Hollande Announces NewAntiavoidance Measures

by Sophie Borenstein

Reprinted from Worldwide Tax Daily as: 2013 WTD 76-5

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Hollande Announces NewAntiavoidance Measures

by Sophie Borenstein

French President Francois Hollande last week an-nounced that a bill containing a series of antiavoidancemeasures to ‘‘moralize’’ public life and fight tax fraudwill be submitted to the Council of Ministers on April24.

Among the measures proposed is the creation of ahigh authority to control the estate assets of Cabinetministers and the heads of major French administra-tions. To discourage the use of tax havens, new report-ing obligations would also be introduced for large com-panies, banks, and wealthy individuals. French banksand companies would be required to submit annually alist of their foreign subsidiaries, including specific de-tails about the nature of their business, their transac-tions, sales, employees, profits, taxes paid, and publicaid received.

A national financial prosecutor would also be ap-pointed to fight economic and financial crime.

Hollande said he is determined to eradicate tax ha-vens in Europe. The proposed measures announced onApril 10 fall under two main categories, detailed below.

Strengthening transparency requirements under a new inde-pendent administrative authority. The antiavoidance billwould require France’s main political and administra-tive leaders to transmit to a new independent adminis-trative authority (high authority) declarations of theirestate assets, interest statements, and declarations at-testing to the completeness and accuracy of the infor-mation provided.

Criminal penalties for failure to transmit the docu-ments or for inaccurate reporting would be substan-tially strengthened.

The declarations of estate assets and the intereststatements of members of the government and mem-bers of Parliament would be made public, and the dec-larations of estate assets would be checked at the be-ginning and end of each term.

There would also be a rule prohibiting lawmakerswith parliamentary mandates from conducting anyother professional or business activity (with some ex-ceptions for professional activities that are compatiblewith the mandate).

Strengthening the fight against economic and financialcrime and tax havens. The fight against tax fraud andinternational tax evasion has become a key issue forFrance’s sovereignty and the recovery of public ac-counts. The bill would therefore bolster the resourcesof the courts, the police, and the tax administration topursue and identify complex tax fraud and money-laundering networks.

A special prosecutor with national jurisdiction overcases of major corruption and substantial tax evasionwould be created, and a central office to fight againstfraud and corruption would be established within theCentral Department of Judiciary Police. In the mostcomplex cases of tax fraud and money laundering, thesame special investigative techniques used to combatorganized crime would be employed. The statute oflimitations would be modified for the most serious of-fenses.

Criminal penalties for tax evasion would also beincreased for the worst offenses. Further, elected offi-cials convicted of tax fraud or corruption would beineligible for public office for 10 years, or possibly per-manently (with the possibility that the prohibitioncould be revoked).

The government’s attack on fraud and internationaltax evasion extends both to individuals who concealassets abroad and to companies transferring their prof-its to tax havens. French banks would therefore be re-quired to publish annually a list of all their subsidiariesaround the world, country by country, and would haveto indicate the nature of the activities of each subsid-iary and provide for each country the turnover, thenumber of employees, the results, the taxes paid, andthe state aids received.

The government wants to strengthen mechanismsfor fighting tax havens at the national, EU, and inter-national levels by signing information exchange agree-ments with countries identified as tax havens andmonitoring their implementation.

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To end banking secrecy and the concealment of in-come and assets, France has joined four other EUmember states in support of a pilot automatic informa-tion exchange program and is proposing at the EUlevel the elaboration of common rules governing thirdcountries, including Switzerland.

France also supports initiatives to fight aggressivetax planning by allowing companies to reduce their tax

liability to account for the erosion of tax bases and thetransfer of profits, particularly in the area of the digitaleconomy, and has joined other member states in callingfor the revision of the EU anti-money-laundering direc-tive and greater transparency of corporate and legalentities such as trusts. ◆

♦ Sophie Borenstein, partner, Reed Smith, Paris

Reprinted from Worldwide Tax Daily as: 2013 WTD 76-5

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