Commissioner Moscovici’s remarks at the press conference of the informal ECOFIN Council meeting – 11 September
The Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici gave a statement with regard to key priorities currently on the EU agenda and topics discussed in the Council, including climate, migration and, interestingly, tax policy. In his remarks, Commissioner Moscovici stressed the importance of ensuring that companies generating profits in the EU pay a “fair share of tax” within the Union. He emphasises that this does not mean that the Commission is seeking to harmonise minimum tax rates in the EU. On the same occasion, the Commissioner heavily criticised tax avoidance and its effects on the economy, and regretted difficulties in coming up with a coherent definition for and means of achieving effective taxation in discussions with Member States.
September infringements package: three tax related cases – 24 September
During the month of September, the European Commission launched three infringement procedures against Member States suspected for non-compliance with regard to rules concerning taxation and customs union in the EU.
The first case concerns Germany, which the Commission is requesting to amend its VAT legislation on the application of the special scheme for travel agents. The German scheme allows the travel agent to set a so-called “price margin” as the taxable amount for VAT. According to German VAT law, this scheme can only be applied to travel services provided to private end users. The German scheme also allows travel agents to set one single profit margin for all supplies of travel packages sold during a tax period. However, EU case-law states that this special scheme is applicable not only to private travellers but to all customers, including businesses. Furthermore, the travel agent should calculate the margin per travel service, and is not allowed to make an overall calculation of the VAT margins per tax declaration period.
The second case relates to Greece, where reduced excise duty rates apply specifically on two local spirit drinks “Tsipouro” and “Tsikoudià”. EU rules however provide that the same excise duty rate should apply for all products made with ethyl alcohol. And finally in France, Commission has asked local authorities to comply with procedural rules when granting refunds to non-residents on the tax deducted at source which was not due on dividends.
In all three cases the Commission reaction takes the form of a reasoned opinion, meaning that the concerned countries have two months to notify the Commission of the measures taken in order to correctly apply European principles. Failing this the Commission may decide to refer them to the Court of Justice of the EU.
Commission public consultation on modernising VAT for cross-border e-commerce – 25 September
The European Commission (EC) has recently launched a public consultation on modernising VAT for cross-border e-commerce, ahead of expected legislative proposals in this area scheduled for 2016 and as part of the Digital Single Market (DSM) strategy. For example, EC is looking for feedback on the associated Mini-One Stop Shop (MOSS), a tool allowing businesses that sell cross-border digital services in the EU to declare and pay all their VAT in their own Member State. In the context of the public consultation, EC is also re-iterating its intention to put forward again a proposal on a VAT threshold to exempt smaller businesses from the changes, a measure that was previously rejected by Member States. In terms of next steps, the deadline for submitting answers to the consultation is 18 December.
ECON Committee discusses Automatic Exchange (AEOI) of Information on tax rulings – 15 September
The European Parliament (EP) ECON Committee has discussed MEP Markus Ferber’s (EPP/GER) draft report on mandatory automatic exchange of information in the field of taxation which was published in July 2015. During the discussion, several MEPs expressed broad support for the report, considering it a good basis for subsequent discussion and consideration. The general tone of the debate was moderate, although stricter views notably with regard to public disclosure came from the side of the Greens and GUE-NGL (far Left). Furthermore, several speakers highlighted the need for common positions and approaches between Ferber’s report, the TAXE Committee report on tax rulings and the corporate tax transparency report as drafted by Anneliese Dodds (S&D/UK) and Ludek Niedermayer (EPP/CZE). In terms of next steps, the Committee vote on the report is scheduled for 13 October, and a vote in Plenary on 26 October.
