Contribution to the public consultation on DAC

1 Summary

Palta welcomes the Commission’s initiative to simplify and declutter tax legislation, by recasting the Directive on Administrative Cooperation (DAC). Administrative burden is a major cost for companies operating in the EU and also a barrier when trying to enter the Single Market.

Simplification efforts should always lead to concrete and measurable reductions in compliance costs and the time required for fulfilling tax obligations. Clearer and more streamlined legislation benefits both businesses and tax administrations by reducing unnecessary complexity and making obligations easier to manage.

Palta fully supports the Commission’s ambitious target to reduce administrative burdens by 25% for businesses and 35% for small and medium-sized enterprises. High percentage of our member companies are SMEs, operating locally. However, from our perspective, a “home market” for an European company should always be the European Single Market. Administrative tax burdens should never become a barrier to doing business within the EU.

It should be possible to do DAC reporting centrally within a group through the authorities of a single country for all group companies

Taxation procedures would be simpler and more effective by using digital taxation tools, harmonising and digitalising the tax reporting & process.

Secure and interoperable digital identity wallets under eIDAS 2, such as the forthcoming European Business Wallet, would significantly improve DAC reporting by enabling reliable cross‑border taxpayer identification, reducing duplication and errors, and allowing companies to authenticate once and reuse verified information without new identifiers or added administrative burden.

2 Simplification proposals for DAC4, DAC6 and DAC7

The recast of the DAC should prioritise measures that genuinely eliminate duplication, legal uncertainty and excessive administrative workload. Technical consolidation or minor adjustments alone will not deliver meaningful improvements unless they clearly reduce the administrative burden faced by taxpayers. Here are some proposals from Finnish companies.

2.1 DAC4

National legislation is stricter than the directive and varies in many Member States causing administrative costs and uncertainty. CBCR requirements should be harmonized.
The parent/other EU resident group company should be able to do CBCR centrally within a group through the authorities of a single country for all group companies.
Example could be also taken from the reporting model in Germany and Norway, where reporting is done on the corporate income tax return form.

2.2 DAC6

DAC6 reporting obligation should be removed. DAC6 is very burdensome and costly, but the results on getting information to tackle tax avoidance have been very low. In fact, the companies are of the opinion that the DAC6 represents the single largest source of administrative burden within the DAC framework.
Basically, the DAC6 is causing unreasonably high administrative costs to compliant companies already paying their taxes. The DAC6 is ineffective and not targeting the law breakers.
OECD Pillar 2 GloBE-rules and Minimum Tax Directive reporting requirements address the potential no- or low-taxed structures, making the DAC6 reporting unnecessary and overlapping.
The hallmarks have been drafted so broadly that a large amount of data is required to be analysed, assessed against the hallmark tests and provided to tax authorities, in a short time frame. Also, double reporting is caused. There is not clarity to what purpose the vast amount of data is used.
If the DAC6 reporting is not entirely deleted, at least the amount of hallmarks should be decreased significantly.
The poor guidance and inconsistent interpretation and implementation of the DAC6 legislation also causes uncertainty and risk of tax disputes and penalties.
The effectiveness of DAC6 was analysed in 2022 (i.e. before minimum taxation was implemented). The report made by the Ministry of Finance of Finland[1] indicated that DAC6 reporting has created significant additional administrative workload and costs for intermediaries and taxpayers. Collecting and assessing the required information (especially due to hallmark criteria) has been resource‑intensive and unclear. While the authorities estimate they have gained some useful information about cross‑border arrangements, the overall benefits for the authorities have been limited. The report didn’t indicate any meaningful increase in tax revenues as a result of the reporting obligations, and the effectiveness of DAC6 was considered low relative to the burden it creates.

2.3 DAC7

Palta wishes DAC7 reporting could be enabled to be done centrally within a group through the authorities of a single country for all group companies. Current regulations allow reporting in one country in situations where the same legal entity is required to report in multiple countries. However, when operating in multiple countries with a subsidiary model, each subsidiary has to do the reporting separately to its own country’s tax authorities. The administrative burden and financial cost of reporting are significant in these situations, especially because there are large differences between countries in the required file format.
Each country’s tax authority should accept a unified XML standard template for reporting. Currently, the XML schema used in several EU countries differs significantly from the OECD model schema, and this makes reporting very laborious for platforms operating in multiple countries.

3 Overarching simplification proposals

Centralised EU reporting

As mentioned above, Palta is of the opinion that it should be possible to do DAC reporting centrally within a group through the authorities of a single country for all group companies. This would be one of the most impactful improvements to reducing administrative burden.

A single EU‑level reporting portal would streamline the exchange of information between tax authorities and remove the need for taxpayers to navigate multiple national interfaces. This would also encourage the development of fully integrated end‑to‑end reporting solutions, reducing fragmentation and ensuring that technical updates or schema changes are implemented consistently across the Union.

Similar centralised models already exist in other EU policy areas, e.g. customs. which have demonstrated that unified digital entry points can significantly simplify compliance processes for both administrations and businesses. By adopting a comparable approach for DAC reporting, the EU could reduce administrative burden, improve data quality and enable more efficient cross‑border cooperation.

A central portal would also support interoperability, ensuring that reporting standards are applied uniformly and preventing Member State–specific technical formats from re‑emerging.

