Statement to the Ministry of Finance: Proposal for a Council Directive on administrative cooperation in the field of taxation (DAC) recast

To the Ministry of Finance
Issue number: VN/20147/2026

Service Sector Employers Palta is grateful to the Ministry of Finance for the opportunity to comment on the amendment of the DAC recast directive during the preparation of the Government communication to Parliament. Palta is also available for the subsequent stages of preparation.

Palta takes a positive view on the Commission’s objectives to streamline and simplify DAC regulations. As the Commission acknowledges, the overall framework of nine different DAC directives has created a fragmented and complex regulatory network, weakened taxpayers’ legal certainty and significantly increased administrative costs. The Commission organised an open consultation round early 2026. Palta is pleased that companies’ comments are reflected in the proposal.

The directive proposal harmonises and simplifies reporting and information exchange at EU level. However, the current fragmented national DAC legislation and any mutually inconsistent national implementation of this directive continue to pose challenges to uniformity, and the reduction of the administrative burden may remain incomplete. In many cases, national legislation is stricter than the minimum requirements of the directives, because EU legislation deliberately leaves Member States discretion regarding the level of harmonisation. The Draghi report also describes this problem: tax legislation has been identified as an area often affected by so-called gold-plating, meaning national over-implementation of EU regulation.

In addition, Member States often keep national regulation in force even in matters already regulated by EU law, leading to overlapping regulatory systems. Finland should therefore implement the directive without stricter or divergent national regulation. In connection with the possible implementation of the DAC and Tax Omnibus directive proposals, Finland’s tax system should be examined as a whole, and the regulation should be simplified and harmonised systematically.

The European Commission’s proposal pays attention to this challenge. Member States have been left less discretion in the implementation of the directives. Palta is pleased that providing guidance to Member States to ensure uniform application is specifically mentioned in the proposal. The Commission should assess the implementation.

The Commission states directly in its impact assessment that DAC6 reporting has not produced much useful information while causing high costs for companies. Palta supports the proposed reductions in DAC6 reporting, most importantly the exemption of groups within the scope of minimum tax reporting (Pillar 2, DAC9) from DAC6 reporting.

The deadline for submitting information is laid down in the Act on Reportable Arrangements. The taxpayer has to report the information to the Finnish Tax Administration within 30 days of any of the reporting thresholds laid down in the Act being met. If the report contains an error, according to the Tax Administration’s guidance, the report must be resubmitted in its entirety, not only the changed parts. Palta supports the Commission’s proposal to extend the reporting period to 90 days.

In their earlier communication with the Commission, Finnish companies hoped that the reform of DAC reporting would introduce impactful changes that genuinely reduce overlap and administrative burden. Combining country-by-country reporting (DAC4) and minimum taxation reporting (DAC9) is exactly the kind of significant reform proposal that was hoped for. One reporting form, with one deadline, would cover the entire EU group.

The Commission’s impact assessment identifies a key problem: the absence of a centralised and reliable system to verify that the reported TIN (Tax Identification Number) corresponds to the correct taxpayer. It proposes a centralised TIN verification tool as a solution. Palta considers the objective supportable: reliable digital identification would reduce errors, overlaps and problems related to data matching, and would lighten companies’ administrative burden. According to the proposal, the use of a verified TIN would also enable simplified reporting, under which a company would only need to report the taxpayer’s name and verified TIN. Digital, efficient and reliable identification and authentication are important not only for tax administration but also in business-to-business interactions.

In recent years, the DAC system has been expanded to cover an increasing number of reporting obligations. As a result, the volume of personal data and identification data transferred between Member States continues to grow. The more personal identity codes and other identifiers are processed in different systems and Member States, the greater the risks of incorrect matching, data breaches and identity misuse. Companies should not be burdened with unnecessary responsibility for collecting and disclosing personal data where such processing is driven primarily by official reporting requirements rather than by the company’s own business activities.

In earlier stages of legislative preparation, Palta has proposed both in Finland and to the Commission that a digital identity wallet for natural persons and companies (organisations) would be the best means of identification in tax matters. Member States must offer their citizens the possibility to take an EUID wallet into use by the end of 2026. In addition, a European business wallet (EBW) proposal is being prepared. Business wallets could function as an interoperability layer between current national identifiers. This would improve the quality of taxpayer identification and information exchange without creating new administrative obligations for companies.

The directive draft recognises ID wallets as a parallel alternative to TIN verification. Palta considers it important that the TIN verification tool and European identity and business wallets are built to be genuinely interoperable, and that both are accepted neutrally in Member States. Mandatory or fragmented regulation favouring only one identification model should not emerge in the Member States. The EU and Finland should also take into account the work being carried out in the OECD on the development of an international identity wallet.

In Finland, the personal identity code is used as the tax identifier for natural persons. The personal identity code functions widely as an ID both in dealings with authorities and in private-sector services. Although the personal identity code alone is not a strong digital authentication, its broad and permanent use in different systems increases risks related to data matching, misuse and data protection challenges. If a personal identity code ends up in the wrong hands due to a data breach or other data leak, it cannot be changed in the same way as, for example, a password.

The European identity wallet would offer a safer and more modern alternative. Taxpayer identification could be based on information verified by an authority rather than solely on a permanent identification number. The tax authority could receive reliable confirmation of the identification of a person or company without it always being necessary to receive, store or forward the personal identity code. This would improve data quality, reduce incorrect identification data, accelerate cross-border information exchange and ease companies’ administrative burden.

The EU is moving towards a model based on the exchange of verified attributes and attestations instead of permanent identifiers. This approach better supports data protection, information security and cybersecurity requirements. The European identity and business wallets should therefore be viewed not only as tools for reducing administrative burden, but also as important information security and cybersecurity initiatives.

Finland and other Member States should proceed swiftly with the implementation of ID wallets and ensure that they can also be used for taxation and DAC reporting purposes. For Finland, this issue is particularly acute because the use of the personal identity code as a tax identifier creates structural data protection and information security risks.

In the automatic exchange of tax information XML is an established standard format (both in the EU and the OECD) aimed at fast, uniform and interoperable reporting between Member States. In the proposal it is stated specifically, with regard to DAC reporting frameworks and TIN verification: “XML format is used as common exchange standard”.

Palta’s member companies operate internationally and report tax information in several countries. Their reporting systems, tools and internal processes are primarily built around the XML format, which requires significant investments in automated and harmonised reporting across the EU.

For this reason, it is problematic if Finland or other Member States require nationally divergent reporting formats. For example, when DAC6 reporting was introduced in Finland, the report had to be submitted through the Ilmoitin.fi -service as a key-value pair file, and XML reporting was not accepted, even though the service has an XML interface. Such national deviations increase administrative burden, unnecessary conversion and the risk of errors.

In Finland, XML reporting should always be enabled in the future when the tax reporting in question is based on EU- or OECD -standardised information exchange. Under the Tax Procedure Act (verotusmenettelylaki), the Finnish Tax Administration may issue more detailed instructions on the content, timing and method of submitting reports, but the standardised XML format is not laid down in law. In connection with the possible implementation of the DAC reform, acceptance of the XML format should be mentioned in the Tax Procedure Act and in other regulation concerning DAC reporting.

At the same time, it should be ensured at EU level that Member States do not make national deviations from common XML schemas, as has happened, for example, in DAC7 reporting in relation to the OECD model schema. National XML deviations should be removed, and Member States’ tax administrations should accept the standardised XML reporting model as such.

The directive proposal corresponds in many respects to Palta’s objectives, and we take a positive view of the Commission’s proposals. It would be important to continue simplifying the regulation. Our proposals for further work are set out below: