- Guardian reveals further details on Commission plans for public CBCR – 7 February
- Greens-EFA Group publishes report on IKEA’s tax optimisation – 12 February
- Council holds first discussion on the anti-avoidance package – 12 February
- Commission launches consultation on Improving Double Taxation Dispute Resolution Mechanisms – 16 February
- TAXE and ECON Committee hold hearing with Commissioner Moscovici – 17 February
“EU proposals will force multinationals to disclose tax arrangements” – 7 February
According to the Guardian, the European Commission is likely to propose at least some degrees of public disclosure of Country by Country Reporting (CBCR) information by large multinationals. The article states that “the impact assessment is said to have dismissed corporate complaints about commercial competitiveness being damaged by public disclosure”. Sources cited by the article state that the initial results of the ongoing impact assessment appear to indicate that public disclosure requirements would not have particularly negative effects on European businesses. The rules would apply to all large conglomerates operating in the EU, including US-based ones. The same sources moreover give 12 April as the date when the proposals would be presented. The provisions would be introduced as an amendment to “one of two existing Directives” (probably Accounting of Shareholder’s Rights), thereby avoiding unanimity in the Council.
Un-related to the Guardian article, other Commission sources have stated that it is still unclear whether or not proposed provisions on public CBCR would take the form of a legislative proposal or not. One option would be the introduction of a Good Taxpayer-label which could incentivise voluntary disclosure of CBCR information. Such a label would of course not exclude the possibility of parallel legislative requirements either, especially if the mandatory requirements only apply to a portion of (largest) multinationals in which case smaller ones could choose to opt in. Several Member States are reported to be cautious over public disclosure requirements, but willing to look carefully Commission proposals when they are published. At least the Netherlands (which also holds Council Presidency until June) and UK’s George Osborne have expressed support for public disclosure.
Further details on anticipated re-launch of CCCTB – 2 February
At a tax conference organised by the European Banking Federation (EBF), a Commission representative provided additional insights into what can be anticipated with regard to the upcoming proposal on Common Consolidated Corporate Tax Base (CCCTB). As is known, the Commission will put forward two separate proposals: one establishing a common tax base, and the other dealing with consolidation. The scheme will moreover be mandatory for businesses concerned. Particular provisions within the proposals may cover hybrid mismatches, treatment of R&D costs, addressing the debt-equity bias as well as a cross-border loss relief mechanism to compensate for the (temporal) lack of a consolidation element. With regard to the debt-equity bias, a majority of respondents unsurprisingly chose the Allowance for Corporate Equity (ACE) as the preferred option for addressing the issue. The proposals are currently expected for November.
Fighting tax evasion: EU and Andorra sign new tax transparency agreement – 12 February
EU has finalised and signed a new tax transparency agreement with Andorra. The agreement will make it more difficult for EU citizens to hide undeclared income in financial institutions located in Andorra. The agreed provisions enter into force in 2018, from which Andorra and EU Member States will automatically exchange their residents’ financial accounts information with each other. Similar agreements have been recently signed with Switzerland, Liechtenstein and San Marino, whilst negotiations with Monaco are currently being finalised.
Commission paper: Financial Transaction Taxes in the European Union – 12 February
The European Commission has published a report on financial transaction taxes (FTT) in the EU. The paper takes stock of the ongoing negotiations on an EU-wide FTT between 10 Member States (previously 11, until Estonia withdrew), and provides an overview of current economic literature and a description and analysis of recently introduced FTTs at Member State level, as well as of the Commission proposal for a European scheme.
“Commission still undecided on ‘Google tax’” – 12 February
According to Euractiv, European Commission is still undecided as to whether or not to include a “Google tax” in its anticipated copyright proposal, expected for spring. The measure in question refers to a possible EU ancillary copyright law, similar to a measure introduced by Spain two years ago and which led to Google News stopping its operations in the country in 2014. Such a law would allow news companies to charge online search engines such as Google if they include their articles in search results. MEPs have however rejected the introduction of an ancillary copyright law for press publishers.
Consultation on Improving Double Taxation Dispute Resolution Mechanisms – 16 February
The European Commission has launched its long awaited public consultation on improving dispute resolution in double taxation cases. The Commission intends to come forward with a legislative proposal to improve dispute resolution for double taxation later in 2016, and the public consultation will feed directly into the proposal. The consultation focuses on improving the double taxation dispute resolution mechanism. The general objective of the initiative is to create a better investment and business environment by achieving greater legal certainty for companies, at a time where great changes to the tax policy landscape (transparency, fight against tax fraud and evasion, etc.).
The consultation gathers stakeholders’ views in particular on (1) the relevance of removing double taxation for enterprises operating cross border, (2) the impact and effectiveness of double taxation dispute resolution mechanisms for business and enterprises established in the European Union, (3) how these mechanisms can be further improved, and (4) the solutions that are discussed and proposed. The deadline for providing comments is 10 May.