Fighting tax evasion: joint meeting with Commission President Juncker – 17 September
Commission President Jean-Claude Juncker as well as Commissioners Pierre Moscovici (Economic and Financial Affairs, Taxation and Customs) and Margrethe Vestager (competition) attended a hearing of the European Parliament (EP) TAXE Committee regarding the Luxleaks scandal. During the hearing, MEPs especially from the Greens and GUE-NGL (Left) pressed President Juncker hard on his role in establishing Luxembourg as an EU tax haven. President Juncker strictly denied any conscious involvement in establishing a system of tax avoidance or evasion in the country. He instead emphasised the need for greater tax fairness and transparency, declaring that a fragmented and contradictory “fiscal landscape” is a challenge to the Single Market. During the session, several MEPs reiterated calls for transparency on tax rulings, as well as Country by Country Reporting (CbCR). Certain representatives, including Sven Giegold (Greens-EFA/GER) furthermore criticised Juncker’s reaction as mere whitewashing.
Juncker furthermore called for the establishment of a Tax Committee in the Council, and stated the relevance of a Common Corporate Tax Base (CCTB) as a key tool in tackling tax dodging. With regard to CBCR, Commissioner Moscovici stated that he will be waiting for the results of the Commission public consultation on tax transparency before considering a mandatory disclosure scheme. However, whilst President Juncker declined to commit himself to public CBCR, Commissioner Moscovici confirmed that on a personal level he is in favour of such a system.
Draft opinion of the ECON Committee on the Digital Single Market – 17 September
ECON Committee of the European Parliament (ECON) has published its draft opinion for the soon-to-be-published IMCO Committee own initiative report Towards a Digital Single Market (DSM). The lead rapporteur for the ECON opinion is Renato Soru (S&D/ITA). The ECON opinion states that a cross-border tax system is a necessary prerequisite for a “true European Single Market” and in order to prevent tax avoidance practices used by numerous digital platforms. In addition, the opinion calls on the Commission to extend public Country by Country reporting (CBCR) for multinationals to cover all sectors. In terms of next steps, IMCO Committee is expected to publish its draft report shortly, and the lead rapporteurs will consider the inclusion of elements from opinions of other Committees into their report.
“Parliament tax committee threatens to blacklist uncooperative lobbyists” – 18 September
The TAXE Committee of the European Parliament (EP) has called for sanctions against companies that refused to attend public hearings during the drafting stages of the Committee report on tax rulings and measures similar in nature or effect, according to Euractiv. Only four out of 18 summoned multinational companies attended hearings to answer MEPs’ questions. As retaliation, a group of MEPs from the Committee called for the exclusion of certain lobbyists of the non-cooperative firms from the EU’s transparency register. Many MEPs have interpreted the companies’ refusal to attend the hearings as a sign of disrespect.
Corporate taxation system has reached its limits, say ministers and MEPs – 22 September
The Finance Ministers of four Member States have attended a hearing of the TAXE Committee with regard to tax transparency and tax policy reform in the EU. Ministers Wolfgang Schäuble from Germany, Michel Sapin from France, Pier Carlo Padoan from Italy and Luis de Guindos from Spain faced a series of questions from MEPs touching on a variety of pertinent subjects in the ongoing tax debate, including exchange of information on tax rulings and public disclosure of Country-by-Country Reporting (CBCR). The Ministers called for better cooperation between Member States on tax affairs, and ensured their desire to come up with a European fiscal framework that is fair and transparent. On a particularly interesting note, Minister Schäuble called for the establishment of “certain minimum rates of taxation”.
During the same occasion, the Finance Minister of Luxembourg (which currently holds the rotating Council Presidency) Pierre Gramegna stated that a Council agreement on automatic exchange of information of tax rulings is expected for early October. He furthermore clarified that the Directive, once established, will not attempt to define what constitutes aggressive tax dodging; rather, such a definition will be established based on future experiences. On CBCR, the Presidency Minister confirmed that the intention is to wait for the results of the Commission’s public consultation on tax transparency.
