How is Deloitte handling the challenges coming from the legislative evolution of hybrid financial instruments?

Abstract

On 29 May 2017, the European Commission introduced the Anti-Tax Avoidance Directive 2 (ATAD 2) which aims to counter the use of hybrid mismatches within as well as with the third countries. The Member States of the European Union, including Luxembourg, have to implement the provisions of ATAD 2 into their national laws as from 31 December 2019. Deloitte Tax and Consulting Luxembourg has Canadian clients who use hybrid financial instruments to invest through Luxembourg companies. The structures of these clients are likely to be impacted by ATAD 2. Deloitte and its clients are thus navigating in a period of uncertainty as they do not know yet how the Luxembourg will implement ATAD 2. Nevertheless, the latter need clarity to plan their strategy. Therefore, Deloitte has to communicate with them in regard to this problematic so as to reassure them. Within the framework of our project thesis, we sought to bring employees tools to allow them to have a centralized and structured communication with their clients. To this end, we first analyzed the legislative evolution of the hybrid financial instruments in the European Union and assessed the implications of ATAD 2 on typical financial instruments used by Canadian companies. The result of these analyses is exposed in the first part of this rapport. Then, we sought to understand how Deloitte is currently handling this problematic. To this end, we realized a SWOT analysis via interviews. This showed us that the employees do not have appropriate technical support to be able to handle the problematic and that there is a lack of communication and exchange sharing within the firm. The employees therefore need technological tools which could allow them to share information as well as technical supports to help them communicate with their clients. Therefore, this report concludes by recommendations to create a technological platform which should improve the internal exchanges. The development of this platform as well as the analysis which led us to make these recommendations are described in the second part of the report.