Updated Commission list of VAT Cross Border Rulings (CBR) – 17 February
The European Commission has updated the list of VAT Cross Border Rulings (CBR). The list is part of a pilot project that began in 2013, and allows taxable persons to obtain advance rulings on the VAT treatment of “complex cross-border transactions” that they envisage between two or more participating Member States. Several Member States are participating on the project, which was originally set up by the VAT Forum. The project is scheduled to continue until 30 September 2018.
Speech by Commissioner Jonathan Hill at the European Forum for Manufacturing and Association for Financial Markets in Europe Dinner Debate – 17 February
Commissioner Hill has delivered a speech for the occasion of the European Forum for Manufacturing and Association for Financial Markets in Europe Dinner Debate. In his speech, the Commissioner outlined plans with regard to withholding taxes. He stated that this year the European Commission will assess how to simplify the system to reclaim withholding tax when these are subject to double taxation. Due to the complexities of the current system, investors do not always reclaim the money they are entitled to, and the estimated costs of this amount to a total of €8 billion each year.
Motion for a European Parliament resolution on Apple’s tax avoidance strategy – 19 January
Four French MEPs of the ENF Group (far-Right) have published a Motion for resolution on Apple’s tax avoidance practices. In it, the MEPs refer to the recent tax dispute settlement deal in which Apple agreed to pay €318 million to Italy in compensation for its tax planning practices. The MEPs argue that tax avoidance schemes such as the ones used by Apple are made possible by “the removal of fiscal borders and free-trade agreements” since it enables multinationals to “escape their obligation”. With this regard they call on the Commission to assess losses from tax avoidance by multinationals and any compensation that they owe to Member States in the digital sector.
Motion for a European Parliament resolution on tax transparency and multinationals – 20 January
The MEP Aldo Patriciello (EPP/ITA) has published a Motion for resolution on corporate tax transparency. In it, he argues that tax rulings granted by Member States to multinationals undermine proper tax competition, and consequently calls on the Commission to take an “innovative approach” to harmonise legislation on “favourable tax deals” in order to ensure a level-playing field between companies as well as countries in the EU.
Motion for a European Parliament resolution on rethinking the rules and regulations on tax relief for smart working – 1 February
The MEP Gianluca Buonanno (ENF/ITA) has published a Motion for resolution with regard to rules and regulations on tax relief for “smart working”. The Motion focuses on what Mr. Buonanno refers to a way of working characterised by flexibility and remote work, and refers to research highlighting the innovation and productivity enhancing virtues of this form of labour. He regrets however that companies are still largely based on more conventional working methods, and consequently calls for legislation in order to promote concessions such as tax reliefs for businesses opting for change.
“Commission to hand over tax documents to MEPs” – 8 February
As reported notably by Politico, the European Commission will deliver requested documents to the MEPs of the TAXE II Committee investigating tax rulings in the EU. Commission President Jean-Claude Juncker announced in a letter to the European Parliament President Martin Schulz (S&D/GER) that the Commission will disclose 5,500 documents of the Code of Conduct Group on Business Taxation. The documents will include minutes of the Code of Conduct Group’s meetings, and MEPs are hoping that these will reveal which Member States have blocked progress in the forum. Some of the documents however will be viewable behind closed doors only. Commission’s announcement follows a legal challenge launched against it by the MEP Fabio Di Masi (GUE-NGL/GER) at the General Court of the EU in January.
MEP Cora Van Nieuwenhuizen (ALDE/NLD) calls on the profession to contribute to key tax questions – 8 February
The MEP Cora Van Nieuwenhuizen (ALDE/NLD) has written an opinion piece for the online publication of the Royal Dutch Institute of Chartered Accountants (NBA) in which she highlights some key difficulties framing the ongoing tax debate in the EU as well as any potential solutions. In particular, she discusses the challenge of defining exactly where and how value creation takes place (to underpin the principle according to which profits and value should be taxed where created). She argues that these difficulties stem from the changing economic landscape, where multinationals operate across borders and the “knowledge economy” with more abstract and often digitalised services is increasingly prevalent. She finally argues that smaller countries cannot but rely on tax competition in order to ensure their economic viability in comparison to countries with larger internal markets and domestic consumption. She therefore calls on the accountancy profession to contribute to these debates and discussions in order to find appropriate solutions to the key issues.
“IKEA cheating EU governments out of massive tax revenue according to new research” – 12 February
The Greens-EFA Group of the European Parliament has published a new report looking into the corporate tax practices of IKEA in Europe. The report in particular claims to demonstrate how IKEA exploits tax loopholes in European countries, specifically the Netherlands, Belgium and Luxembourg, in order to avoid paying taxes. One of the techniques employed is shifting royalties from IKEA stores to a Dutch subsidiary, from which they eventually end up in Liechtenstein. Moreover, the report argues that the European Commission’s recently launched Anti-Tax Avoidance Package (ATAP) is insufficient in tackling against the kind of tax avoidance employed by IKEA, notably due to a lack of public disclosure provisions. The report has already received wide attention from the media and decision-makers, and will further contribute to the ongoing discussions on tax reform and corporate tax practices at the EU-level.
