EP publishes draft report on fair and simple taxation
The draft report, prepared by MEP Ludek Niedermayer (EPP/Czech Republic), is a response to EC’s package on fair and simpler taxation published in July 2020.
The non-binding draft report welcomes EC’s initiative for cooperative compliance and includes strong calls for simplifying SMEs’ tax compliance burdens and costs. It also calls for “the formalisation” of the Charter of taxpayers’ rights. Other recommendations include a call for a single EU VAT registration procedure and number, a definition of tax residency and a harmonised EU e-invoicing standard.
An ECON Committee vote is currently scheduled for 13 January 2022, and the Plenary vote for 14 February.
FISC Committee hearing on technology in tax
On September 30, the EP’s FISC Committee held a workshop on a study on ‘The risks and benefits of technology in the tax area: from modernisation of tax systems to increased risks of fraud’.
During their presentations, the attending experts stressed that tax administrations stood to benefit on the whole from increased digitalisation of tax systems. An example was the use of blockchain technology to streamline systems and combatting fraud in areas such as withholding tax and VAT.
However, such a comprehensive change would also entail risks, with the guest speakers underlining the importance of ensuring high quality, interoperable data when it came to risk mitigation. This is in addition to the need for harmonisation of approaches to digitalisation of tax systems at the EU level. Recording
EP debates Pandora Papers
In light of the Pandora Papers (see article below), European P’s Plenary held a discussion on the efforts to combat money laundering, tax evasion and avoidance.
Many MEPs pointed out that yet another scandal shows that the efforts made so far haven’t been enough. They also heavily criticised the Council for removing three jurisdictions from the EU blacklist despite the most recent scandal. A number of MEPs also pointed to deficiencies in implementation of the current rules, regretted the lack of political will to put a stop to these practices, and some called for the end of the unanimity vote in the Council on tax matters.
Other issues discussed included the role of shell companies as well as of intermediaries. Read more
EP adopts position on reform of EU’s policy framework against harmful tax practices
EP Plenary adopted on 7 October a draft report on harmful tax practices and reform of the EU’s Code of Conduct Group, drafted by the MEP Aurore Lalucq (S&D/France). The resolution was adopted with 506 votes in favour, 81 votes against and 99 abstentions.
The day before, the EP debated the draft report. Many MEPs called for the imposition of a harmonised corporate tax rate in Europe, ambitious reform of the Code of Conduct working group and more transparency on the criteria used to assess which countries should be included on the EU’s blacklist of tax havens.
Commissioner Gentiloni lamented that the Code of Conduct Group reform was not proceeding fast enough. This is, according to him, due to a minority of EU member states dragging their heels. Read more
FISC hearing on the implementation of the 6th VAT Directive
FISC Committee discussed on 11 October the draft report on the implementation of the 6th VAT Directive, prepared by the MEP Olivier Chastel (Renew Europe/Belgium).
During his introductory remarks, Mr. Chastel remarked that the study on which his report was based held that the current VAT system across Europe is complex, costly, and allowed for a great deal of fraud to take place. In this regard, a definitive and simplified VAT system was needed which tended towards the implementation of one standard VAT rate. He also noted that compliance costs were around 2.5% of company turnover and thus were a heavy burden on taxpayers.
ECON Committee is scheduled to vote on this non-binding report on 1 December, followed by a Plenary vote on 17 January 2022.
FISC Committee holds 2 hearings on impact of national tax regimes on the EU
Both hearings took place on 11 October. The first hearing was organised with a panel of experts for information gathering purposes. The second hearing was to discuss a draft report prepared by MEP Markus Ferber (EPP/Germany) on the same topic (see last TPU edition).
During the first hearing, MEPs heard from guest speakers – including a Commission representative – that countries should implement changes to taxation policy which would support growth and investment, and thus foster a sustainable economic model with broader social support systems. They emphasised that EU member states do not make their tax policies in a vacuum and there are spill-over effects cross-border. There should be as much coordination as possible between countries on taxation, the speakers underlined.
At the second hearing, Mr. Ferber stated that, while tax remained a national competence, Member States should be encouraged to better coordinate tax matters for the benefit of the EU as a whole, a stance that was echoed by several members who took the floor. A Committee vote on the non-binding report is scheduled for 6 December, followed by a Plenary vote on 17 January.
Draft report on withholding taxes published, hearing on 27 October
The draft report was prepared by the MEP Pedro Marques (S&D/Portugal). The report, most interestingly, calls on EC to propose a “harmonised EU procedure for withholding tax refunds”. It also emphasises that “digitalising these procedures and improving cooperation between national tax administrations could reduce the administrative burden and uncertainty in cross-border investments”.
On 27 October, FISC Committee held a public hearing on the same topic, to help inform the EP’s work. Paul Gisby represented Accountancy Europe in the expert panel.
EP debates OECD reforms
EP Plenary debated on 20 October the global tax reform agreements reached by the OECD Inclusive Framework.
At the hearing, Commissioner McGuinness confirmed that the Commission’s DG TAXUD is already working on a Pillar 2 Directive (which, depending on OECD’s progress on the model rules, might be proposed by the Commission on 22 December this year, Ed.). For Pillar 1, the EC will aim to “ensure a consistent and comprehensive implementation” at EU level.
Several MEPs expressed enthusiasm for the historic agreement and called on Member States to cooperate in its implementation. Others, like MEP Ludek Niedermayer (EPP/Czech Republic), underlined that while the agreement is a great demonstration of international cooperation, other challenges in the tax system also remain. He mentioned, for example, the big VAT gap, compliance costs for SMEs and complications for businesses that want to operate in the EU Single Market. Recording
EP adopts Resolution calling for changes in light of Pandora Papers
The resolution was adopted in Plenary on 21 October with a large majority of 578 in favour, 28 against and 79 abstentions.
Although legally non-binding, the resolution gives a strong indication of the current ‘mood’ inside the Parliament on the topics that it covers. Some of its key tax provisions include:
- Denouncing the EU list of non-cooperative jurisdictions for being ineffective, for it to become more transparent and the criteria to be reinforced
- Calling on the Commission to expand the scope of DAC 6
- Calling on the Commission to ensure UK alignment with standards on taxation and money laundering
- Calling on the US to join the Common Reporting Standard (CRS) and for its role to be considered in the EU list
FISC hearing with Slovenian Parliament’s representatives
Members of the EP’s FISC Committee exchanged views with Members of the Finance Committee of the Slovenian Parliament. Two sessions provided the opportunity for representatives from both the Slovenian and the European Parliament to present their views on the two-pillar reform driven by OECD, and the expectations regarding the introduction of an EU digital levy.
The meeting took place in the context of the FISC Subcommittee’s willingness to enhance the cooperation and interaction between the European Parliament and national Parliaments. Read more
EP discusses LuxLeaks scandal
The hearing, in FISC Committee, took place on 28 October and brought together a panel of experts including EC representatives, as well speakers from Le Monde and PwC.
EC commented on the so-called tacit approval letters at the heard of LuxLeaks and said that it is currently analysing explanations provided by Luxembourgish authorities. At this stage, it is not clear to EC that the tacit approval letters could provide the level of legal certainty that ‘standard’ tax rulings do.
EC also confirmed that it is currently reflecting on further changes to the Directive on administrative cooperation (DAC) in light of the more recent Pandora Papers. Read more