ECON discussion on tax transparency – 23 September
ECON Committee of the European Parliament discussed recently the draft report on transparency, coordination and convergence in corporate tax policies, with Anneliese Dodds (S&D/UK) and Ludek Niedermayer (EPP/CZE) as lead rapporteurs. During the discussion, the report and its proposals received broadly positive comments with specific additions and recommendations mentioned by commenting MEPs. Of particular interest, Molly Scott Cato (Greens-EFA/UK) called for public disclosure of Country-by-Country Reporting (CBCR), as the report in its current state does not specify whether CBCR should be subject to public disclosure or not. Furthermore, she brought up the role of the profession in the tax advisory sector, and with specific reference to the big four demanded for a separation of auditing and tax advice services in companies providing both, reduction in the big firms’ market dominance, and making tax planning activities subject to shareholder approval. These calls were echoed by Fabio de Masi (GUE-NGL/GER), who urged the report to include provisions with regard to potential conflicts of interest arising from same firms providing tax consulting services to private and public sector clients simultaneously. With this in mind, the amendments to the draft report are likely to include provisions targeting the profession broadly, and the big four specifically. In terms of next steps, the deadline for amendments is 6 October, the Committee vote is currently scheduled for 1 December and the vote in Plenary for 19 January 2016.
MEP Questions & Answers
Increased transparency regarding the tax behaviour of large corporations in Europe – 1 September
The European Commission has provided an answer to a question asked by the MEP Fabio de Masi (GUE-NGL/GER) in early July with regard to transparency on the tax behaviour of large companies in Europe. In his question, Mr. de Masi asked the Commission to clarify what measures it is planning to undertake to tackle tax evasion in Europe, and whether the Commission considers that the time is right for ensuring a “more transparent and fair tax system” through shaping common discipline rules in the EU.
In his reply, Commissioner Moscovici refers to the Commission’s tax transparency package from 18 March 2015 which includes a proposal for automatic exchange of information on tax rulings. Furthermore, the Commissioner refers to the Action Plan on corporate taxation published on 17 June 2015, which includes provisions to re-launch the Common Consolidated Corporate Tax Base (CCCTB) that would help ensure that taxes are paid where profits are generated. Furthermore, the Commission supports Member States work on the Code of Conduct for business taxation, as well as the recent public consultation gathering feedback on disclosing publicly key tax information, including Country by Country Reporting (CBCR).
Financial Transaction Tax (FTT) and priorities for allocating the revenue – 1 September
The European Commission has provided an answer to a question asked by the MEP Ivan Jakovcic (ALDE/CRO) in mid-July regarding the Financial Transaction Tax (FTT). In his question, Mr. Jakovcic asks the Commission to which priority areas the revenue generated from the currently planned 11-Member State FTT would be allocated. In his reply, Commissioner Moscovici states that the the relevant Directive implementing the cooperation for the FTT does not specify rules on revenue allocation. The 11 Member States currently working on the project are the ones to decide on the use of the revenue. The Commissioner however argues that even if parts of the FTT income would become available for the EU budget, no a priori earmarking for priority areas would be possible.
Proposal to make the common consolidated corporate tax base mandatory – 17 September
The European Commission has provided an answer to a question asked by the MEP Ivan Jakovcic (ALDE/CRO) in mid-July regarding the mandatory nature of the Common Consolidated Corporate Tax Base (CCCTB). In his question, Mr. Jakovcic asks the Commission whether indeed it is planning to make the CCCTB compulsory at least for multinational companies. In his reply, Commissioner Moscovici reiterates the Commission’s intention to propose a two-staged approach with consolidation being proposed separately at a later stage. Furthermore, the scheme would indeed be mandatory at least for multinationals, thereby rendering the system an effective tool to fight tax avoidance.
Single tax policy in the Eurozone – 21 September
The European Commission has provided an answer to a question asked by the MEP Branislav Skripek (ECR/SVK) in late-July regarding single tax policy in the Eurozone. In his question, Mr. Skripek asked the Commission to guarantee that the Eurozone is not moving towards a single tax policy and common ministry of finance.