TAXE and ECON Committee hold hearing with Commissioner Moscovici – 17 February
ECON and TAXE II Committees of the European Parliament have held a joint-hearing with Commissioner Pierre Moscovici. The purpose of the hearing was to further discuss the Commission’s proposed Anti-tax avoidance package (ATAP), and to exchange views on priorities and expectations.
Whilst a majority of the speaking MEPs broadly welcomed the package, a number of them felt that the proposals did not quite go far enough especially with regard to transparency and public Country-by-Country Reporting (CBCR), which the Commission will only propose at a separate context later in April. MEPs from EPP, ECR and ALDE moreover urged the Commission to be mindful of potential effects of the ATAP provisions to EU’s competitiveness. Furthermore, the ambiguity of some of the proposal’s provisions and terminology were criticised. On CBCR, Commissioner Moscovici repeated that the Commission will put forward a public disclosure proposal in April, after the results of the ongoing impact assessment have been finalised.
Of particular interest, the question of tax advisors and their role in promoting “aggressive tax planning” as well as potential conflicts of interest were mentioned twice. Jeppe Kofod (S&D/DEN), who will be the co-rapporteur for a TAXE II Committee’s report on corporate tax planning and rulings, asked for a legal framework with sanctions against the tax advisory industry, including the possibility of revoking business licenses. Emmanuel Maurel (S&D/FRA) for his part called for an incompatibility regime to address potential conflicts of interest in the sector. In his reply, Commissioner Moscovici confirmed that the Commission will eventually go beyond what is currently proposed with regard to corporate tax reform and that legal options will always be considered for identified issue areas. He refers to the 2014 audit reform which already introduced restrictions to tax advisory services on the audit sector, but nonetheless stated as a personal opinion that he considers it sensible to address conflicts of interest in the tax advisory sector. The Commission will look at the impacts on businesses and tax advisors before considering any proposals. Based on other sources, the Commission is not actively working on legislation targeting tax advisors, but will put forward initiatives in the context of the Single Market Strategy to look into the conditions of service provision across a range of sectors, potentially including tax advisors.
ECON Committee holds hearing with Jeroen Dijsselbloem – 18 February
The Dutch Minister of Finance Jeroen Dijsselbloem has attended a hearing of the European Parliament ECON Committee in his capacity as Eurogroup President and chair of the ECOFIN. During the hearing, Mr. Dijsselbloem notably highlighted the priority areas of the upcoming Dutch Presidency. Of particular interest, he confirmed that the Presidency will give particular emphasis to the proposed Anti-tax avoidance package (ATAP), and will be aiming for a Council deal on the dossier by May. As seen in the 15 February ECOFIN discussion on ATAP however, it is possible that the negotiations will be long and difficult especially with regard to provisions not related to OECD BEPS recommendations. During the same ECOFIN meeting, Germany proposed to divide ATAP into those part that relate directly to BEPS recommendations, and the rest. Mr. Dijsselbloem has however insisted on the need of a holistic approach, and will want to see how much progress can be reached on the package as a whole,
MEP Questions & Answers
VAT fraud – 11 January
The European Commission has replied to a question asked by the MEP Brian Hayes (EPP/IRL) with regard to VAT fraud. In his question, Mr. Hayes refers to Commission’s estimation according to which €180 billion are lost annually due to VAT fraud, and consequently asks for the Commission to provide a breakdown by Member States of annually lost amounts due for the past five years. In his reply, Commissioner Moscovici refers to a study published in autumn 2015 that provides details of the estimated VAT gap in 2013 for 26 Member States. VAT Gap signifies the amount of estimated VAT revenue loss from fraud and evasion, tax avoidance, bankruptcies, financial insolvencies and miscalculations. With regard to Missing Trader Intra-Community (MTIC) fraud, Commissioner Moscovici states that the Commission has no estimations nor is there much information available on it for the EU.
Double taxation on retirement income – 13 January
The European Commission has replied to a question asked by the MEP Izaskun Bilbao Barandica (ALDE/ESP) with regard to double taxation of retirement income in the EU. In her question, Ms. Bilbao Barandica argues that double taxation of retirements happens in many Member States despite rulings against the practice by the Court of Justice of the EU (CJEU). With this regard, she asks the Commission what information it has on the issue, whether it believes that it is justified, and whether it is planning to establish a “mechanism” to prevent such double taxation. In his reply, Commissioner Moscovici points out that under EU law Member States have no obligation to eliminate double taxation, and that taxation in general remains a Member State area of responsibility. However, the Commission is aware of the problem and has in the past undertaken action to address it. These include two public consultations, launching of an expert group on taxation of individuals, a January 2014 initiative to eliminate tax discrimination against mobile EU citizens, as well as webpages and online databases to inform taxpayers on the existing law, rights and steps if these rights are breached.
