Update

Tax Policy

 Cannot read this email? Open in your browser.January 2020 
 

Tax Policy Update

9 December - 13 January

 
 
 
 

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Highlights

 
 
 
 
  • European Commission launches Green New Deal, including tax elements
  • European Parliament adopts resolution on international tax reform
  • OECD international tax reform negotiations get stormy turn
 
 
 
 
 

Feature story

 
 
 
 

International tax reform negotiations take stormy turn

OECD negotiations for international tax reform have heated somewhat in past months.

The events started with a 3 December letter from US Treasury Secretary Steven Mnuchin to the OECD, in which he expressed concerns about the mandatory nature of Pillar 1 and its deviation from established international tax rules. He suggested instead to make Pillar 1 a safe-harbour regime – effectively voluntary for countries and companies.

In his 4 December reply to Mnuchin, OECD’s Secretary-General Angel Gurría expressed concern that the US proposal might risk delaying the current deadline for finding an international agreement.

At a tax conference later in December, another US official stated that the US would decide on the optionality only once Pillar 1’s design is clearer. OECD’s Pascal Saint-Amans also hinted at the possibility of looking at the optionality once Pillar 1 architecture is agreed on.

Overall, the mood ahead of an Inclusive Framework meeting on 29-30 January is gloomier. The participants now hope to simply agree to continue discussions beyond January on the way forward, and an agreement by June 2020 looks less likely according to officials.

France and the US try to find solutions

On 7 January, the French finance minister Bruno Lemaire announced that France and the US have given themselves 15 days to find a compromise to OECD digital tax negotiations.

France has expressed its support for the OECD secretariat’s Pillar 1 proposal, whilst the US appears to be backtracking.

 
 
 
 
 

EU Developments

 
 
 
 

European Commission


European Commission launches Green New Deal with tax elements

On 11 December, the European Commission published its Green New Deal strategy (and Annex). It presents the new Commission’s roadmap for Europe’s sustainable transition.

Tax is also part of the plans. In June 2021, the Commission intends to revise the Energy Tax Directive, to align Europe’s energy tax incentives to favour green options over fossil fuels, and presumably to remove exemptions for kerosene.

Moreover in 2021 the Commission will launch a proposal on “carbon border adjustment”, possibly including a carbon border tax (CBT). Vice-President Frans Timmermans recently re-iterated the Commission’s commitment to consider a CBT, whose purpose is notably to ensure that European businesses are not at a competitive disadvantage compared to their global competitors.

 
 
 
 
 

European Parliament


European Parliament confirms positions on two anti-VAT fraud files

On 17 December, the European Parliament approved its positions on two proposals: to improve administrative cooperation in the fight against VAT fraud and to introduce new requirements for payment service providers. Both files were led in the Parliament by the MEP Lídia Pereira (EPP/Portugal).

The report on administrative cooperation was adopted by 590 votes to 19 with 81 abstentions and the report on the requirements for payment service providers by 591 votes to 18 with 86 abstentions.

The Parliaments positions are non-binding, but its opinion is needed in order for the Member States to be able to adopt the files.

European Parliament adopts its position on international tax reform

On 18 December, the European Parliament adopted a resolution on international OECD-level tax reform. The resolution passed with 479 votes in favour, 141 votes and 69 abstentions.

The resolution highlights that the international corporate tax reform should fit the EU single market, and safeguard a level playing field for all firms, especially SMEs.

The resolution welcomes developing a new nexus that goes beyond physical presence, suggests for this nexus to include all firms that interact with customers and users in a country, proposes country‑specific revenue thresholds and highlights the benefits of CCCTB.

The resolution does not, however, propose a minimum tax rate linked to Pillar 2, despite earlier efforts by some political Groups such as S&D to include one in the text

Commissioner Gentiloni discusses international tax reform with MEPs

Prior to the vote (see above), MEPs discussed international tax reform with Commissioner Gentiloni.

According to the Commissioner, the Commission’s initial impact assessment shows that the EU “as a whole” would benefit from Pillar 1, and all EU member states from Pillar 2. The Commission also requested EU member states to give their CBCR information in order to help refine its impact assessment.

The Commissioner the EU will consider Europe-only measures if no international agreement emerges in 2020.

MEP Markus Ferber (EPP/Germany) emphasised the need for international solutions and urged the EU to put an end to its own “tax havens”. Irene Tinagli (S&D/Italy) criticised the existing international tax system for increasing inequalities, whilst Luis Garicano (RE/Spain) said it is unfair that multinationals pay less taxes than SMEs.

 
 
 
 
 

Council


Germany publishes new compromise text on FTT

On 9 December, Germany proposed a new financial transaction tax (FTT) compromise, in an attempt to unlock the stalling negotiations.

The text remains close to the French model, with a 0,2% tax rate and limited to buying or selling of shares of listed companies with a market capitalisation of over EUR 1 billion.

Newer elements include excluding IPOs and leaving it to each country to decide whether to tax private pension products – a key demand of Belgium.

The German proposal was criticised from the left for not going far enough whilst the right fears that the FTT would hamper investment.

The ten EU countries negotiating on FTT have yet to agree on how the tax yields would be divided between them. Read more

Member states adopt proposal to exempt EU defence efforts from VAT

On 16 December, EU member states adopted the Commission’s proposal to grant VAT exemptions for EU defence cooperation under the Common Security and Defence Policy (CSDP).

