- European Parliament ECON Committee publishes report on achieving a definitive VAT system and combating VAT fraud – 27 April
- Commission launches consultation on proposal to introduce a Services Passport and address regulatory barriers affecting services sectors – 2 May
- Additional jurisdictions, including Panama, commit to the international standard of automatic exchange of financial account information to tackle tax evasion and avoidance – 9 May
- European Parliament votes opinion on AEOI of CBCR information, Commissioner Moscovici hints to action against advisors – 12 May
DG TAXUD publishes its Management Plan 2016 and Strategic Plan 2016-2020 – 14 March
The European Commission’s DG TAXUD has published its Management Plan 2016 as well as its Strategic Plan 2016-2020. Both documents provide indications and timelines for upcoming DG TAXUD action, and as such enable to anticipate what can be expected. The highlights from the Management Plan include:
- Q2 2016: Commission will publish a resolution on arbitration for tax dispute resolution;
- September 2016: Commission will organise a conference on direct taxation and investments, possibly together with the IMF;
- October 2016: the Commission will publish its simplification package for SMEs, including a proposal on the SME scheme;
- Q4 (November) 2016: the Commission will publish its proposal for CCCTB;
- December 2016: the Commission will publish studies on the functioning of the MOSS and the extension of the VAT web portal;
- December 2016: the Commission will publish its proposal for VAT on e-commerce;
- Q4 2016: the Commission will publish a feasibility study on an EU Tax Identification Number (TIN);
- End-2016: the Commission will publish a strategy to enhance tax administrations’ capacity and ability to fight against fraud;
- End-2016: the Commission will publish its 2016 VAT gap report;
- End-2016: the Commission will publish a feasibility study on a mandatory “split payment system” in combination with a generalised reverse charge mechanism on VAT.
The Strategic Plan in turn indicates the following:
- The Commission will ensure that companies currently abusing loopholes in the system will need to readapt their tax policy strategies to the new context where aggressive planning is no longer tolerated. Tax advisors will play a crucial enabling role in supporting all businesses during the transition;
- The Commission will use the European Semester to promote “growth friendly and fairer tax systems”, with particular focus on concrete steps Member States can take to reduce tax fraud, evasion and avoidance;
- The Commission will ask Member States to do the “necessary reforms” in their tax systems to simplify them and make them more growth-friendly;
- 2017: the Commission will Issue its assessment on state of play on cooperation between Member States in tax audits;
- 2017: the Commission will publish a study how national tax incentives for venture capital and business angels can foster investment into SMEs and start-ups and promote best practice across Member States.
Every Commission DG prepares and publishes a multiannual Strategic Plan and a Management Plan for the upcoming year. Their purpose is to translate the political priorities and the strategic objectives of the Commission into concrete operations, and to provide an instrument enabling the DG’s management to plan, follow up and report on the activities and resources of the DG, and to ensure that resources are aligned with objectives.
Management Plan 2016: http://ec.europa.eu/atwork/synthesis/amp/doc/taxud_mp_2016_en.pdf
Strategic Plan 2016-2020: http://ec.europa.eu/atwork/synthesis/amp/doc/taxud_sp_2016-2020_en.pdf
“EC Asks France To Comply With Judgement On Taxation Of Dividends” – 29 April
According to Tax News, the European Commission has asked France to comply with the ruling of the Court of Justice of the EU (CJEU) regarding the tax treatment of dividends of non-resident subsidiaries. The Commission argues that the French Conseil d’Etat 2012 judgment on tax refunds paid by companies in France with subsidiaries in other Member States is in breach of EU law. France now has two months to react, and if the Commission is not satisfied with taken action it may take the case to the CJEU.