In his reply, Vice-President Dombrovskis refers to the Five Presidents’ Report setting forward a plan to complete the EMU by 2025. The Commissioner states that the second stage of the report calls for a fiscal stabilisation function for the Eurozone, and the establishment of a euro area treasury for collective decision-making on certain areas of fiscal policy. However, such a treasury would not establish common tax policies, but rather Eurozone Member States would make tax policy decisions under a framework of common rules as is the case today already. Finally, the Commissioner confirms that in spring 2017 the Commission will present a White Paper to outline additional steps needed to complete the EMU.
Country-by-country reporting (CBCR) impact assessment – 21 September
The European Commission has provided an answer to a question asked by the MEP Fabio de Masi (GUE-NGL/GER) in early-June regarding the impact assessment on Country by Country Reporting (CBCR). In his question, Mr. de Masi asks the Commission whether the Dutch Ministry of Finance has officially expressed to the Commission its support for a swift impact assessment on CBCR that would lead to a proposal on public disclosure of CBCR for multinationals operating in the EU. In his reply, Commissioner Hill confirms that the Dutch Ministry of Finance has indeed expressed its support, and the letter is publicly available on its website.
Letter (p. 12):
Eurogroup statement on structural reform agenda – thematic discussions on growth and jobs: benchmarking the tax burden on labour – 12 September
The Eurogroup consisting of Finance Ministers of all Eurozone Member States has issued a statement calling for further reduction in the tax burden on labour. According to the statement, such a move would boost growth and jobs. Any reductions in the tax burden on labour should according to the statement be accompanied by either compensatory reductions in spending, or by shifting labour taxes towards “taxes less detrimental to growth”.
“Berlin to push for financial transactions tax to cover all of EU” – 13 September
According to Financial Times (article only available to subscribers), the German Finance Minister Wolfgang Schäuble has declared that the current Financial Transactions Tax (FTT) project involving 11 Member States should be eventually expanded to cover all Member States. Schäuble made his statement in the context of a 12 September meeting between Finance Ministers from the 11 countries currently involved. He stated that the rationale behind the proposal is in potential contradictions between FTT across only 11 countries, and the expected Capital Markets Union (CMU) proposals of the European Commission aiming to better integrate capital markets across all 28 EU Member States. The FTT in its current form would affect primarily shares and derivatives.
“Germany, Belgium consider transaction tax impact on economy” – 22 September
According to Reuters, Germany, Belgium, Spain and Portugal currently working on a Financial Transactions Tax (FTT) together with seven other Eurozone Member States want to reduce the impact that a possible FTT could have on savers and markets’ funding of the economy. According to a discussion paper quoted by Reuters, one possible method could be to “try to assess whether it is possible to identify transactions which are directly linked to the risk hedging activities of real economy enterprises”. Efforts to minimise the potential negative economic effects of the FTT attempt to address criticism and concerns directed against the measure’s possible dire impacts on European economies during a period of crisis.
OECD report on taxation of SMEs – 5 September
OECD recently published a study titled Taxation of SMEs in OECD and G20 Countries. The study looks into the tax policy and tax administration arrangements that affect SMEs in OECD and G20 countries and is based on a questionnaire completed by a total of 38 countries as well as OECD’s own databases. The purpose of the study is to reflect on the influence of tax policy decisions on various dimensions of the SME sector. According to the results of the study, one of the most important issues affecting SMEs is the higher impact of regulatory requirements and ensuing compliance costs in comparison to larger players. Furthermore, SMEs face considerable constraints with regard to debt financing. The study consequently recommends for governments to design appropriate public support programmes for SMEs (including tax related). Overall, governments should pay closer attention to the specific challenges as well as the heterogeneous nature of the SME sector when designing national tax systems.
