the foregoing were not enough “… no “intermediary can validly allege directly that he was unaware of the information obligations to which he is subject and individually due to his consideration as an intermediary” (paragraph 47).
Article 7 of the Charter guarantees the secrecy of professional advice, both with regard to its content and its existence. “Therefore [los clientes] they must be able to legitimately trust that their lawyer will not divulge to anyone, without their consent, that they have used their services.” (paragraph 27). The secret is disclosed in two ways: first the “intermediary” is informed and then, through the latter, the Administration.
Violating professional secrecy is not a bit useful, since “…the tax administration may request additional information [a la recibida por un “intermediario” que no disponga de secreto profesional] directly to the taxpayer concerned” (paragraph 52). Item more: it is not valid for a third party to communicate [a la Administración tributaria) “la identidad del abogado intermediario ni su consulta”. (parágrafo 57). Además, las autoridades fiscales pueden y deben, si lo estiman necesario, controlar al propio interesado.
En definitiva, manifiesta el TJUE (parágrafo 66): el precepto cuestionado “es inválido a la luz del artículo 7 de la Carta en la medida en que su aplicación por los Estados miembros tiene como consecuencia imponer al abogado que actúa como intermediario […] when exempt from the obligation to provide information […] Due to the fact that it is subject to professional secrecy, the obligation to communicate information […] to any other intermediary who is not his client.”
The CJEU decision binds all national courts that hear a problem similar to the one that has been the procedural object of the judgment handed down on December 8, 2022.