Consultation on proposal to introduce a Services Passport and address regulatory barriers affecting services sectors – 2 May
The European Commission has opened a public consultation on its Services Passport as well as addressing regulatory barriers on services sectors. The consultation consists of 111 questions, and respondents are free to only reply to those sections that are of relevance to them. Of particular interest, the consultation for example entails questions on business services from the perspective of service providers, as well as more generic questions on the scope of the actions. The questions overall seek to understand both the stakeholders’ concerns regarding the current situation, and which EU policy options are deemed most suitable. The respondents are in this regard asked whether they would like the EU to address multidisciplinary restrictions or shareholding requirements.The deadline for submitting responses is 26 July.
European Parliament ECON Committee publishes report on achieving a definitive VAT system and combating VAT fraud – 27 April
The MEP Werner Langen (EPP/GER) has submitted a draft own-initiative report on the definitive VAT regime and combatting VAT fraud for the consideration of the ECON Committee. The report is legally non-binding and commits neither the Commission or the Council to action. The main elements of interest from the report include the following:
- Welcomes in broad terms the Commission VAT Action Plan, published in early-April, but calls for more “fundamental reform” and a more coordinated tax policy between Member States;
- Endorses the destination-principle proposed by the European Commission;
- Argues that differences in VAT rates pose uncertainties for companies involved in cross-border activities, and maintains that reduced rates are ineffective in achieving the intended social goals:
- Calls consequently for a single list of reduced goods and services, allowing for fewer exemptions than currently – these should be decided at the EU-level;
- Calls for products to be subject to the destination principle regardless of in what form or through which platforms they have been purchased, and regardless of the means of delivery;
- Calls on the Member States to apply the same VAT on public and private companies;
- Expresses enthusiasm towards the general reverse charge mechanism – extend reverse charging to all B2B transactions:
- Calls on the Commission to conduct pilot projects to assess its effects;
- Less distortion to competition;
- Reverse charge mechanism would reduce fraud, simplify accounting.
In terms of next steps, the deadline for amendments is 31 May. The vote in the ECON Committee is scheduled for 13 July, whilst a Plenary vote is expected for 5 September.
Overview: the European Parliament’s work on taxation – 3 May
The European Parliament has published an overview of its part work on taxation, as well as upcoming action. It includes a description of the special tax Committees, the various tax reform recommendations put forward by the MEPs, as well as a list of key work that the Parliament will undertake during the rest of the year, including on amending the Accounting Directive to introduce public Country by Country Reporting (CBCR) for multinationals, as well as the proposal for a Common Consolidated Corporate Tax Base (CCCTB) currently anticipated for November. Moreover, as reported in earlier FEE Tax Policy Updates, the Parliament will establish a new Committee of inquiry with particular focus on the Panama Papers scandal.
“US should be considered a tax haven according to new research” – 11 May
The Greens-EFA Group of the European Parliament has published a new study arguing that the US can be considered a “tax haven”. For example, the study argues that the US fails to keep up with tax transparency advances, and has significant loopholes in its legal framework regarding beneficial ownership. It moreover puts forward five recommendations to address the situation. It calls on the EU to push countries to establish central public registries of beneficial ownership information for all types of legal persons and legal arrangements; commit to global automatic exchange of information in line with the OECD’s Common Reporting Standards; and to publish aggregate information on the financial assets held by non-residents (according to country of residence) in their financial institutions. Moreover, the EU itself should “carefully screen” the US according to the criteria which will be developed for a common European “black list of tax havens”, and to establish a withholding tax scheme on all EU-sourced payments against non-compliant financial institutions.
Plenary votes opinion on AEOI of CBCR information – 12 May
The European Parliament Plenary has voted on its opinion on the Commission proposal for Country by Country Reporting (CBCR) between tax administrations, as part of the Administrative Cooperation Directive and with the view of implementing the BEPS Action 13 coherently across the EU. The amendments as approved in the ECON Committee at the end of last month were largely adopted as such by the Plenary as well (for additional details, please see the Tax Policy Update from 29 April), with some minor changes. Specifically, the MEPs are no longer calling for the information to be shared with third countries, but now call on the Commission to publish an aggregated summary of the country-by-country reports. In parallel, the Council has already reached an agreement on the Commission proposal, and will have no obligation to take the Parliament’s suggestions into account. The proposal is now subject to final approval by Member States, after which it becomes EU law.