Harmonised deadlines for reporting

Member States apply different reporting deadlines, and the underlying legislation also enters into force at varying times across countries. As a result, companies must have their reporting processes and tools ready as soon as the first relevant national legislation becomes applicable.

The differing deadlines further complicate compliance. In many cases, the timelines are not workable in practice and place disproportionate time pressure on businesses. Reporting schedules should also be aligned more closely with the complexity of the required assessment and the practical realities of business operations.

User-friendly guidance

Tax reporting guidance is often fragmented to multiple sources, highly technical in nature, and difficult for taxpayers to navigate. A streamlined and user‑friendly guidance framework would improve legal certainty, reduce compliance costs, and support a more uniform application of the rules across the EU.

For example, in several Member States taxpayers must currently consult legislation, administrative instructions, FAQs, and informal interpretations, all of which may differ in scope or wording. And then compare these with the similar set of guidance from other Member States where the group has to do reporting. This fragmentation not only increases the risk of errors but also leads to unnecessary time spent searching for authoritative instructions.

A standardised EU template when possible

The Commission should introduce a harmonised template for DAC (and other tax‑related) reporting to be used across all Member States whenever feasible. A harmonised EU‑wide reporting template for DAC reporting would significantly improve internal coordination within MNEs, strengthen legal certainty and promote a consistent application of rules across all Member States. Such a template should be fully interoperable with national systems.

Where such a template is not yet available or cannot be used in every Member State, companies should be required to submit only information that is readily accessible without additional administrative effort.

Report only once

There should not be overlapping requests for information. This would require that DAC obligations should be more closely aligned with existing compliance frameworks, e.g. OECD Pillar 2 GloBE, minimum taxation, CBCR and TP documentation, so that taxpayers can rely that information already submitted to tax authorities is available and avoid multiple reporting of the same data. However, taxpayers should be clearly informed of the purpose for which data is collected.

Furthermore, notifications should only be required when previously submitted information has changed. The reporting tool/portal could e.g. prefill the information to the report (like in Germany the amount of remaining/undepreciated depreciation base is prefilled to the tax return form). This would allow the company to evaluate if the information is still up to date and accurate.

4 Technical simplification proposals

Differences in reporting formats and technical requirements varying from country to country are costly and burdensome.

Taxation procedures would be simpler and more effective by using digital taxation tools, harmonising and digitalising the tax reporting & process.
Quick wins could be reached for example by harmonising the technical elements of reporting processes (some have already been mentioned above in more detail):
- legislation coming into force at the same time in all Member States
- non-binding but simple and easy to implement reporting templates
- similar understanding of the content of the data points
- similar due dates of reporting
- always accepting reporting also in e.g. English and French, not only allowing local language
- ensuring the same reporting format (XML, XBRL) to enable use of similar reporting tools

5 EU Business Wallet to be leveraged in DAC reporting

Reliable taxpayer identification remains one of the persistent challenges in DAC exchanges. This was also mentioned in the Commission Staff Working Document on evaluation of the DAC[2]. Both the EU and the OECD have recognised that secure, interoperable digital identity solutions are essential for reducing errors, improving data matching and enabling more automated, close to real‑time tax processes. EUDI Wallets under eIDAS 2 and the forthcoming European Business Wallets would address this by providing secure, government‑verified and interoperable identity credentials that tax authorities can trust across borders. This would reduce mismatches, duplications and errors that currently arise from divergent national identifiers.

For businesses, a wallet‑based model would also streamline interactions with tax authorities: companies could authenticate themselves once, share verified licences or registration data digitally, and avoid repeated submissions in every Member State. Thus, the business wallet would enable identification when using centralised EU reporting. The Commission estimates that business wallets could generate substantial annual savings by eliminating redundant administrative steps and enabling secure, automated data exchange. At the same time, this approach avoids imposing new identifiers or additional burdens on companies, as wallets can build on existing national ID systems and integrate into Tax Administration 3.0 developments. The OECD’s Tax Administration 3.0 vision likewise emphasizes the role of trusted digital identity as a foundational building block for a frictionless tax system, enabling automated processes, better data matching and fewer manual interventions by taxpayers. An important element is, that the OECD eID work is currently planned to be interoperable with the eIDAS 2 -concept. The work is still ongoing.

Wallet‑based solutions also reflect practical business needs. Business wallets would also be usable for B2G, B2B and cross‑border transactions. In order to be usable, business wallets must provide clear benefits such as streamlined B2B authentication, permit and licence management and secure document sharing. Rather than introducing a new EU tax identification number, which would be costly and disruptive, wallets could serve as an interoperable layer that links existing national identifiers through standardised, verifiable credentials. This approach would improve the accuracy of taxpayer identification and data exchange without increasing administrative obligations for companies.

6 Concluding Remarks

The Omnibus-project of decluttering of tax legislation should not be limited to DAC recasting, but all EU’s tax legislation should be analysed and simplified. A more comprehensive, practical approach is needed. One that focuses on simplifying processes, removing overlapping reporting requirements and aligning procedures more effectively across Member States.

Palta and its member companies remain at the Commission’s disposal for further dialogue on these issues.

Additional information:
Maria Volanen
Head of Tax and Trade Policy
Service Sector Employers Palta

[1] Seurantaraportti rajat ylittävien järjestelyjen raportoinnin kokemuksista.PDF

[2] REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND
THE COUNCIL on the evaluation of Council Directive 2011/16/EU on administrative cooperation in the field of taxation