Possible increase in VAT on certain Greek islands in the Aegean – 14 January
The European Commission has replied to a question asked by the MEP Elissavet Vozemberg (EPP/GRE) with regard to VAT increases on certain Greek Aegean islands. In her question, Ms. Vozemberg expresses concerns over plans to eradicate the special VAT treatment of certain Greek Aegean islands, and potential impacts on the islands’ economic development. With this regard, she asks the Commission whether such a plan is in line with EU’s objective of promoting the development of remote regions, and what impacts such a measure could have on the local economy and tourism. In his reply, Commissioner Moscovici states that low VAT efficiency in Greece is in part due to the various special regimes applied for various purposes. He points out that there are a lot of alternative support measures for the islands (including various EU funding instruments), and that the Greek islands have been given ample transition time to properly adapt to the anticipated VAT changes.
EU VAT review – 21 January
The European Commission has replied to a question asked by the MEP Catherine Bearder (ALDE/UK) with regard to EU VAT review. With reference to reduced or 0-VAT rates, Ms. Bearder calls the European Commission to pay particular attention on the VAT rules applied to women’s sanitary products. She asks the Commission whether the anticipated VAT Action Plan will give greater flexibility to Member States to exempt “essential items such as sanitary products”, whether there is precedent for new VAT exemptions and 0-rates granted after a Member State has joined the EU, and finally whether the Commission will pay attention to the broader impact of current VAT rules on women in the context of its anticipated Action Plan. In his reply, Commissioner Moscovici states that by default all goods and services supplied within the EU are subject to VAT, and that the current VAT Directive establishes a standard minimum rate of 15% to most goods. Reduced rates may be applied at 5% or above, notably on sanitary products. 0-rates are based on temporary derogations granted to specific Member States, and no new such rates have been introduced after January 1991. Commissioner Moscovici however confirms that the Commission will deal with VAT rates as part of its anticipated Action Plan, and that any action following this proposal will have to be preceded by an impact assessment that take notably into account social impacts.
VAT on sanitary protection (towels and tampons) – 21 January
The European Commission has replied to a question asked by the MEP Marielle De Sarnez (EFDD/FRA) with regard to VAT on sanitary protection products. In her question, Ms. De Sarnez asks the Commission what are its views with regard to a special VAT rate for sanitary products such as towels and tampons. In his reply, Commissioner Moscovici reminds that current VAT rules enable Member States to apply a reduced rate of no lower than 5% on products such as tampons. Commissioner Moscovici confirms that the Commission will deal with VAT rates as part of its anticipated Action Plan, and that any action following this proposal will have to be preceded by an impact assessment that take notably into account social impacts.
Negotiations on the Shareholder Rights Directive – 25 January
The Council of the EU has replied to a question asked by the MEP Hugues Bayet (S&D/FRA) with regard to the ongoing negotiations on the Shareholders’ Rights Directive (SHRD). In his question, Mr. Bayet asks the Council whether it is indeed true that Germany, Italy and Spain are opposed to public Country-by-Country Reporting (CBCR), what arguments have these countries put forward against it, and what would the Council recommend instead in case they were to reject public CBCR. According to the Council reply, the European Parliament will be informed once the Council has formed an opinion on the matter in the context of the SHRD. Moreover, the reply refers to the ongoing impact assessment on public CBCR, and confirms that the European Parliament and Council representatives currently negotiating on the Directive (“trilogues”) have agreed to wait for the results of the impact assessment before advancing on this particular issue.
State aid – 25 January
The European Commission has replied to a question asked by the MEP Jane Collins (EFDD/UK) with regard to state aid. In her question, Ms. Collins asks the Commission what measures the UK government can undertake to “protect jobs in the British steel industry”. In her reply, Commissioner Vestager confirms that selective tax reductions or public contribution to wages would in principle constitute a breach of EU state aid rules since such measures are not covered by Commission guidelines with regard to the steel sector.
Database on harmful tax practices – 26 January
The European Commission has replied to a question asked by the MEP Fabio De Masi (GUE-NGL/GER) with regard to a database on “harmful tax practices”. In his question, Mr. De Masi asks the Commission whether it has a database or “any other form of systematic register” on harmful tax practices or preferential corporate tax regimes in the EU. In case such a database exists, he asks why this has not been shared with the European Parliament’s TAXE Committee, and whether in such a case the Commission would share it. In his reply, Commissioner Moscovici confirms that the Commission has no such database.
