8 January 2016

FEE Tax Policy Update 21 December – 8 January


  • French government rejects National Assembly’s calls for public Country by Country Reporting – 16 December
  • Court of Justice of the EU provides ruling on transfer of know-how on VAT – 17 December
  • IMCO and ITRE Committee MEPs vote on Digital Single Market – 21 December


European Parliament

IMCO and ITRE Committee MEPs vote on Digital Single Market – 21 December

The full consolidated text of the joint IMCO-ITRE Committee own initiative report on the Digital Single Market (DSM) has been published, reflecting the results of the Committee vote which took place on 14 December. The lead rapporteurs for the dossier are Kaja Kallas (ALDE/EST) and Evelyne Gebhardt (S&D/GER). The report follows the European Parliament’s own-initiative procedure, which commits neither the Commission or the Council to legislative action. Having said that, the report does put forward the MEPs’ positions on the issues covered, which becomes relevant when the Commission starts to legislate on the mentioned topics such as VAT as well as Country by Country Reporting (CBCR), both anticipated for 8 March.

On the VAT side, the report notably welcomes the Mini One-Stop Shop (MOSS) system but expresses concerns over a lack of thresholds for SMEs. It moreover calls on the Commission to submit a proposal allowing Member States to reduce VAT rates for the press, digital publishing, e-books and on-line publications, calls for a “simplified online VAT scheme”, as well as for a simplification of the cross-border VAT system in the EU.

Of particular interest, an ECON Committee opinion to the report introduced a call for CBCR across sectors to be introduced, calling in particular for extending CBCR on taxes for multinationals to all sectors, with the exclusion of SMEs and midcaps. It should however be taken account that the report makes no reference to public CBCR. And finally, the report calls for the establishment of an EU-wide Common Consolidated Corporate Tax Base (CCCTB) in order to prevent “market distortion”, tax avoidance and tax evasion, and to foster better coordination on taxation. In terms of next steps, the European Parliament Plenary will vote on the report on 19 January.




MEP Questions & Answers

Council Directive 2011/16/EU on administrative cooperation in the field of taxation and the mandatory automatic exchange of information in the field of taxation – 27 November

The European Commission has replied to a question asked the MEP Jiri Mastalka (GUE-NGL/CZE) in early-October with regard to administrative cooperation and exchange of information in the field of tax. In his question, Mr. Mastalka refers to an earlier European Parliament JURI Committee (legal affairs) opinion calling for mandatory automatic exchange of information in the field of VAT, as well as for minimum tax rates in the EU. He consequently asks the Commission whether it is planning to implement any such initiatives. In his reply, Commissioner Moscovici states that automatic exchange of VAT information is already in place, and the work in this area has been of high quality. With regard to the question on minimum tax rates, Commissioner Moscovici emphasises the need to ensure that profits generated in the EU are taxed there as well, but maintains that fairer corporate taxation can be achieved without a harmonisation of tax rates in the EU. As examples, he brings up Commission’s ongoing work to “close legislative loopholes”, to improve the transfer pricing system and implementing stricter rules for preferential tax regimes.

Question: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013588&language=EN

Answer: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013588&language=EN

High VAT rates and VAT compliance gap in Greece – 30 November

The European Commission has replied to a question asked by the MEP Theodoros Zagorakis (EPP/GRE) in early-October with regard to a potential correlation between high VAT rates and the VAT compliance gap, with specific focus on Greece. In his question, Mr. Zagorakis asks the Commission whether it feels that there is a link between the VAT compliance gap as well as the high VAT rates “imposed in Greece in recent years”. In his reply, Commissioner Moscovici confirms that the Commission does not believe that there would be a “direct and strong link” between the two. He however admits that in general higher tax rates may incentivise tax evasion, and that there is consequently a strong argument for “reforms in this area”.

Question: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013414&format=XML&language=EN

Answer: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013414&language=EN

Taxes on labour in the Member States – 3 December

The European Commission has replied to a question asked by the MEP Csaba Molnár (S&D/HUN) in early-October with regard to labour taxes. In his question, Mr. Molnár refers to a Commission report showing that labour taxes in the EU have not significantly fallen in recent years. He consequently asks the Commission whether it sees the possibility of decreasing labour taxes in Hungary specifically in order to boost employment, whether such a reduction would be financially feasible in Hungary, and what effects it could have on the country’s economy. In his reply, Commissioner Moscovici states that Hungary has received recommendations both from the Council and the Commission to lower its tax burden on labour, especially amongst lower income groups.

