Combating tax avoidance and establishing a fair taxation system are key objectives in the context of ensuring the proper functioning of the European market.This is stipulated in the recent Directive on the automatic exchange of information within the EU (also known as DAC 6), which was incorporated into Greek law by Law 4174/2020, introducing the obligation for “intermediaries” and in some cases for the taxpayers themselves, to report to the tax authorities cross-border arrangements that could potentially be used for aggressive tax planning , aiming at gaining a tax advantage from the person concerned, provided that these arrangements meet certain hallmarks set out in the Directive.
The category of intermediaries which are under the obligation to disclose to the competent national tax authority such aggressive arrangements includes any person who designs, markets, organizes or implements a cross-border arrangement of potentially aggressive tax planning. Financial advisers, accountants, lawyers are considered, inter alia, as intermediaries , to the extent that they provide appropriate assistance or advice to their client regarding reportable cross-border arrangements. A key issue that arises in the implementation of the Directive is that of the conflict between the obligation to report possible aggressive tax regulations within the EU and the obligation of the “intermediary” consultants to observe professional confidentiality .
Especially with regard to legal professional privilege, which is one of the main guarantees for the exercise of the legal function with constitutional and legislative bases, the conflict seems even stronger. This is so because without confidentiality it would not be possible to effectively defend the interests of clients, especially if the lawyer had each time the obligation to cooperate with the competent public authorities and disclose information that came to his notice during the communication with his client.
Therefore, the following question arises: Does the purpose of combating aggressive cross-border tax regulations justify the limitation of confidentiality (as, for example, has been deemed to apply under certain conditions in the case of money laundering)? Both the Directive itself and the Greek law do not give a clear answer. The wording of the Greek law foresees the exemption of the lawyer from the obligation to notify the Authorities, to the extent that he operates within the limits of the legal framework governing his profession, when compliance with the obligation of disclosure constitutes breach of the obligation of confidentiality and secrecy. It seems, therefore, that the exception concerns the entire scope of legal services as lawyers obviously are not allowed to act outside the legal framework of their profession. However, that is, an early conclusion, since the Directive has not yet been interpreted as to what is eventually covered by confidentiality and what is not.
In any case, the obligation to disclose seems to severely restrict the taxpayer’s right to legal and tax advice, while in essence it transfers the burden of carrying out monitoring activities and disclosing possible aggressive tax planning to the “intermediaries” – professionals and advisors of each taxpayer – instead of the appropriate state control mechanisms. It is expected to be assessed in practice whether the new regulations will be able to be implemented effectively and serve the purpose for which they were adopted.