CYIL vol. 15 (2024)

CYIL 15 ȍ2024Ȏ THE INFLUENCE OF THE OECD ON EU LEGISLATION law, 52 but it is worth noting that the directive itself provides a rather interesting foundation that individual member states adapt according to their needs. 53 BEPS Action 2 also recommends including certain incomes in the taxable base of the receiving country to neutralize the effects of hybrid mismatches. Directive (EU) 2017/952 reflected this requirement by stipulating that member states either deny deductions for payments, expenses, or losses, or require taxpayers to include the relevant payment in their taxable income. 54 Ultimately, we can conclude that the mentioned directive is a direct result of the BEPS project and, thanks to it, was adopted in such a short time and is now transposed into the laws of all member states. 2.2.3 Implemented Harmful tax practices Another OECD BEPS measure, whose implementation in EU law we will clarify, is Measure No. 5 – harmful tax practices. The EU has acted in this regard mainly through its Code of Conduct Group (business taxation). The aim of the EU Code of Conduct (business taxation) is to promote fair tax competition within the EU as well as outside it. Originally, it was a legally non-binding code of conduct created by finance ministers. The tool primarily serves to identify and assess preferential tax measures that may be harmful. 55 Subsequently, in 2016, the EU expanded the territorial scope of the code of conduct through its Communication on an External Strategy for Effective Taxation. 56 This communication introduced a process of listing jurisdictions that do not meet the standards of good governance in tax matters. From the opposite angle, it should be noted that despite the OECD’s effort for voluntary commitment to the BEPS project by countries worldwide, the EU uses its market power and the reputational disadvantages associated with being listed on the EU blacklist to compel jurisdictions to comply with the regulatory regime. 57 In cooperation with the OECD, the Code of Conduct ensures the compliance of jurisdictions with the BEPS project and tax transparency standards. This is secured through membership 52 For ex.: KHO 2023:31 Finnish company (A Oy) and its Swedish subsidiary (B AB). 53 The Slovak Republic transposed Directive (EU) 2017/952 into law, amending and supplementing Zákon č. 595/2003 Z. z. o dani z príjmov v znení neskorších predpisov a ktorým sa menia a dopĺňajú niektoré zákony [Act No. 595/2003 Coll. on income tax as amended and by which they change and supplement some laws]. According to the explanatory memorandum of the law, it is evident that affected taxpayers, both individuals and legal entities, will be negatively impacted by excessive administrative burden, which corresponds to the judgment of the Supreme Administrative Court in Finland, Case A Oy. To date, we do not have a specific study or ex-post analysis on the negative effects in the Slovak business environment, but this does not mean that such an impact on both individuals and legal entities is not felt. 54 Point 9 of the Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries. 55 COUNCIL OF THE EU, 2024. Code of Conduct Group (Business Taxation) What is the EU Code of Conduct? (cit. 2024-03-02). Available online: https://www.consilium.europa.eu/en/council-eu/preparatory-bodies/code conduct-group/. 56 Reforming the EU policy on harmful tax practices (including the reform of the Code of Conduct Group): 2020/2258(INI). 57 SHARMAN, J. C., 2009. The Bark is the Bite: International Organizations and Blacklisting. In: 4 Review of International Political Economy 16, 2009, p. 573.

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