Update

Tax Policy

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

Tax Policy Update

27 January - 10 February

 
 
 
 

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Highlights

 
 
 
 
  • OECD Inclusive Framework agrees on next steps for international tax reform
  • European Commission publishes work programme 2020 with tax measures
  • European Parliament’s upcoming tax Committee to be chaired by S&D
 
 
 
 
 

Feature story

 
 
 
 

Inclusive Framework agrees on way forward on international tax reform

The OECD’s Inclusive Framework – representing 137 countries and jurisdictions – has agreed on a way forward for international tax reform.

At their meeting in end-January, the Inclusive Framework adopted a political declaration, including an outline of the architecture of a unified approach to Pillar 1 with a revised work programme, and a note on progress on minimum taxation under Pillar 2.

The agreed approach to Pillar 1 is inspired by the OECD secretariat’s proposal for a unified approach from October 2019. However, the Inclusive Framework’s document includes more details on the planned scope, underlining that the new rules would apply to undertakings in direct contact with consumers and to automated digital services.

The scope excludes extractive industries such as mining, and the document argues that most financial services activities would also not be covered as they are not necessarily customer facing.

The document also outlines some of the outstanding political issues of Pillar 1, including the US safe harbour proposal which would make the new provisions optional for businesses. However, this proposal has not received much support from other countries. Another outstanding issue is the question of binding arbitration.

The OECD’s Pascal Saint-Amans also admitted that the recent momentum for an agreement has been increased by the threat of trade wars, such as the one that almost erupted between the US and France over the French national digital tax.

The Inclusive Framework hopes to reach an agreement on the key features of the reforms at its meeting on 1-2 July in Berlin. Read more

 
 
 
 
 

EU Developments

 
 
 
 

European Commission


Vestager re-iterates unilateral EU action if the OECD fails to agree on digital taxes

The Commission’s Executive Vice-President Vestager in charge of digitalisation has re-iterated that she would support EU member states’ national unilateral measures on digital taxation, should the OECD fail to reach an agreement this year.

In this context, Spain, France, Italy and the UK have declared that they would proceed with their respective national digital tax plans in such a scenario.

These intentions add pressure on the OECD’s Inclusive Framework to agree on common international rules, lest see the rise of a patchwork of national rules and potential trade conflicts.

European Commission publishes Work Plan 2020

On 29 January, the European Commission published its work programme for 2020, indicating the new policy proposals and Communications to be expected in 2020. For tax, two items to note:

  • non-legislative communication on business taxation for the 21st century, focusing on the tax aspects of the Single Market, in Q1 2020
  • a legislative proposal and action plan on the fight against tax evasion and to make taxation “simple and easy”, also in Q1 2020

Reportedly, both are to be expected on 25 March but this is to be confirmed.

The work programme also specifies that definitive VAT, C(C)CTB and public CBCR continue to be the Commission’s priorities for the year. Read more

Commission publishes Tax Policies in the EU Survey

The European Commission has published its latest tax policies in the EU survey.

The survey examines how EU member states’ tax systems perform in terms of fighting tax abuse, promoting sustainable investment, supporting job creation and employment, and mitigating inequalities. Read more

Commission plans to evaluate VAT rules for travel agents

The European Commission intends to evaluate the effectiveness of the current special VAT rules for travel agents; including the so-called margin scheme. A public consultation will be launched on the topic in March. Should the evaluation process demonstrate the need for reform, the Commission may propose amendments to existing rules. Read more

 

 
 
 
 
 

European Parliament


EU could use carbon border tax against Brexit Britain, warns MEP

The Chair of the European Parliament’s ENVI Committee, Pascal Canfin (RE/France) has suggested that the EU could use the planned carbon border tax (CBT) against the UK after Brexit. He argues that deploying the CBT against the UK might be necessary if the country’s environmental standards do not match those of the EU’s, thus risking leaving European businesses at an unfair disadvantage.

The European Commission is currently conducting a feasibility study on the CBT, the results and conclusions of which should not be expected before end-2020 at earliest. Read more

European Parliament’s upcoming permanent tax Committee to be chaired by Socialists

Discussions are continuing on setting up a permanent subcommittee on taxation in the European Parliament. The areas of competence for the Committee are still open and will be resolved in the next few weeks. One of the big outstanding questions on this is whether or not AML should also be in the tax Committee’s scope.

However, reportedly the political Groups have now agreed that the Committee should be Chaired by the S&D group. The Committee would be made up of 30-35 MEPs from the ECON Committee.

The Parliament’s Conference of Presidents is currently expected to give a final decision on setting up the Committee in March. If confirmed, the new Committee could start its work in May.

 
 
 
 
 

MEP Questions and Answers


Commission is evaluating Administrative Cooperation Directive and may consider “possible actions” for follow-up

  • question by MEP Maria Grapini (S&D/Romania)
  • reply by Commissioner Gentiloni

Commission confirms a donation given free of charge to a charitable organisation is outside the scope of VAT

  • question by MEP Marco Zanni (NI/Italy)
  • reply by Commissioner Gentiloni

Commission reflects measures against tax evasion, to reinforce exchange of info and address digitalisation

  • question by MEP Monika Beňová (S&D/Slovakia)
  • reply by Commissioner Gentiloni

Commission ready to act alone on digital tax and believes no EU country qualifies as a tax haven

  • question by MEP Dimitrios Papadimoulis (GUE-NGL/Greece)
  • reply by Commissioner Gentiloni

Commission will assess impact of ending aviation kerosene tax exemption and consider mitigating measures

  • question by MEP José Ramón Bauzá Díaz (RE/Spain)
  • reply by Commissioner Gentiloni

 

 
 
 
 
 

International Developments

 
 
 
 

US threatens retaliation against EU over carbon tax

As things are starting to calm down between France and the US in their clash over the French digital tax, a new trade war and tax front may be opening.

The Trump administration has warned that a prospective EU carbon border tax (CBT) could be met by trade sanctions by the US. CBT’s purpose is to protect European businesses from competition from third countries whose environmental standards do not meet the EU’s.

The European Commission is expected to publish further details on its thinking and approach to CBT towards the end of this year. Read more

 
 
 
 
 

News in brief

 
 
International
 
FT opinion: international agreement on digital taxes needed but don’t abandon unilateral measures
 
International
 
OECD and IOTA join forces in promoting stronger tax systems
 
International
 
Taxamo publishes overview of digital indirect tax regimes from across the world
 
International
 
Financial Times believes that EU’s carbon border tax is risky but needed
 
National
 
Slice of Apple’s Irish Tax Billions Goes to Other Countries
 
National
 
EY hit with €95m claim over links to German bank in tax scandal
 
Council
 
Code of Conduct Group publishes work programme for Croatian Presidency mandate
 
National
 
Danish tax agency demands nine foreign banks repay
 
International
 
OECD launches public consultation on country by country reporting (CBCR)
 
National
 
Poland proposes 7-point action plan to fight against tax avoidance in the EU
 
 
 

Events

 
 
13/02/2020
 
The collaborative economy - data exchange with tax authorities - EESC
 
19/02/2020
 
Tax Day 2020 – Accountancy Europe
 
17/02/2019
 
The future of taxation in the EU: tax solidarity – Bruegel
 

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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