Update

Tax Policy

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

Tax Policy Update

November

 
 
 
 

EC's green tax consultations

 
 
 

We have responded to the EC's consultations on the revision of the Energy Taxation Directive (ETD) and the carbon border adjustment mechanism (CBAM).

 
 
 
 
 

Q&A: VAT, customs duty and Brexit – prepare now

 
 
 

A Q&A providing practical information on the main changes known so far regarding Brexit.

 
 
 
 

Highlights

 
 
 
 

  • Commission Work Programme for 2021 indicates tax initiatives ahead
  • European Parliament’s new tax Committee (FISC) kick-starts work with hearings and draft resolution
  • EU member states adopt common positions on several tax files in latest Council Conclusions
  • OECD work on Pillars 1 and 2 postponed to mid-2021, European Commission warns last deadline

 
 
 
 
 

EU Developments

 
 
 
 

European Commission


Commission publishes its Work Programme for 2021

According to the European Commission’s Work Programme for 2021 published on 19 October, the following items should be expected for tax by June 2021 at latest:

  • A “digital levy” and proposal for digital levy as an EU own resource
  • Revision of the Energy Tax Directive (ETD)
  • Carbon Border Adjustment Mechanism (CBAM) proposal for it as an EU own resource

Moreover, according to the Work Programme’s annexes, the familiar buzzwords public country by country reporting (CBCR), financial transaction tax (FTT) and the common consolidated corporate tax base (CCCTB) will continue to be the Commission’s priorities. Read more

Commission publishes roadmap on VAT for financial services

The European Commission’s roadmap published on 22 October presents what is to be expected for the Commission’s upcoming legislative package concerning VAT for financial services. The Commission highlights that current VAT rules for financial and insurance services are criticised for being complex, difficult to apply and not having kept pace with the development of new services in the sector. This seems to have led to:

  • lack of VAT neutrality (businesses being unable to reclaim VAT associated with financial and insurance services)
  • legal uncertainty for businesses
  • high administrative and regulatory costs

The initiative will aim to address these issues by modernising how VAT is applied in the sector. The Commission will launch a public consultation in the first quarter of 2021, followed by the legislative package in the fourth quarter of 2021. Read more

Communication on business tax for 21st century postponed to early-2021

This is what DG TAXUD’s Reinhard Biebel confirmed when speaking at the 29 October SDG Summit organised by CSR Europe. Mr. Biebel also confirmed that the Communication would include “other points” than merely digital taxation. Read more

Commission challenges several EU countries for breaching tax rules

In its October infringements package, the Commission announced that it has referred the following EU countries to the Court of Justice of the EU:

  • Greece for its income tax rules for businesses that discriminate against foreign branches
  • Netherlands for its rules on the cross-border transfer of pension capital and cross-border provision of pensions
  • Belgium due to its rules on the tax deductibility of alimony payments for non-residents
  • Poland for its rules depriving medicine producers of excise duty exemptions

In the infringements package, the Commission also issued warnings to several other member states for suspected breach of EU tax rules. Read more

European Commission publishes details of upcoming initiative on tax administrative cooperation on crypto-assets and e-money

On 24 November, the European Commission published an Inception Impact Assessment on the upcoming revision of the Directive on Administrative Cooperation (DAC8). The revision aims to improve cooperation between national tax authorities, particularly in emerging areas such as crypto-assets. This initiative should provide tax administrations with information to identify taxpayers who are actively using new means of exchange, notably crypto-assets and e-money, in order to curb tax fraud and evasion.

Stakeholders have until 21 December to provide feedback on the Inception Impact Assessment. A more comprehensive public consultation is scheduled for first quarter of 2021, followed by the proposal in the third quarter of 2021. Read more

 
 
 
 
 

European Parliament


FISC Committee holds hearing on international tax reform

On October 28, the new FISC Committee of the European Parliament held a hearing with the Commission and OECD on international tax reform.

At the hearing, OECD’s Pascal Saint-Amans pointed to the (now confirmed) Biden administration and that it might take until March for the OECD to find out what its stance on Pillars 1 and 2 are. He did point out that both political parties in the US have said that they would retaliate in case of unilateral digital taxes. Mr. Saint-Amans also argued that EU countries could already go ahead with Pillar 2, and that it is understandable that the OECD work is delayed by a few months given COVID and the US elections.

DG TAXUD’s Benjamin Angel contended that OECD needs time until mid-2021, but that this would be the last deadline for the European Commission. Answering to a question by MEP Marek Belka (S&D/Poland), he also underlined that the Commission will need a new own resource based on digital tax income.

FISC Committee publishes details of work ahead

European Parliament’s FISC Committee has published its work plan for the months ahead. According to the work plan, notably the following are to be expected:

  • Non-legislative own initiative reports on EU Code of Conduct, digital taxation and sustainable tax system in a post-COVID context
  • Legislative own initiative report on the Commission’s July tax Action Plan with its 25 announced policy actions
  • Implementation report on the VAT Directive and VAT gap
  • Studies on harmful tax practices in the EU, the risks and benefits of technology in tax, evaluation of EU’s tax Directives and more

Read more

FISC Committee discusses role of tax policies in COVID recovery

On 16 November, European Parliament’s FISC Committee held a hearing on the role of tax policies in post-COVID economic recovery. The hearing hosted as external speakers Grace Perez Navarro from the OECD, Joaquim Miranda Sarmento, Professor at the University of Lisbon and Liina Carr, ETUC Confederal Secretary.

At the hearing, Ms. Navarro emphasised that governments will have to look at different angles of tax policy to support post-COVID recovery, ranging from fighting tax avoidance to environmental and labour taxation. Professor Sarmento called for tax support measures for SMEs, and to create minimum and maximum corporate tax rates (25%-50%). Ms. Carr among other measures underlined the importance of public country by country reporting (CBCR).