Question: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013435&format=XML&language=EN

Answer: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013435&language=EN

Platform undertakings and taxation – 4 December

The European Commission has replied to a question asked by the MEP Merja Kyllönen (GUE-NGL/FIN) in early-October with regard to the taxation of platform undertakings. In her question, Ms. Kyllönen asked the Commission to elaborate what it is planning to do with the view of ensuring that platform undertakings (such as Airbnb and Uber) fulfil their “obligations to society” in the field of taxation, thereby ensuring fair competition between them and conventional market actors. In his reply, Commissioner Moscovici confirms that although taxation in principle remains a Member State competence, the Commission may take action to tackle cross-border tax evasion. The Commission moreover cooperates with Member States in order to enhance a consistent application of EU VAT rules, including on supplies carried through and by sharing economy platforms. And finally, the Commission has committed to assessing the role of platforms as part of its Digital Single Market Strategy, including on tax.

Question: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013575&format=XML&language=EN

Answer: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013575&language=EN

Corporate taxation in EU Member States: Italy bottom of ranking – 7 December

The European Commission has replied to a question asked by the MEPs Fulvio Martusciello (EPP/ITA) and Alberto Cirio (EPP/ITA) in early-October with regard to corporate tax in the EU. In their question, the MEPs raise concerns about Italy’s low ranking in Member States’ tax system performance ranking, and urge the Commission to indicate what it will do to reduce these progress gaps between Member States. In his reply, Commissioner Moscovici states that the Italian tax system is subject to national competence, but that the Commission may submit recommendations to Member States in the context of the European Semester with the view of improving their economies.

Question: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013493&language=EN

Answer: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013493&language=EN

Lack of action by European institutions on double taxation discouraging mobility and free movement of labour within the EU – 8 December

The European Commission has replied to a question asked by the MEPs Milan Zver (EPP/SVN) and Romana Tomc (EPP/SVN) in early-October with regard to double taxation of labour in the EU. In their question, the MEPs state that Slovenian migrant workers pay higher taxes than Austrians working in the “same environment” due to differences in the tax systems between the two countries. The MEPs consequently ask the Commission when it plans to undertake action to address issues such as the one elaborated, and whether the tardiness in addressing them is due to Member State resistance in the Council. In his reply, Commissioner Moscovici re-iterates the known fact that taxation is a Member State competence, and that differences in cross-border tax rules due to a lack of coordination do not per se constitute a breach of EU rules. However, the Commission Expert Group on cross-border tax issues facing EU citizens will publish a report “in the coming week”, and based on the report the Commission will decide on potential next steps. The Commission is moreover looking into the possibility of proposing a binding arbitration mechanism to settle cross-border double-taxation disputes.

Question: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013636&language=EN

Answer: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013636&language=EN

Commission, TAXE Documents and Ireland – 9 December

The European Commission has replied to a question asked by the MEP Matt Carthy (GUE-NGL/IRL) in early-September regarding TAXE Committee’s access to documents during its investigative work into Member States’ tax practices. In his question, Mr. Carthy regrets Ireland’s refusal to deliver documents containing, amongst other things, Member State positions on tax issues as well as their tax practices. He consequently asks the Commission to elaborate on how it will ensure that multinationals “that are manipulating tax systems” will be held accountable. In his reply, Commissioner Moscovici elaborates on the actions it has taken in the past year (e.g. its tax transparency package from March 2015, the agreement on exchange of information on tax rulings from October, as well as its June 2015 Action Plan on fair and efficient corporate taxation), and reminds that the requested documents were made available for the TAXE Committee under “a specific agreement”.

Answer: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2015-013137&language=EN

Reply: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2015-013137&language=EN


Court of Justice of the EU

Court of Justice of the EU provides ruling on transfer of know-how on VAT – 17 December

The Court of Justice of the EU (CJEU) has provided a ruling on concluding a licencing agreement with a company established in a Member State with a lower standard VAT rate than in the Member State where the company granting the licence is established. In CJEU’s interpretation, the fact of concluding such an agreement cannot in itself be considered as an “abusive practice”. The ruling concerns a case involving a licensing agreement between a Hungarian company and a firm established in Madeira. Hungarian tax authorities claimed that the transfer of know-how from the Hungarian company to the Madeira-based one did not correspond to a “genuine economic transaction”, and was potentially intended to benefit from Madeira’s lower VAT rates.



The General Court annuls the Commission’s decision finding that the ‘Spanish tax lease system’ was illegal State aid – 17 December

The General Court of the EU has ruled against an earlier European Commission decision from 2013 which interpreted Spain’s “tax lease system” (STLS) as illegal state aid. The STLS concerned fiscal arrangements usually organised by banks acting as intermediaries between shipping companies and shipyards, which in Commission’s view resulted in a breach of EU state aid rules. In the General Court’s interpretation, the Commission failed to provide sufficient reasoning for considering the scheme as unlawful state aid, and took a different interpretation to that of the Commission by stating that the economic advantages involved were not selective.