Prior to the vote, the MEPs in Plenary exchanged views on the report specifically, and CBCR broadly. Of particular interest, the EPP Group (Christian-Democrats) expressed no coherent position on public disclosure. Similar mutually differing views were heard from within the ECR Group as well (nationalist Eurosceptics). Moreover and as expected, the Groups on the Left side of the political spectrum (S&D, Greens-EFA, GUE-NGL) raised concerns over the high threshold of €750 million consistently proposed by the Commission. Of additional interest, Commissioner Moscovici listed his priorities for additional action in the area of tax. This included “shedding more light on aggressive tax planning”, and more specifically on the work of “financial advisors”.
MEP Questions & Answers
EU VAT system – 29 April
The European Commission has replied to a question asked by the MEP Brian Hayes (EPP/IRL) with regard to the EU VAT system. In his question, Mr. Hayes refers to different VAT thresholds and the problems that these cause for smaller businesses. He therefore asks the Commission whether the Mini One-Stop Shop (MOSS) has been successful in simplifying the VAT system for SMEs. In his reply, Commissioner Moscovici lists a number of initiatives for 2016, in particular modernising VAT for cross-border e-commerce, including the extension of MOSS to cross-border supplies of tangible goods, the removal of the exemption for the importation of small consignments, the application of home country rules including invoice requirements and audits, and the introduction of a VAT exemption threshold for start-up companies for their EU sales. In 2017 moreover, the Commission will submit a proposal to amend the VAT Directive’s provisions on the SME scheme.
Luxembourgish excess-profit rulings – 2 May
The European Commission has replied to a question asked by the MEP Hugues Bayet (S&D/BEL) with regard to Luxembourg’s excess profit rulings. In his question, Mr. Bayet refers to the recent Commission ruling on Belgium’s excess profit schemes, which stated that they are in violation of EU’s state aid provisions. He therefore asks the Commission whether it will look into similar practices in Luxembourg. In her reply, Commissioner Vestager argues that each country and schemes are different, and consequently no other country in the EU employs schemes exactly similar to the Belgian ones. The Commission’s investigations into Luxembourg’s rulings broadly, however, is still ongoing.
French property tax – 3 May
The European Commission has replied to a question asked by the MEP William Dartmouth (EFDD/UK) with regard to the French property tax. In his question, Mr. Dartmouth states that France has recently re-introduced a 15.5% social charge on property sales by non-residents, which in his interpretation has been ruled as unlawful by the Court of Justice of the EU (CJEU). He consequently asks the Commission what action it will take to enforce the CJEU decision. In her reply, Commissioner Thyssen (Employment, Social Affairs, Skills and Labour Mobility) states that the Commission is in contact with French authorities regarding the issue, in order to ensure that the measures are in line with EU rules.
Investigation into the tax rules applicable in the jurisdiction of Gibraltar – 4 May
The European Commission has replied to a question asked by the MEP Ramón Jáuregui Atondo (S&D/SPA) with regard to tax rules applicable in Gibraltar. In his question, Mr. Atondo refers to a specific case from which he deduces that Gibraltar is helping Spanish citizens in tax avoidance. He therefore asks the Commission whether and when it will launch an investigation on the issue. In his reply, Commissioner Moscovici states that the Code of Conduct on business taxation is amongst other things looking into the case of Gibraltar. However, he also points out that as a general rule state aid rules are not applicable to individuals (as in the case referred to by Mr. Atondo) unless they can be considered as undertakings.
