We are delighted to share with you EPIF’s response to the European Commission public consultation pertaining to the review of Directive 2011/16/EU as regards measures to strengthen existing rules and expand the exchange of information framework in the field of taxation to include e-money.
E-money, as defined by EU legislation, is by design a means of payment for services and goods that contributes to financial inclusion rather than a deposit in the “ordinary course of a banking business”– both as regards to the overall value stored on average on an e-money instrument, as well as the timeframe over which this value is stored on an e-money instrument. Classical use cases are low value payments for digital goods and services or payments on public transport networks whereas industry evidence also shows that as customers depend more on e-commerce, they have grown to rely on e-money also for purchases of expensive items e.g. luxury holidays, cars, art, electronic goods.
EPIF supports the objective to fighting tax fraud and tax evasion by capturing e-money accounts that are being used to hold large balances over a sustained period of time. Indeed, some e-money products provide a functionality resembling that of a bank account.
However, EPIF strongly maintains that a clear demarcation is needed between those use cases where the holder of e-money clearly intends to use e-money instruments as a means of storing large amounts of capital and/or over a longer timeframe, from those use cases where the holder of e-money clearly intends to use e-money instruments to make purchases. To ensure that the reporting objective is met, EPIF proposes establishing clear reporting thresholds.
EPIF also proposes to distinguish payment products where the payment service provider acts in a passthrough capacity, e.g. products that are used for money remittance, enable the acquiring of transactions for merchants, or are used for making payments to suppliers or to employees. In particular, EPIF would argue that an entity undertaking money remittance, and no other activities, does not present a risk of being used for tax avoidance or evasion and thus should be excluded from the scope of DAC. To the extent that a money transfer entity provides stored value products, it could potentially be in scope of DAC and thus be required to perform due diligence on accounts above the threshold proposed.
At last, EPIF strongly agrees with the European Commission Inception Impact Assessment that only the data necessary to perform the risk analysis and facilitate tax control of e-money should be collected. EPIF also calls for a single home country reporting mechanism regarding the data collection by national authorities.