OECD report on greater co-operation and information sharing between government agencies to counter financial crimes – 18 September
OECD recently published a report titled Improving co-operation between tax and anti-money laundering Authorities: access by Tax Administrations to information held by financial intelligence units for criminal and civil purposes. The report calls on Tax Authorities across the world to cooperate and share information with the view of tackling financial crime, including tax fraud and evasion. The report is based on survey data gathered from 28 countries regarding the access of Tax Administrations to Suspicious Transaction Reports (STRs) for both criminal and civil matters. It puts forward a set of recommendations to further improve work in this area, including to ensure that tax administrations have the fullest possible access to the STRs received by the Financial Intelligence Units (FIU) in their jurisdictions, and for jurisdictions to implement appropriate legislative measures to ensure access to STRs and to facilitate the maximum effectiveness in using them.
OECD to release BEPS package for reform of the international tax system to tackle tax avoidance on Monday 5 October 2015 – 25 September
On Monday 5 October OECD is expected to publish its BEPS package aiming to reform the international tax system in order to tackle tax avoidance. An announcement event will be organised for the occasion, available via webstreaming. This will be followed by the presentation of the final BEPS package on 8 October at the G20 Finance Ministers’ meeting.
“Small businesses claim partial EU VAT victory” – 10 September
According to Financial Times (article only available to subscribers), SMEs have claimed a partial victory in their fight against certain changes in EU VAT rules. European Commission has declared its intention to propose a threshold below which companies are exempt from VAT; however, no clear figures have been released for the time being. The initial purpose of the Vatmoss system (VAT mini one-stop shop) for reporting and paying duty was to prevent reductions in the VAT obligations of large technology companies conducting cross-border digital sales. However, the measure has in practice affected small-scale sellers as well, hence the SMEs’ call for further adjustments in the system.
“Piketty: EU must demand more transparency from companies in Africa” – 11 September
According to Euractiv, the influential French economist Thomas Piketty has called on the EU to demand for greater tax transparency from companies with operations in Africa. This would involve disclosing taxes paid locally in order to ensure that the companies pay their “fair share” of tax. Piketty emphasises the importance of increasing the amount of tax revenues in African countries to 30%-50% of GDP, with the view of fostering development. He calls on the EU to enact legislation in this regard.
“Critics brand Renzi’s latest tax cut a political ploy” – 14 September
According to Financial Times (article only available to subscribers), critics have labelled Italian Prime Minister Matteo Renzi’s plans to reduce taxes on first homes as a political move to attract centrist voters. Officials of the Italian Government have addressed this criticism, stating that this particular tax cut should be considered as only one segment of a broader tax reduction programme aiming to reduce the fiscal burden on citizens and businesses in the country currently recovering from a period of economic crisis.
“Dutch government rules out easing pension fund VAT rules” – 21
According to IPE, the Dutch government does not intend to ease VAT rules for pension funds by bringing them to the same level with the Belgian standards. The statement was given by Eric Wiebes, who is the current state secretary for the Treasury. He commented that the existing Dutch system is in accordance with EU rules with regard to VAT, and therefore there is no need to further discuss any reductions in pension funds’ tax obligations.
“Troubling times for low-tax tradition in Switzerland’s Zug” – 24 September
According to Financial Times (article only available to subscribers), the Swiss Canton of Zug known for its low tax policy on families and companies is facing pressure to increase its tax rates. The purpose of such a possible measure would be to address the Canton’s deficit crisis, the result of a number of financial blows as well as a strong Swiss franc.
29/09/2015, Priorities for the forthcoming Single Market Strategy, EPC, 14:00-17:00, Brussels.
16/10/2015, State Aid and Tax Rulings – an appropriate way to tackle aggressive tax planning?, Brussels School of Competition, 08:00-10:00, Brussels,
19/10/2015, ECFIN Annual Tax Workshop: Political economy of tax reforms, European Commission, 08:30-17:00, Brussels.
05/11/2015, Breakfast Policy Briefing with Jonathan Hill, EPC, 08:00-09:30, Brussels.
30/11/2015, The priorities of the Dutch Presidency of the Council, EPC, 08:00-09:30, Brussels.