Tax avoidance through trade agreements – 11 May
The European Commission has replied to a question asked by the MEP Anne-Marie Mineur (GUE-NGL/NLD) with regard to tax avoidance through trade agreements. In her question, Ms. Mineur argues that Investor-State Dispute Settlement (ISDS) procedures often used for tax avoidance. In particular, she argues that despite carve-outs to exclude tax issues from such dispute settlement, companies have been successful in pursuing tax cases through them nevertheless. She consequently asks the Commission what action it will take to tackle dispute settlement challenges by companies, often letterbox companies, with the purpose of avoiding taxes. In her reply, Commissioner Malmström (Trade) states that she is convinced that those agreements that the EU is a part of contain no “loopholes” enabling tax evasion, and “mailbox companies” do not benefit from the investor dispute settlement and other Investment Chapters since “real business operations” in at least one of the jurisdictions covered by the agreement is required.
Possible violation of state aid legislation by Google and the Netherlands – 11 May
The European Commission has replied to a question asked by the MEPs Marco Valli (EFDD/ITA) and Marco Zanni (EFDD/ITA) with regard to state aid violations by Google and the Netherlands. In their question, the MEPs refer to a royalty transfer case by Google whereby the company’s Dutch subsidiary managed to decrease its tax base through foreign branches in Bermuda. He argues that the Commission proposal for public Country by Country Reporting (CBCR) would leave a number of multinationals from its scope due to the high threshold, and consequently asks the Commission whether it would consider lowering the proposed threshold, and whether it feels that it makes sense for the breaching Member States to actually receive the tax income following a positive investigation. In her reply, Commissioner Vestager states that the purpose of the state aid investigations is to restore the competitive situation that existed before the granting of the incompatible state, and consequently there is no paradox in allocating the collected tax income to Member States. Moreover, she gives no indications on the Commission’s willingness to reduce the proposed public CBCR threshold.
Investment flows through offshore financial hubs declined but remain high – 3 May
The UN Conference on Trade and Development (UNCTAD) has published the latest edition of its Global Investment Trends Monitor. According to its findings, in 2015 a total of $221 billion was directed to low tax jurisdictions. In 2014, the largest amounts of income booked in foreign affiliates could be found in the Netherlands, followed by the US, UK, Luxembourg and Switzerland. As a consequence, the report calls for “greater coherence” in global investment and tax policy regimes.
“Australia to implement ‘Google tax’” – 4 May
According to the Financial Times (article only available to subscribers), Australia intends to implement a so-called Google tax, also known as a diverted profits tax. The plan would be to have the tax in place starting July 2017, and it would impose a penalty tax rate on multinationals that have attempted to shift profits offshore. In parallel, Australia’s treasurer Scott Morrison announced plans to reduce the country’s corporate tax rate from the current 30% to 25%.
“Panama Papers: US launches crackdown on international tax evasion” – 6 May
As reported notably by the Guardian, the US is taking action against international tax evasion. The White House has announced a number of measures aiming to close loopholes, which according to the article constitutes one of the “most comprehensive responses yet to the Panama Papers revelations”. The proposed measures include, for example, further transparency action to fight against tax evasion and money laundering.
“Australian Tax Board Proposes Tax Transparency Code” – 9 May
According to Tax News, the Board of Taxation of Australia has published its final report on a new Tax Transparency Code (TTC) for multinationals. The report divides disclosure requirements into two categories, the first of which requires the adjustment of the accounting profit to tax expense and to the income tax obligation, amongst other things. The second part requires the provision of details regarding the company’s tax strategy and governance, a summary for paid corporate taxes, as well as information on related-party dealings abroad.
“China airs plan to help close multibillion-dollar corporate tax loophole” – 11 May
According to the South China Morning Post, China is considering to strengthen multinationals’ tax reporting requirements with the view of contributing to the global fight against tax loopholes. The tightened reporting requirements under consideration would oblige multinationals to file reports on internal pricing and costs between their foreign branches and headquarters. According to the article, the rules would come into effect retroactively, from 1 January 2016.
Additional jurisdictions, including Panama, commit to the international standard of automatic exchange of financial account information to tackle tax evasion and avoidance – 9 May
A number of new jurisdictions, including Panama, have committed to sharing financial account information with other countries, bringing the total number of signatories to 101. The new signatories will begin exchanging information from September 2018.