New Greek programme and fighting tax evasion – 26 January
The European Commission has replied to a question asked by the MEP Dimitrios Papadimoulis (GUE-NGL/GRE) with regard to Greek plans for fighting tax evasion. In his question, Mr. Papadimoulis asks the Commission what specific measures have been agreed with the Greek authorities in fighting VAT tax evasion, and in particular regarding tax evasion through triangular transactions, what proposals the Commission will submit to Greece with regard to disclosure of wealth hidden abroad in deposits or real estate, and whether it will support the Greek government efforts to tackle tax evasion by transfer-pricing between parent companies and subsidiaries within the EU. In his reply, Commissioner Moscovici lists the measures for combating tax evasion in the Greek programme and including measures fostering disclosure of wealth information. He moreover refers to EU arrangements on automatic exchange of information of financial account information between Member States as well as a number of third jurisdictions (e.g. Liechtenstein, San Marino and Switzerland), and on Commission action in fostering efficient corporate taxation in the EU.
Tax administration in Poland – 26 January
The European Commission has replied to a question asked by the MEP Julia Pitera (EPP/POL) with regard to tax administration in Poland. In her question, Ms. Pitera refers to an OECD assessment according to which the Polish tax administration is both costly and ineffective in tackling tax fraud. She consequently asks the Commission what is its own assessment on this, and whether the Commission has information with regard to the scale of tax fraud in the EU. In his reply, Commissioner Moscovici confirms that the Commission has made similar assessments on the Polish tax administration, especially given Poland’s significant VAT gap which is 7th highest among EU Member States. The Commission considers VAT gap to be a good indicator to assess the effectiveness of tax administrations, but has no information on the scale of VAT fraud in Poland or other Member States.
VAT rates on artwork – 26 January
The European Commission has replied to a question asked by the MEP William Dartmouth (EFDD/UK) with regard to VAT on artwork. In his question, Mr. Dartmouth asks the Commission whether it is planning to eliminate the VAT on artwork imported from the US, in the context of TTIP. In his reply, Commissioner Moscovici confirms that the Commission has not taken nor is it intending to take any measures to exempt artwork imports form the US from VAT.
Application of VAT to educational services – 26 January
The European Commission has replied to a question asked by the MEP Eva Kaili (S&D/GRE) with regard to VAT on private educational services. In her question, Ms. Kaili refers to the removal of the VAT exemption on certain educational services in Greece, and expresses concerns on the ensuing increase in the costs of such services. She therefore asks the Commission whether the measure constitutes a violation of the right to education as established by the EU, why such exemptions remain in place in other Member States, and whether the Commission is planning to adopt measures against the emergence of “parallel economy and undeclared work” caused by the removal of the VAT exemption. In his reply, Commissioner Moscovici states that the exemption applies to public bodies and other bodies governed by public law. Private education can under certain conditions be subject to the same exemptions. Member States do not however have reporting obligations to the Commission in this regard, and the Commission can only undertake action in case the national law is in breach of EU VAT Directive. Finally, it is the responsibility of Member States to take measures against any increase in the parallel economy.
TAXE Committee — ‘confidential’ code of conduct room documents – 28 January
The European Commission has replied to a question asked by three S&D MEPs regarding confidential Code of Conduct Group room documents. In their question, the MEPs state that the Commission has refused to disclose the Group’s “room documents” due to their confidentiality. They therefore ask the Commission what legal grounds the Commission has used to assess this confidentiality, and state that some of these documents have been shared with the University of Amsterdam. In his reply, Commissioner Moscovici provides references to the legal provisions justifying the confidentiality of the documents in question. The Commission has moreover launched a consultation amongst Member States to further determine which information in the Code of Conduct Group’s minutes can be made available to the European Parliament. Finally, the Commissioner argues that all ‘room documents’ of the Group since 1998 have been made available for the TAXE Committee, or at least in a meeting in camera. In the case some room documents have not been made available “inadvertently”, the Commission will remedy the situation as soon as possible.
Increase in VAT on Greek islands – 28 January
The European Commission has replied to a question asked by the MEP Manolis Kefalogiannis (EPP/GRE) with regard to VAT increase on Greek islands. In his question, Mr. Kefalogiannis refers to a recent Greek government decision to abolish reduced VAT rates for Greek Aegean islands, which has generated concerns on the impacts of the move to local economies. He consequently asks the Commission whether it is possible to re-establish the reduced VAT rates at a later stage. In his reply, Commissioner Moscovici states that a number of investments (infrastructure, services, healthcare etc.) can be made to boost the islands’ economies, and that some of this funding is available through EU schemes such as the European Structural and Investment Funds, where a portion of investment is ear—marked for the Aegean Island Region.
Member States’ tax practices – 29 January
The European Commission has replied to a question asked by the MEP Werner Langen (EPP/GER) with regard to Member States’ tax practices. In his question, Mr. Langen states that so far agreements on exchange of information on Member States’ tax practices towards large companies have not generated permanent exchange of relevant tax information. He therefore asks the Commission at what point the Commission was able to establish that tax authorities and companies have entered into “one-off agreements on tax rates”, and what in its opinion are the implications to competition of royalties “imposed” by parent companies on subsidiaries in order to reduce taxable profits. In his reply, Commissioner Moscovici states that the Commission has not identified agreements concerning tax rates in its state aid investigations, but that it is assessing the level of royalty payments to parent companies in order to assess whether or not they are in line with market conditions.
