IF EU SCHENGEN AGREEMENT COLLAPSES! BACK TO THE FUTURE OF TAX PLANNING? Giancarlo CERVINO Centre for International Fiscal Studies Lugano

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1 IF EU SCHENGEN AGREEMENT COLLAPSES! BACK TO THE FUTURE OF TAX PLANNING? Giancarlo CERVINO Centre for International Fiscal Studies Lugano INTAX EXPO INTERCONTINENTAL HOTEL KIEV UKRAINE 12 September 2016 Centre for International Fiscal Studies 1

2 WHAT HAPPENED UNTIL NOW? CYPRUS CRISIS: THE BAIL-IN NEW POLICY GREEK CRISIS: IS THE EURO RELIABLE? NEW EU DIRECTIVES (CORPORATIONS, TAX AVOIDANCE, ETC.) NEW OCDE INITIATIVE: BEPS MORE MONEY LAUNDERING, TAX EVASION AND FRAUD CRACKDOWN AUTOMATIC EXCHANGE OF INFORMATION RUSSIAN DE OFFSHORIZATION 2

3 WHAT IS HAPPENING NOW? SYRIA AND LYBIA WARS: COLD AND HOT WARS UNINTERRUPTED FLOW OF ECONOMIC AND WAR MIGRANTS: DIFFERENT APTITUDE OF EU COUNTRIES HISTORICAL COMPARISON OF IMMIGRATION DEFLATION AND HIGH UNEMPLOYMENT: THE REAL PROBLEMS ECONOMIC, SOCIAL AND FINANCIAL CRISIS: NEVER ENDING? BAIL-IN POLICY ADOPTED IN ALL EU SINCE 1 JANUARY 2016: ARE BANKS STILL SAFE? THE ITALIAN CONUNDRUM TEMPORARY SUSPENSION OF SCHENGEN AGREEMENT IN VARIOUS EU COUNTRIES (AUSTRIA, GERMANY, SWEDEN, ): WHAT PRACTICAL CONSEQUENCES? 3

4 WHAT IS HAPPENING NOW? BREXIT! 4

5 WHAT COULD HAPPEN IN NEAR FUTURE? ANOTHER POSSIBLE BANKING CRISIS: ITALIAN BANKING SYSTEM COLLAPSES SCHENGEN AGREEMENT COLLAPSES: THE RETURN TO PHYSICAL BARRIERS AND TO RESTRICTION ON THE FREE MOVEMENTS OF PERSONS ERASMUS EXCHANGE PROGRAMME IS INTERRUPTED: STOPPING THE DEVELOPMENT OF NEXT GENERATIONS OF PEACEFUL EUROPEANS SWISS REFORM ON FREE MOVEMENT OF PERSONS: THE GUILLOTINE CLAUSE ENTERS INTO FORCE THE STOP TO BILATERALS AGREEMENTS FORCED REPATRIANTIONS OF MIGRANTS BEGIN AND SOCIAL TENSIONS INCREASE: THE VICTORY OF POPULISM IN EU 5

6 A HOST OF TAX CONSEQUENCES EVEN IF THE EU SURVIVES AND THE DAMAGE IS LIMITED TO RESTRICTIONS ON THE FREE MOVEMENT OF PERSONS, TAX RULES WOULD BE AFFECTED THE PRIORITY OF ALL FUNDAMENTAL EU FREEDOMS ON NATIONAL LAW WOULD BE IN DOUBT SOME MEMBER STATES WOULD PUT UP NOT ONLY PHYSICAL BARRIERS BUT ALSO TAX BARRIERS TO PEOPLE CROSSING EU BORDERS FREE MOVEMENT OF CAPITAL WOULD BE LIMITED CREATING OBSTACLES TO THE FREE MOVEMENT FOR BUSINESS CAPITAL CONTROLS WOULD BE REINSTATED IN STRONGEST MEMBER STATES AND ALL MEMBER STATES WOULD REACT 6

7 A HOST OF TAX CONSEQUENCES NEW DISCRIMINATORY ACTIONS WOULD BE TAKEN AGAINST FOREIGN- SOURCE CAPITAL DIFFERENT TAX TREATMENTS TO DISTINGUISH AMONG RESIDENT AND NONRESIDENT TAXPAYERS AND BETWEEN DOMESTIC AND FOREIGN INVESTMENTS WOULD BE INTRODUCED AGAIN IN A CLIMATE OF WEAKENING FREEDOMS, MEMBER STATES WOULD REINFORCE ANTIAVOIDANCE RULES, BUT ALSO STATE AID POLICY AND FIGHT AGAINST HARMFUL TAX COMPETITION WILL BE AFFECTED: MEMBER STATES WOULD BE TEMPTED TO ATTRACT FOREIGN INVESTORS ON THEIR OWN, REGARDLESS THE IMPACT FOR OTHER MEMBERS 7

8 A HOST OF TAX CONSEQUENCES PROLIFERATION OF PATENT BOXES TO PROTECT AND TO BOOST R&D FOREIGN NON DOMICILED STATUS FOR INDIVIDUALS WOULD BE REINTRODUCED SPECIAL OFFSHORE REGIMES COULD BE REINSTATED INTERNATIONAL TAX RULINGS COULD BE ASKED AGAIN AUTOMATIC EXCHANGE OF INFORMATION ON TAX DATA AND TAX RULINGS WOULD BE LIMITED OR STOPPED 8

9 A HOST OF TAX CONSEQUENCES LEGAL UNCERTAINTY WOULD DISINTEGRATE THE PRESTIGE OF EU INSTITUTIONS AND OECD AND USA WOULD LOSE A PARTNER IN G-20 USA, CHINA AND RUSSIA WOULD HAVE MORE LEVERAGE IN NEGOTIATIONS WITH INDIVIDUAL EUROPEAN STATES MULTINATIONALS WOULD BECOME THE TARGET OF HARSHER NATIONAL MEASURES TO PROTECT THE TAX BASE BUT THEY WOULD HAVE THE POSSIBILITY AGAIN TO NEGOTIATE TAX BENEFITS BY WAY OF RULINGS WITH SINGLE MEMBER STATES. BACK TO THE FUTURE OF TAX PLANNING? 9

10 THANK YOU AND GOOD BYE Centre for International Fiscal Studies Via Madonnetta 17, CH-6900 Lugano Switzerland Tel Fax GIANCARLO CERVINO THANKS YOU FOR YOUR ATTENTION AND IS READY FOR Q&A! 10