In their reactions, FISC MEPs stressed the need to reduce the tax burden on SMEs, shifting it instead to those who can and should pay more taxes. The discussion thus focused on ways to develop the financial transactions tax (FTT), recalibrate corporate taxation and develop green taxes. Read more

FISC publishes motion for resolution on EU list of tax havens

FISC Committee has published its first draft motion for resolution, prepared by the Committee Chair MEP Paul Tang. The resolution, which focuses on the EU list of “tax havens”, laments the removal of jurisdictions such as Cayman Islands from the EU list. It also calls for EU member states to be subjected to the same criteria than the ones set for third countries.

The draft resolution will be subject to further amendments, and will be voted in the ECON Committee (under which FISC Committee functions) on 12 December. The resolution is legally non-binding. Read more

 
 
 
 
 

MEP questions & answers


Commission clarifies what methodology it used to calculate EUR 10 billion revenue estimation for Single Market Tax

  • Question by MEP Marc Botenga (GUE-NGL/Belgium)
  • Reply by Commissioner Hahn (budget)

Commission estimates tax revenue losses in the EU due to tax avoidance and VAT gap

  • Question by MEP Carmen Avram (S&D/Romania)
  • Reply by Commissioner Gentiloni

 
 
 
 
 

Council


Council publishes Conclusions on digital taxation, no firm commitment for stand-alone EU initiatives

The Council’s draft Conclusions, adopted on 27 November, focus on tax challenges from digitalisation, economic recovery and taxation, and tax good governance. They constitute EU member states’ positions on the various tax questions, and include the following:

  • Commission should put forward proposals for a “digital levy”, carbon border adjustment mechanism (CBAM) and possibly a financial transaction tax (FTT)
  • Underlines that indirect taxation can be used to support the green transition
  • European Council will evaluate the situation with OECD international tax reform negotiations in March 2021, but refrains from committing to EU-only proposals
  • On VAT, welcomes the Commission’s intention to modernise reporting obligations for cross-border transactions within the EU and to examine the need to further harmonise reporting obligations for domestic transactions. Also highlights the use of new technologies to improve efficiency of reporting

Read more

EU member states reach agreement on DAC 7

EU member states have reached a consensus on the Commission’s latest amendment to the Directive on tax administrative cooperation (DAC 7).

The Council text retains the main elements of the Commission’s initial proposal, which establishes an obligation on digital platforms to report once a year to tax authorities all revenues generated by vendors or service providers through their platforms.

The EU Council text specifies that the reporting obligation should cover both cross-border and non-cross-border activities, and maintains that the reporting obligation would apply to all platforms regardless of their legal nature, with the exception of government entities.

The Council also proposes to postpone the application of DAC 7 by 1 year – from 1 January 2023. Council agreement

 
 
 
 
 

International Developments

 
 
 
 

OECD says no deal in 2020, launches consultations on Pillars 1 and 2

In a statement issued on 12 October, the OECD announced that an agreement on international tax reform (including digital taxation) would be postponed until mid-2021. The negotiations failed to reach their initial timeline due to COVID and continued US insistence on its safe harbour proposal for Pillar 1.

Despite the timeline setbacks, G20 finance ministers already committed to further work with the aim of reaching an agreement by the mid-2021 deadline. Ahead of the G20 meeting, the OECD also published a report on its latest tax work progress. The report provides insights on the state of negotiations.

Finally, the OECD also published its blueprints for Pillar 1 and Pillar 2 and launched a public consultation on them, with a deadline of 14 December.

 
 
 
 
 

National Developments

 
 
 
 

France reinstates digital tax, courting trade war

On 14 October, French finance minister Bruno Lemaire announced that France will begin collecting tax on big digital companies this year after international talks failed to agree on a global levy.

“With the US it has always been clear,” Bruno Le Maire said in a call with reporters after a virtual meeting of G20 finance officials.

“If there was no agreement at the OECD [Organization for Economic Cooperation and Development] in the autumn, we would levy our national tax,” he added. “There has never been any ambiguity on the subject.” On 25 November, France confirmed that it will levy a tax on digital giants before Biden administration takes office Read more/Read more

 
 
 
 
 

News in brief

 
 
European Parliament
 
Senior French MEP goes on hunger strike to protest EU budget deal
 
European Commission
 
Commission publishes latest VAT Guidelines
 
International
 
OECD releases new methodology for the peer review of BEPS Action 13
 
International
 
COVID-19 and the climate crisis: Combining green budgeting and tax policy tools for a better recovery
 
International
 
OECD publishes report on taxation of virtual currencies
 
International
 
Transparency International report highlights tax practices of banks based on CBCR data
 
International
 
ECOFIN publishes report sent to heads of EU governments on tax work progress in the Council
 
International
 
Code of Conduct Group publishes report sent to heads of EU governments on tax work progress
 
International
 
OECD and Eurasian officials meet to discuss latest developments in international tax
 
International
 
OECD delivers on tackling harmful tax practices, as a further set of preferential tax regimes are dismantled or tightened (BEPS Action 5)
 
International
 
OECD publishes Mutual Agreement Procedure Statistics for 2019
 
International
 
US Tariffs Poised to Hit Austria, India, Italy on Digital Tax
 
National
 
Netherlands to introduce an aviation tax from January 2021
 
European Parliament
 
European Parliament adopts opinion on the identification of taxable persons in Northern Ireland
 
European Parliament
 
European Parliament approves temporary VAT exemption for Covid-19 vaccines and test kits, still to be approved by Council
 
European Commission
 
Compliance, cooperation and crisis management top agenda of Tax Administration summit
 
International
 
OECD report: Governments should strike balance between encouraging philanthropy through tax support and ensuring effective public policy
 

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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