Recent developments with the FTT – 1 February
The Council of the EU has replied to a question asked by the MEP Hugues Bayet (S&D/FRA) with regard to recent developments on the Financial Transactions Tax (FTT). In his question, Mr. Bayet asks the Council what is its official position with regard to the FTT rate to be set, and what will be done with the revenue from the scheme. In its reply, the Council emphasises that the proposal is still being discussed, and that once a Council position has been established it will be made available to the public.
Taxation of foreign assets held by Greek citizens – 3 February
The European Commission has replied to a question asked by the MEP Eleftherios Synadinos (NI/GRE) with regard to the taxation of foreign assets held by Greek citizens. In his question, Mr. Synadinos refers to new Greek government plans to introduce a new wealth tax in order to increase revenue and repatriating capital from abroad by making it subject to tax. He therefore asks the Commission how possible dual taxation can be avoided if the Greek government proceeds with the plan. In his reply, Commissioner Moscovici states that EU Member States have a “wide network of conventions” with other Member States and third countries that aim to prevent double taxation.
Tax treatment of hybrid financial products – 3 February
The European Commission has replied to a question asked by the MEP Esther De Lange (EPP/NLD) with regard to the tax treatment of hybrid financial products. In her question, Ms. De Lange asks the Commission for a “comprehensive overview” on the tax treatment of hybrid financial products across the EU, and to indicate in particular whether coupons are tax-deductible or whether any other tax incentives are in place. Moreover, she asks whether Member States have notified the Commission of their tax treatment of such products with relation to state aid, and what is the Commission’s view on these tax treatments. In his reply, Commissioner Moscovici confirms that the Commission does not gather such data from Member States, nor have any Member States notified the Commission. He finally states that the tax treatment of hybrid financial products is a responsibility of Member States within the frames of EU law. He emphasises in particular that these tax treatments should not lead to double non-taxation.
Presidency proposes minimum effective taxation option in Interest and Royalties Directive – 26 January
According to Agence Europe (article only available to subscribers), the Dutch Presidency has taken initial steps towards a clause on minimum taxation in the context of the Interest and Royalties Directive (IRD). More specifically, the Presidency proposes for the taxation of royalties or interest payments to be considered as “minimum effective taxation” if the payment in question is subject to an effective tax rate of 10% or more in the beneficiary’s country. According to Agence, this signifies that the Presidency is aiming for an absolute approach, as opposed to a relative approach where a rate would be compared to that of another Member State. At the same time however, the Presidency maintains that significant differences in views between Member States still exist, and that further work and negotiations is necessary.
Agence Europe, 16/02/2016
Council holds first discussion on the anti-avoidance package – 12 February
EU Ministers of Finance (Ecofin) have discussed for the first time the European Commission Anti-tax avoidance package (ATAP), launched at the end of January. This constituted a first formal exchange of views of the Ministers on the dossier, and brought into light some of the cleavages and difficulties that can be anticipated for the upcoming months.
Of particular interest, the German Minister Wolfgang Schäuble proposed to divide the package into two: one part consisting of provisions more or less fully in line with the OECD BEPS recommendations, and the second part to cover the rest. Mr. Schäuble argued that this is the only way to ensure swift adoption of the measures given that many Member States have already committed to the OECD BEPS measures such as exchange of information of Country by Country Reporting (CBCR) information. In his assessment, otherwise the provisions would not be adopted at least for the next year or two. Several Member States agreed with the German Minister’s proposal, whilst Commissioner Moscovici expressed reservations and called for the adoption of the ATAP as a whole. Some of the non-OECD BEPS related elements include the switchover clause, the General Anti Abuse Rule (GAAR) and the provisions on exit taxation. These originate instead from Council discussions in the context of the Common Consolidated Corporate Tax Base (CCCTB) from the past four years. Both Commissioner Moscovici as well as the Dutch Presidency however insisted on the need for a holistic approach.
With regard to other points of interest, Member States welcomed the Commission proposals overall and emphasised the need for coordinated European action to implement the OECD BEPS measures. This includes the proposed CBCR between tax authorities, which a number of the Ministers supported. Of particular interest, UK’s George Osborne repeated his earlier expressed support for public CBCR. Furthermore, a number of Ministers criticised the lack of proper impact assessments for the ATAP, and called for such an assessment to be carried especially with regard to those provisions that go beyond OECD BEPS recommendations. Overall, Member States felt that progress could be fast on the amending Directive on Automatic Exchange of Information (AEOI) to encompass CBCR provisions, but with regard to the Anti-tax avoidance Directive (ATAD) the discussions could take much longer.
