Update

Tax Policy

Cannot read this email? Open in your browser.June 2019

Tax Policy Update

29 May - 11 June 2019

 
 
 

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Our periodic updates provide you with the latest news on SME, tax, technology, audit and sustainable finance.

 
 
 
 
 

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Highlights

 
 
 
 

  • European Parliament elections – what impact on tax?
  • OECD announces next steps for digital and minimum tax reforms
  • Investors and large French businesses call for tax transparency, tax convergence respectively

 
 
 
 
 

Feature story

 
 
 
 

Tax Policy Update gets an aesthetic revamp

Dear readers,

Those of you with a keen eye may have noticed already in the last edition that the Tax Policy Updates have been re-formatted. But fear not! The content and quality of the substance are not compromised.

The purpose of this purely aesthetic revamp is to render you reading experience more convenient and pleasant, whilst still ensuring that you have access to the up-to-date information and intelligence that you have grown to expect from the Updates.

I hope that you will enjoy this new more convenient template as much as I have so far. Me and my colleagues remain open for any feedback from your side.

On that note, I would like to wish you all a pleasant beginning of the summer, and looking forward to continuing to update you on the trends and tales of Europe’s fast evolving tax policy landscape.

With kindest regards,

Johan

 
 
 
 
 

EU Developments

 
 
 
 

European Commission


Commission singles out 6 Member States as prone to aggressive tax planning

Commission has re-iterated that several of EU Member States’ tax systems are more prone to aggressive tax planning risks.

It singles out certain features of tax systems in Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands specifically. Although the Commission cannot force these countries to undertake action, it does put the political spotlight on them.

This assessment was made as part of the Commission’s periodic European Semester package, published on 5 June, which analyses and makes recommendations on Member States’ economies. The objective of the European Semester is notably to ensure economic policy coordination. Read more

 
 
 
 
 

European Parliament


European Parliament election results are in

On 26 May, the European Parliament elections took place with 751 MEPs elected to represent European citizens.

With 179 MEPs (37 less than previous term), Christian Democrats remain the largest group but they will have to seek more than one ally in the future to get their policies through.

Socialists came in second with 153 MEPs (-32), followed by the big winner liberal ALDE group with 110 seats (+36). Greens can also be considered winners, as they are now the fourth largest group with 74 MEPs (+22). The far-Left GUE-NGL registered significant losses, and now stands at 38 MEPs (-14).

On the far-Right side, several new MEPs from Italy and France contributed to a predicted surge in strength. Whether or not the various far-Right factions can rally behind a common political grouping will determine their eventual strength. Read more

How might the European Parliament election results affect its tax work?

First, the balance of power in the Parliament has shifted following the elections. The Greens have significantly increased in numbers, placing them into a decisive role on many issues. This means that their ambitious tax priorities can also be expected to gain prominence.

This is also the case for the liberal ALDE Group, consisting of several new MEPs from Emmanuel Macron’s Renaissance movement, who are likely to promote ‘fair taxation’ at the EU agenda. And the Social-Democrats as the second largest group in the Parliament will continue to eagerly work with others to reinforce the Parliament’s tax work.

Second, MEPs will attempt to set up a permanent Committee on tax matters. Such a permanent committee would only have a consultative role, given the Parliament’s lack of powers on tax. But it would be highly effective in keeping tax on the political agenda and building political momentum, as happened with past temporary tax Committees.

Third and finally, MEPs will seek to advance the tax agenda in non-tax files as much as possible. It is conceivable, for example, that the MEPs would call for stricter rules on tax advisors as part of audit, services or competition legislation.

As a final thought, it is also interesting that although over 60% of all elected MEPs are new faces, many of previous term’s tax-focused MEPs were re-elected. This demonstrates yet again the importance that European citizens put on tax questions. Read more

 
 
 
 
 

Council


Code of Conduct Group publishes several assessments of national tax regimes

The Council’s Code of Conduct Group has now published a number of assessments it has conducted on the potential harmfulness of certain EU and non-EU countries’ tax regimes.

The documents are originally up to from several months ago, but give interesting insight into the criteria and approaches taken by the Group when assessing jurisdictions’ tax systems.

They were published as background to the Group’s regular dialogue and reporting to the EU Finance Ministers (see article below).

For non-EU countries: Costa Rica, Cook Islands, Barbados (assessment of its commitment letters as part of EU’s tax haven listing work, see here and here), Malaysia and Bermuda (assessment of final legislation as part of EU’s tax haven listing work).

For EU countries: France (here and here), Croatia, Cyprus, Lithuania, and Poland (here and here).

Code of Conduct Group reports to Finance Ministers on progress

The Code of Conduct Group has also published a report on its past and planned future activities, as well as draft Conclusions that EU’s Finance Ministers are invited to endorse.

The report provides a comprehensive overview of what the Group has been up to, and what it is planning to focus on in the next months. The draft Conclusions, if approved, give a mandate for the future direction of the Group’s work. In particular, the Group’s work would continue during the upcoming Finnish Presidency of the Council on common coordinated EU defensive measures against blacklisted jurisdictions.

The Group also published a separate report on progress with the non-cooperative jurisdictions blacklist specifically.

It should be expected that both the report and the draft Conclusions will be approved without objections by the Finance Ministers.