The text as agreed by EU member states introduces no significant changes to the Commission proposal. The text only makes clarifications and specifies that the exemptions should not cover civilian missions under the CSDP.

Finnish Presidency amends public CBCR Directive to address legal base concerns

Before ending its term in December 2019, the Finnish Presidency of the Council proposed changes to the public country by country reporting (CBCR) proposal in an attempt to address concerns on the text’s legal basis. In practice, this means removing as many references to the provision’s tax impacts.

The changes include, notably, removing references to the potential of CBCR data in transfer pricing risk assessments, and additional wording to emphasise that the measure aims to increase corporate transparency towards investors, creditors and the general public.

Croatia, which started its six-month Council Presidency in January 2020, has shown no intentions to advance the file during its term. Read more

Croatian Presidency publishes its priorities, including on tax

Croatia began its six-month rotating Council Presidency in January 2020, and published its work priorities.

For tax, there are very few concrete commitments. The Presidency will work towards a “modern tax system” that is “based on transparent, efficient and sustainable taxation procedures” and legal certainty.

It will also “continue discussions on priorities and further steps to be taken in the area of direct and indirect taxation”.

According to a provisional timetable, Croatia plans a debate between EU finance ministers on VAT definitive regime and VAT rates reform at the 17 March ECOFIN. A progress report or policy debate on CCCTB is planned for the 19 May ECOFIN. Read more

 
 
 
 
 

CJEU – Rulings


C‑707/18: Taxing transactions for the transfer of ownership of immovable property

C‑389/18: Deduction of dividend distributed from a parent company’s tax base

C‑715/18: Reduced VAT rate to the letting of places on camping or caravan sites

 
 
 
 
 

International Developments

 
 
 
 

Shell publishes country-by-country tax report

On 17 December, Shell published voluntarily its country-by-country reporting (CBCR) data for 2018. The CBC report includes information such as corporate taxes paid and revenue earned in 98 countries where the company has a taxable presence.

The report shows that Shell paid approximately $10.1 billion in corporate taxes in 2018. It received the most revenues from the US, with $191 billion. Its second highest revenue came from Singapore, earning $143 billion there. Read more

 
 
 
 
 

National Developments

 
 
 
 

UK FRC restricts provision of tax advice by audit firms

On 17 December, the UK Financial Reporting Council (FRC) published updated ethical standards for audit firms. In its updated standards, FRC prohibits audit firms from providing a number of advisory services to listed companies and financial institutions, in an effort to strengthen auditor independence. This also includes further prohibitions to give tax advice to such clients. Read more

France and EU warn US against digital tax retaliation

France and the US are in an escalating disagreement concerning France’s recently adopted new tax applicable to large digitalised businesses. The US argues that the French tax unfairly targets US businesses, and is considering trade sanctions in retaliation.

The situation is threatening to evolve into a full-fledged trade war between the US and Europe. Both France and the EU have warned the US that any retaliatory trade sanctions on French products could be met by EU-wide counter-sanctions.

 
 
 
 
 

In brief

 
 
Euractiv
 
Premier of Bermuda: ‘Global minimum tax is anti-competitive’
 
Euractiv
 
France ready to take Trump’s tariff threat to WTO
 
European Parliament
 
European Parliament publishes factsheet on recent VAT in e-commerce legislation
 
MNE Tax
 
Netherlands publishes first summaries of private tax rulings issued to MNE groups
 
Council
 
Council publishes further details on EU defensive measures against tax havens
 
Tax News
 
UK Conservative government to introduce digital tax from April 2020
 
Lexology
 
Turkey Introduces New "Digital Service Tax"
 
European Commission
 
Commission publishes updated guidelines of the VAT Committee
 
Financial Times
 
A fair and simple way to tax carbon emissions
 
Tax Justice
 
Austrian Parliament votes to force government to support EU public CBCR
 
European Commission
 
Commission publishes explanatory notes to 2020 VAT Quick Fixes
 
The Guardian
 
Google says it will no longer use 'Double Irish, Dutch sandwich' tax loophole
 
Tax News
 
Netherlands updates its tax blacklist
 
Tax News
 
EU’s ATAD 2 enters into force from January 2020
 
OECD
 
OECD publishes Peer Review Reports on Exchange of Information on Tax Rulings
 
OECD
 
OECD releases further CBCR guidance for tax administrations and MNE Groups
 
OECD
 
New OECD tool for tax administrations to tackle tax debt and administrative burdens
 
MNE Tax
 
Spain plans to move ahead with a digital tax despite US threats of retaliation
 
Euractiv
 
Czech Republic reportedly not to introduce VAT reverse charge mechanism after all
 
Bloomberg
 
Consensus in Germany that CO2 taxes are not high enough
 
Euractiv
 
EU carbon border tax cheaper and fairer than French energy levy, says report
 
Tax News
 
Austria Publishes Digital Tax Guide
 
 
 

Events

 
 
29/01/2019
 
GRI Tax Standard webinar - GRI
 
13/02/2019
 
The collaborative economy - data exchange with tax authorities - EESC
 
19/02/2020
 
Tax Day 2020 – Accountancy Europe
 

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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