Austria wants revenue target for FTT – 15 February
According to Agence Europe (article only available to subscribers), Austria’s Finance Minister Hans Jörg Schelling has called for a revenue target for the Financial Transactions Tax (FTT) currently negotiated by 10 Member States. He argues that in order for the project to be worth the effort, the tax should raise a revenue of between €15 and €20 billion. So far it appears however that the proposal has not been received with great enthusiasm.
Agence Europe, 16/02/2016
“German, French central bankers call for euro zone finance ministry” – 7 February
According to Reuters, the heads of the French and German central banks have called for a Eurozone Ministry of Finance in their article for the Sueddeutsche Zeitung. They argue that the European Central Bank (ECB) is unable to generate “sustainable long-term growth” in the euro area beyond its monetary policy tools. Consequently, the central bankers emphasise the need for a eurozone Finance Ministry, an independent fiscal council and a “stronger political body” that can take decisions.
“Obama seeks tax hikes on banks, the wealthy to pay for budget” – 9 February
Politico has published a reportage on Barack Obama’s latest budget proposal which includes investing $4.1 trillion into clean energy, education and health. The additional funding would derive from tax hikes, especially on large banks and the wealthiest segment of the society. The budget has already and unsurprisingly received strong criticism from the Republican opposition.
“Digital tax trends: ten international plans to tax the digital economy” – 9 February
Taxamo has compiled a list of tax jurisdictions planning to introduce laws on digital services consumption. The list includes 10 jurisdictions – Australia, New Zealand, Russia, India, Canada, Turkey, Israel, Singapore, Thailand and Uruguay – and for each provides additional details on anticipated legal reforms on the field of digital taxes.
“HMRC pledges to make expat tax avoiders pay up” – 12 February
According to the Financial Times (article only available to subscribers), UK’s HMRC will make further efforts in tax debt collection from British citizens living abroad. The efforts are part of HMRC’s plans to enforce its accelerated payment notices (APN) beyond its jurisdiction, but it remains at this stage uncertain whether the collection scheme is incompatible with EU agreements.
Kenya signs Multilateral Convention on Administrative Assistance in Tax Matters – 8 February
Kenya has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, thereby becoming the 94th jurisdiction and 12th African country to do so. Senegal signed the same Convention earlier this month. The Convention provides for administrative assistance in tax matters, including exchange of information on request, spontaneously and automatically, tax examinations abroad, as well as tax collection assistance. It moreover entails a number of provisions to protect taxpayers’ rights.
“Belgium will appeal EU decision on excess profits” – 8 February
According to Flanders Today, Belgium is planning to appeal against a recent Commission that ruled the country’s excess profit scheme as illegal state aid. The Commission ordered Belgium to recover €700 million of unpaid tax income from up to 35 companies. According to the article, several of the companies concerned have stated that they may not have invested in Belgium without the tax scheme.
Commission opens in-depth investigation into measures for Spanish postal operator Correos – 11 February
The European Commission has opened an in-depth investigation into state support measures granted to the Spanish postal operator Correos since 2004. The investigation will focus on whether the granted public funding constitutes a breach of EU state aid rules. Some of the funding support measures included notably tax exemptions. Spain, Correos and any other “interested parties” may submit their comments, ahead of a final ruling after a period of investigation.
“US accuses EU of bias in tax probes” – 12 February
According to EU Observer, US authorities have accused the Commission for unfairly targeting US multinationals in its state aid investigations. In a letter to the Commission President Jean-Claude Juncker, the US Treasury Secretary Jack Lew, the investigations into companies such as Apple, Starbucks, Amazon and McDonald’s will create “disturbing international tax policy precedents”. The Commission has however pointed out that so far the rulings have requested Member States to recover unpaid taxes from mainly European companies.
“Dutch Gov’t Accepts Pokerstars.eu Tax Ruling” – 16 February
According to Tax News, the Dutch tax authority will not appeal against a ruling by the Amsterdam Court which stated that it cannot tax the profits of residents generated through PokerStars.eu’s online gambling service. In its ruling, the Court argues that the website is licensed and registered in Malta, an EU Member State, for tax purposes. Consequently, the profits of Dutch players cannot be taxed by the Netherlands, in accordance with relevant EU law. The tax authority had for its part argued that the company’s parent website is licensed in Isle of Man, outside of EU’s jurisdiction.
Netherlands will appeal against Commission’s state aid ruling on Starbucks – 16 February
As reported notably by PwC, the Dutch authorities have decided to appeal against the European Commission’s state aid ruling regarding the tax treatment of Starbucks in the country. The appeal and a limited number of Dutch counter-arguments were published in mid-February. The arguments notably claim that the selection criterion was not met, that the Commission incorrectly referred to an EU arm’s length principle which does not exist as such, and that the Commission failed to assess all relevant information. The appeal was made to the General Court of the EU, and was expected.