Transport ministers discuss flight taxes, struggle to find common ground

On 6 June, EU transport ministers discussed flight taxes at the Transport Council meeting.

Several options are considered, such as a tax on kerosene, a tax on ticket and flight prices, and an increased VAT.

During the discussions, especially Belgium, the Netherlands, Luxembourg, France and Sweden were enthusiastic. Cyprus on the other hand was reluctant to increasing ticket prices. Many other more peripheral EU countries are also concerned about the impact of a flight tax on their economies. Germany and somewhat surprisingly Spain also expressed some reservations.

The Netherlands will organise a conference on flight taxes in The Hague on 20 and 21 June.

 
 
 
 
 

MEP questions & answers


Commission maintains its already proposed tax measures would robustly address unrecorded assets held in accounts in offshore tax havens

  • Question by MEP Siegfried Mureşan (EPP/Romania)
  • Reply by Commissioner Moscovici

Commission defends its impact assessment for digital services tax Directive and calls for public CBCR

  • Question by MEP Nadine Morano (EPP/France)
  • Reply by Commissioner Moscovici

 
 
 
 
 

International Developments

 
 
 
 

UN investor network makes recommendations on tax disclosures

Principles for Responsible Investment (PRI) – a UN supported international network of investors – has made recommendations on how investors can engage with companies to alter their behaviour on tax.

PRI maintains that an increasing number of investors are concerned about “aggressive tax planning” and want to push for “responsible tax practices”. Its recommendations aim to address this.

Among the recommendations, PRI suggests that investors should discuss with companies what concerns they may have about public country by country Reporting (CBCR), and how they can manage tax risks. Read more

OECD announces way ahead for digital and minimum tax

The OECD’s Inclusive Framework has adopted a Programme of Work laying out a process for reaching a new global agreement for taxing multinationals. The Programme will explore the technical issues to be resolved through two main pillars.

The first pillar will explore potential solutions for determining where tax should be paid and on what basis (nexus), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (profit allocation).

The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax.

The technical work will be complemented by an impact assessment of how the proposals will affect government revenue, growth and investment.

The aim now is to reach a political agreement ideally before year-end 2019, and complete the work during 2020. Public consultations will be organised in order to obtain stakeholder feedback as the various proposals are refined. Read more

Expectations for OECD’s digital and minimum tax work, Pascal Saint-Amans underlines agreement possible without full consensus

Reportedly, US officials are happy to grant market jurisdictions additional profits and taxing rights, in exchange for countries agreeing to grant multinationals greater certainty and to commit to robust dispute resolution mechanisms.

Pascal Saint-Amans, the tax director at OECD, has also stated that the pillar one proposals can be agreed upon even if a few zero tax jurisdictions disagree. On pillar two, however, he underlined that an agreement can be adopted even without full consensus. Only a cluster of countries is needed to adopt the minimum tax and another cluster to adopt the undertaxed payment rule. The impact of the measures will be felt even if some large countries do not join, he maintained.

 
 
 
 
 

National Developments

 
 
 
 

Ireland’s Finance Minister recognises need for international tax overhaul

Ireland’s Finance Minister, Paschal Donohoe, has stated that Ireland would have to be open for new ways of taxing companies in a digitalised economy.

Crucially, he believes that Ireland should explore and develop a broader concept of value creation which recognises value also arising from scale, brands or access to markets.

His tone appears to indicate that change in the international tax system is inevitable, and it is better for Ireland to engage constructively rather than be sidelined.

However, whilst evidently being open to considering the importance of market jurisdictions in value creation, Paschal also reiterared his opposition to the minimum tax workflow currently undertaken at the OECD and pushed for by France and Germany in particular. Read more

Large French businesses call for corporate tax harmonisation in Europe

AFEP, the representative organisation of French large businesses, has called for a common consolidated corporate tax base (CCCTB) as well as “convergence” on corporate tax rates across Europe.

Moreover, AFEP calls on the EU to be a decisive global leader on tax matters, in face of what it sees as a fragmented OECD.

AFEP argues that such convergence and decisive action will be essential in preserving the competitiveness of the European economy. Read more

Spain wants EU to consider carbon ‘border tax’

Spain has called on the European Commission to introduce a carbon border tax on EU’s external borders, the proceeds of which should go to the EU budget. The Spanish government calls for this discussion to take place during negotiations on a multiannual budget for the EU. Read more

 
 
 
 
 

News in brief

 
 
Guardian
 
  Tax Justice Network lists UK as one of leading global tax havens  
 
Tax News
 
  IMF warns Luxembourg that international tax reforms will threaten its tax income  
 
US
 
  Congressional study shows Trump tax reforms had only negligible economic impact  
 
European Commission
 
  Commission refers Austria to the Court for its failure to align with EU VAT rules for travel agents  
 
European Commission
 
  Commission refers Spain to the Court for imposing disproportionate sanctions for failure to report assets held abroad  
 
Council
 
  New CCTB compromise text published  
 
OECD
 
  OECD applauds major results for tax transparency under CRS  
 

This curated content was brought to you by Johan Barros, Accountancy Europe policy manager since 2015. You can send him tips by email, follow him on Twitter and connect with him on LinkedIn.

 
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