VAT is chargeable on unused air tickets which are not refundable – 23 December

The Court of Justice of the EU (CJEU) has ruled that unused and non-refundable air travel tickets are subject to VAT. In the Court’s interpretation, passengers are subject to the right to use the services purchased and provided by airlines regardless of whether or not they actually use that right. VAT is therefore payable from the moment that a passenger purchases this right to the air transportation service. The ruling is a reaction to Air France’s (nowadays Air France-KML) practice whereby it did not pay VAT to French authorities on air tickets which were non-refundable and not used by the passenger.





French government rejects National Assembly’s calls for public Country by Country Reporting – 16 December

As reported notably by Euractiv, the French government has blocked the call for public Country by Country Reporting (CBCR) that was made by the country’s lower house, the National Assembly. The government had concerns about the measure’s potentially negative impact on the competitiveness of the French business sector in the absence of a similar measure by other countries, and applied pressure on MPs to ultimately reject the initiative. The results of the European Commission’s impact assessment on CBCR are expected for early-March, to be accompanied by relevant legislative provisions.



“NAO Reports On HMRC’s Response To Tax Fraud” – 22 December

According to Tax-News, the UK National Audit Office (NAO) has assessed that tax fraud generates an annual loss of £16 billion (approximately €23 billion) to public coffers. NAO moreover maintains that the HMRC must make improvements into its data use and analysis in this particular area.



“Apple to pay €318 million in tax in Italy” – 30 December

As reported notably by Politico, Apple has reached a deal with Italian authorities whereby it agrees to pay €318 million of taxes to Italy’s public coffers. The deal is the result of an investigation based on suspicions that the company’s Italian arm may have transferred up to €880 million in profits to Ireland. This agreement marks the end of the investigation.



“HSBC escapes action by City regulator following Swiss tax scandal” – 4 January

According to the Guardian, HSBC will not face the threat of “formal action” from the UK Financial Conduct Authority (FCA) in a case where the bank’s Swiss unit assisted clients in tax evasion. No official elaboration has been provided yet, but according to the article the FCA may consider that the bank has made significant improvements to its practices.




State Aid

Commission invites Greece to better target its “tonnage tax” and related support measures in maritime sector – 21 December

With risks that the state support enjoyed by the Greek maritime sector could constitute a breach of EU state aid rules, the European Commission has sent to the Greek authorities proposals on how to address these potential risks. A particular point of contention is the so-called tonnage tax, which the Commission fears may constitute unfair favourable tax treatment to maritime sector intermediaries not actually directly providing maritime transport services. Greece will have two months to inform the Commission of its stance on the issue and its agreement with the proposed measures. If such was to be the case, Greece would have to amend its relevant national laws accordingly and have them in effect on 1 January 2019.



Commission finds Italy provided incompatible state aid to Banca Tercas and welcomes plans of private funds to step in – 23 December

The European Commission has ruled that state aid provided by Italy to the Banca Tercas is incompatible with EU’s state aid rules. In the Commission’s interpretation, the aid granted to the bank did not entail a restructuring plan, nor did it adequately address potentially resulting distortions to competition. The aid was granted through Italy’s mandatory deposit guarantee scheme FITD, but the Commission discovered that it was in fact acting on behalf of the state.




Other News

“For the Wealthiest, a Private Tax System That Saves Them Billions” – 29 December

According to a New York Times article by Patricia Cohen and Noam Scheiber, the “very richest” have been highly successful in shaping a tax policy environment that provides ample enabling opportunities for tax avoidance and evasion. The article takes a critical stance against existing methods and loopholes in the US tax system, and provides a set of examples of business advocacy and influence in the tax policy arena.





19/01/2016, Fiscal policy after the crisis, European Commission, DG ECFIN, 09:00-17:00, Brussels. Source: http://europa.eu/newsroom/calendar/events/2016/01/19_fiscal_policy_after_crisis_en.htm

28/01/2016, 7th Annual European E-Commerce Conference, Forum-Europe, 09:30-18:00, Brussels. Source: http://eu-ems.com/summary.asp?event_id=280&page_id=2575

28/01/2016, Advisory European Fiscal Board and Network of National Fiscal Councils: Friends or foes?, CEPS, 13:15-14:30, Brussels. Source: https://www.ceps.eu/events/advisory-european-fiscal-board-and-network-national-fiscal-councils-friends-or-foes

02/02/2016, 2015 EBF Tax Conference, European Banking Federation, 09:30-17:30, Brussels. Source: http://www.ebf-fbe.eu/2015-ebf-tax-conference/

9-11/03/2016, Global Tax Policy Conference, Irish obalTaxPolicyConference2016.aspx

18/04/2016, Reforming regulation of professions: results of mutual evaluation and way forward, European Commission, Brussels. Source: http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=8592&lang=en&tpa_id=0&title=Conference-on-reforming-the-regulation-of-professions-

09/2016, Bruegel Annual Meetings, Bruegel, Brussels. Source: http://bruegel.org/events/bruegels-annual-meetings-2016/

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