Written by Pieter Baert.
Over the last ten years, the EU has taken several key measures to combat aggressive corporate tax planning, aiming to curb the billions in revenue losses suffered by Member States. However, the variety and breadth of the measures introduced have raised concern about their administrative complexity and overall effectiveness. The Subcommittee on Tax Matters will hold a public hearing on this topic on 15 May 2025.
From post-crisis reforms to simplification initiatives
Following the Great Recession and the subsequent European sovereign debt crisis, and fuelled by publication of various ‘tax leaks’, the EU set out an ambitious range of initiatives to counter corporate tax avoidance. Numerous laws were put into place to close tax loopholes and increase transparency on the tax practices of (large, multinational) companies, including the Anti-Tax Avoidance Directive (ATAD) and the directives on Administrative Cooperation (DAC) and Public Country-by-Country Reporting (Public CbCR). In 2021, a historic global agreement paved the way for the introduction of a minimum effective corporate tax of 15 % for multinationals in the EU, which entered into force in 2024.
Following the 2024 European elections, the European Commission embarked on an overall strategy to cut red tape and simplify EU legislation. In March 2025, the Council called on the Commission to present a road map before the end of Q3 2025 to reduce the reporting burdens for both tax administrations and taxpayers, eliminate outdated and overlapping tax rules, increase the clarity of tax legislation and streamline the application of tax rules, procedures and reporting requirements. This work should cover both direct and indirect taxation, and should ‘preserve the successful achievements’ the EU has made in this area.
Commission evaluations of the ATAD and DAC are already ongoing, and may lead to legislative changes.
Anti-tax Avoidance Directive
The Anti-tax Avoidance Directive (ATAD) set out five key provisions – four specific, one general – to close loopholes that were often abused for aggressive tax avoidance purposes. The ATAD rules entered into force between 2019 and 2022.
Table 1 – ATAD overview
| Council Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market | ||
| Art. 4 | Interest limitation rule | Discourages debt arrangements designed to minimise taxation, limiting the deductibility of taxpayers’ excess borrowing costs |
| Art. 5 | Exit taxation rule | Prevents companies from avoiding tax when relocating assets |
| Art. 6 | General anti-abuse rule (GAAR) | Counters aggressive tax planning when other rules do not apply |
| Art. 7-8 | Controlled foreign company (CFC) rule | Deters profit shifting to a dependent company in a low-tax country to reduce taxable profits |
| Art. 9 | Hybrid mismatch rule | Prevents companies from exploiting national mismatches to avoid taxation |
The provisions of the ATAD function as ‘minimum standards’, allowing Member States to introduce stricter provisions, if they choose to. This flexibility has led to some divergence in the application of these standards, resulting in legal complexity. Additionally, the directive includes several options for Member States, often to exclude certain entities from the scope of a particular anti-avoidance rule. Some stakeholder feedback on the ATAD encouraged the Commission to seek more harmonisation in this area. A study conducted for the Subcommittee on Tax Matters (FISC) similarly noted that reducing the number of available options ‘should be considered for a more homogenous anti-avoidance landscape’.
Discussions are also ongoing about the continued relevance of certain ATAD provisions – such as the CFC rules – in the context of the broader global minimum corporate tax framework. While ATAD is designed to target specific tax avoidance loopholes, the EU Minimum Tax Directive focuses on a minimum level of effective taxation, irrespective of any tax planning strategies employed.
Directive on Administrative Cooperation
As its name implies, the Directive on Administrative Cooperation (DAC) does not govern the imposition or payment of taxes directly. Instead, it facilitates the collection and, increasingly, the automatic exchange of tax-related information between Member States concerning individuals and companies. Benefiting from increasingly efficient digital tools, Member States can track and cross check income streams, swiftly detect evasion or avoidance practices and impose taxes where required according to national legislation. The DAC has undergone eight revisions (DAC1-DAC9) over the past ten years. This has progressively widened the scope of taxpayers and reportable data.
Table 2 – DAC overview
| DAC | Information being reported and exchanged | DAC | Information being reported and exchanged |
|---|---|---|---|
| DAC1 | Income from employment, pension, director fees, income and assets from immovable property and life insurance | DAC6 | Potentially aggressive tax planning schemes of intermediaries |
| DAC2 | Financial account data (account balances, gross amount of interest and dividends received …) | DAC7 | Income earned by sellers on digital sales platforms |
| DAC3 | Advance cross-border tax rulings and advance pricing arrangements of companies | DAC8 | Income earned by crypto-asset traders |
| DAC4 | Country-by-country reports on multinationals (data on revenue, profits, tax paid …) | DAC9 | Top-up tax information returns for the purposes of the Minimum Tax Directive |
| DAC5 | Beneficial ownership and due diligence information as collected through the anti-money laundering legal framework. | ||
Stakeholder responses to the public consultation on DAC indicated that many would welcome greater transparency on how, and to what extent, tax authorities use the data reported. The European Court of Auditors raised a similar concern, noting Member States ‘generally underused’ the data reported under DAC1 to DAC5, which were subject to limited data quality checks.
Stakeholders have been particularly critical of DAC6, which obliges intermediaries – such as tax advisors and accountants – to report information on potentially aggressive cross-border tax arrangements to the tax authorities. Stakeholders regarded the criteria for identifying such arrangements, known as ‘hallmarks’, as overly broad or difficult to apply in practice. This concern was echoed in a study commissioned by the FISC Subcommittee, which also warned about the additional administrative costs for tax authorities: ‘Tax authorities will also be heavily impacted due to the [… expected] volume of disclosed information they will receive. The danger of over-reporting due to the over-inclusion and multiplicity of hallmarks (…) is a real one, and may cause tax authorities [to miss …] some red flags’.
Read this ‘at a glance’ note on ‘The future of EU anti-tax avoidance rules‘ in the Think Tank pages of the European Parliament.
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