6 new countries sign agreement enabling automatic sharing of country-by-country reporting – 12 May
Six new countries have signed up for the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports (CbC MCAA). This brings the total number of signatory jurisdictions to 39. The purpose of the CbC MCAA is notably to enable for the signatories to exchange on a bi-lateral and automatic basis the CbC reports between each other, in accordance with the OECD BEPS Action 13. The signatory countries are Canada, Iceland, India, Israel, New Zealand and China.
Heads of tax administrations take big step forward in global tax co-operation – 13 May
Representatives from 44 tax administrations participated on a conference in Beijing, China, to discuss effective implementation of the OECD/G20 tax agenda, ways to build modern tax administrations prepared for the changing realities of the digital economy, and to improve tax administrations’ capacities overall. During the conference, the attendees committed to continuing international cooperation in tackling offshore tax evasion as well as rendering the international tax system more transparent and fair. For the occasion, a number of publications were also released, titled:
- Tax Administrations and Capacity Building: A Collective Challenge
- Technologies for Better Tax Administration: A Practical Guide for Revenue Bodies
- Rethinking Tax Services: The Changing Role of Tax Service Providers in SME Tax Compliance
- Advanced Analytics for Better Tax Administration: Putting Data to Work
- Co-operative Tax Compliance: Building Better Tax Control Frameworks
EESC publishes opinion on ATAD – 28 April
The European Economic and Social Committee (EESC) has published its opinion on the Commission proposal for an Anti-Tax Avoidance Directive (ATAD). EESC welcomes the Commission’s efforts to implement the OECD BEPS recommendations at the EU-level, but calls on the Commission to align its proposals with the BEPS project. Of additional interest, EESC calls for the exclusion of SMEs from the Directive’s scope since “aggressive tax planning is largely carried out by large multinational corporations”, and calls on the Member States to “disclose the data presented in the reports which will be subject to the automatic exchange of information”.
“Economists call for end of tax havens” – 9 May
As reported notably by the Financial Times (article only available to subscribers), over 300 economists have written an open letter to global leaders, calling for an end to “tax havens”. They argue in particular that “tax havens” do not serve an economic purpose or contribute to global wealth. The letter is published in the context of the global anti-corruption summit organised by the British Prime Minister David Cameron.
Eleven reasons to be tax transparent – 9 May
Eelco van der Enden, a tax partner at PwC, has published an article for the online publication of the Dutch association of accountants, NBA. Mr. van der Enden argues that there is a strong business case for not dismissing public Country by Country Reporting (CBCR), and provides a total of 11 reasons. He for example points out that for the financial and extractive sectors the public CBCR requirements have posed no issues; a number of companies already disclose tax information on a voluntary basis; transparency is inevitable as much of the information is already publicly available elsewhere, whilst in turn those elements that remain secret risk being exposed through leaks; and it is preferable to establish common rules for public CBCR, as opposed to a variety of disclosure systems proposed by different countries.
“EU Anti-Tax Avoidance Directive overshoots its mark” – 11 May
The American Chamber of Commerce (AmCham) in Belgium has published a report on the EU Anti-Tax Avoidance Directive (ATAD), in which it argues that the European Commission has gone too far in its proposals. The AmCham in particular argues that the EU is going too far off the OECD BEPS recommendations, and that this risks hindering the competitive position of EU Member States. It moreover criticises the lack of an appropriate impact assessment. These arguments are frequently heard amongst those more critical of the Commission proposals, and further reflects the concerns raised by the ATAD’s provisions.
13/05/2016, Conference on Fiscal Policy, The Forum on Economic and Fiscal Policy, Amsterdam.
18/05/2016, Reforming regulation of professions: results of mutual evaluation and way forward, European Commission, Brussels.
07/06/2016, The priorities of the Slovak Republic Presidency of the Council, EPC, Brussels.
15/06/2016, 3rd Global Tax Policy Conference, Maastricht University, Maastricht.
09/2016, Bruegel Annual Meetings, Bruegel, Brussels.