“Another Bad Idea Coming Out of Brussels” – 8 February
Dorothy Coleman, the Vice-President of the US National Association of Manufacturers, has commented on a recent blog post the anticipated Commission proposals to establish public Country-by-Country Reporting (CBCR). She writes that such a system would lead to “more aggressive foreign audits and tax assessments that go beyond international tax norms”. She suspects that US companies will be the primary targets of such a measure, and may pose a threat to companies’ competitiveness and growth.
“We should create a tax system that reassures the public” – 9 February
Judith Freedman, Pinsent Masons professor of tax law at the University of Oxford, has written an article in the Financial Times (article only available to subscribers) on the numerous topical scandals concerning corporate tax practices and with reference to the recent tax settlement deal between the UK and Google. She refers to public mistrust towards HMRC’s handling of the Google settlement, but argues that procedurally speaking this was not an anomaly or preferential treatment. She reflects on whether procedures and public reassurance have failed with current practices, and points out that it should not be the job and responsibility of individual politicians and the media to ensure that due taxes are paid.
“BEPS: Baseline shift” – 9 February
Economia has published an article assessing the impacts of the OECD BEPS measures on the behaviour of multinationals. The article includes the views of experts on the field, who describe the main opportunities and challenges of the BEPS recommendations, and assess their potential success. Michael Devereux, director of the Oxford University Centre for Business Taxation, expresses concerns that the BEPS recommendations do not touch upon fundamental questions of the international tax system such as the debt-equity bias, tax reliefs on royalties, as well as where and when profits should be taxed. In the end, he concludes that the BEPS recommendations will have limited success due to taxpayers’ consistent efforts to go around tax laws.
“’Eurozone needs a finance minister’” – 10 February
Italy’s Finance Minister Pier Carlo Padoan has given an interview to Politico, in which he notably calls for a Minister of Finance for the Eurozone, as well as faster integration of its banking and fiscal policies. According to Mr. Padoan, this Minister would notably be in charge over common resources for addressing crisis situations, as well as greater coordination of economic policies.
“KPMG: Professional Chameleons Or Independent Auditors And Regulators?” – 10 February
In his most recent guest blog to the NGO Tax Justice, Atul Shah refers to inherent conflicts of interest in large accountancy firms, and argues that the Big Four are actively helping clients to limit their regulatory obligations, with the help of their insights and expertise on legislation and regulatory affairs. In particular, firms such as KPMG are using their “contacts with regulators, understanding the resources and skill limits of regulators, understanding how slow regulatory investigations can be and how they can be ‘managed’” in order to benefit their clients. He furthermore argues that the conduct of these firms impacts the reputation of the accountancy profession as a whole
“Google tells British MPs it pays ‘fair’ taxes” – 11 February
As reported notably by Politico, Google has defended its tax practices in the UK by stating that they pay their fair share of taxes. Google representatives attended a hearing of a British parliamentary committee after strong criticism from a number of stakeholders regarding the £130 million tax settlement deal reached earlier between the multinational and the UK authorities. One of Google’s vice-presidents who attended the hearing, Tom Hutchinson, argued that Google pays its share of taxes and it is up to governments to determine where they are paid.
“Taxes on trial – how trade deals threaten tax justice” – 14 February
According to a report published by the NGO Global Justice, trade and investment agreements hinder governments’ abilities to conduct progressive tax policies aiming to tackle economic inequality. The report refers in particular to the Investor-State Dispute Settlement Systems (ISDS) which enable companies to “sue states directly at international tribunals”. The report entails analysis of data and documents on ISDS cases according to which 24 countries have already been sued in tax-related disputes.
“PFZW, PGGM call for EU-wide tax harmonisation for pension funds” – 16 February
According to IPE, PFZW and PGGM have issued a call on the European Commission to harmonise tax rules for pension funds. The organisations in particular argue for a common “pension fund” definition for tax benefit claims. PFZW is a pension fund for the Dutch healthcare industry, and PGGM its asset manager.
“Study Confirms Problems For US MNEs From CbC Reporting” – 18 February
According to Tax News, a study conducted by the American Action Forum (AAF) has concluded that the Country-by-Country Reporting (CBCR) provisions laid down in the OECD BEPS Action 13 will affect US multinationals though additional compliance burdens and forcing to disclose sensitive information. The report argues that CBCR information on US multinationals submitted directly to third countries would not have “the same confidentiality and appropriate use protections as CbC reports transmitted from one country to another.”
01/03/2016, Value Added Tax, with Donato Raponi, Head of Unit VAT DG TAXUD, British Chamber of Commerce, Brussels.
9-11/03/2016, Global Tax Policy Conference, Irish Tax Institute and Ash Center (Harvard Kennedy School), Dublin.
18/04/2016, Reforming regulation of professions: results of mutual evaluation and way forward, European Commission, Brussels.
09/2016, Bruegel Annual Meetings, Bruegel, Brussels.