Tax Policy Update

• European Parliament publishes study on tax advice regulation in Europe
• Czech finance minister aims for Pillar 2 deal in October
• Germany’s Olaf Scholz says unanimity rule for tax decision-making in the EU should be scrapped
• US successfully adopts its minimum tax bill but potentially incompatible with OECD Pillar 2

European Commission

Commission launches VAT infringements against 5 Member States

The European Commission (EC) announced in its 20 July infringements package that it is sending a letter of formal notice to Belgium, Greece, Spain, Austria and Portugal since they have not transposed the value-added tax (VAT) Directive by the deadline of 30 June 2022. This relates, specifically, to the new rules on the VAT and excise duty treatment of defence efforts undertaken within the EU and within the NATO umbrella. Read more

European Parliament

FISC hearing on tax incentives and exemptions

The public hearing took place on 11 July, and was titled “The role of tax incentives and exemptions in the framework of the reform of corporate taxation and in the promotion of European economies’ competitiveness”. The purpose of the hearing was to gather insights and opinions from experts on the effectiveness and economic relevance of tax incentives for investment. This included, in particular, tax-free zones in the EU, as well as discussing incentives’ effect on the competitiveness of Member States and the Single Market as a whole. A background brief was also prepared by the Parliament’s services for the hearing.

ECON Committee hosts Czech finance minister

The hearing with the Czech finance minister took place on 13 July and focused on the Czech Council Presidency’s priorities in financial affairs and taxation. Most notably, he told the Committee on Economic and Monetary Affairs (ECON) MEPs that his Presidency will aim for an agreement on the EC’s Pillar 2 proposal in October. The finance minister was also reluctant about using enhanced cooperation for the proposal, and said there are more pressing priorities to deal with than the unanimity on tax files question. Read more

FISC publishes study on regulation of tax advice

The much anticipated study was finally published on 2 August. It was commissioned by the Subcommittee on Tax Matters (FISC) to inform their work on the topic.

The study provides an overview of tax intermediaries’ regulatory landscape and presents a comparative analysis of five countries – Germany, Ireland, the Netherlands, Italy and the UK. It shows that many professions provide tax advisory services, including tax advisers, lawyers, accountants, bankers and wealth managers, and that many disparities exist between countries.

The study also underlines that tax advice will always involve professional judgment that cannot be replaced by additional reporting obligations or technology. Read more

US considering fixing FATCA issue, PETI Committee delegation hears

Some US lawmakers are reportedly considering changing its Foreign Account Tax Compliance Act (FATCA) rules that affects in particular so-called ‘accidental Americans’. This is what a European Parliament PETI (petitions) Committee delegation to the US was told in July. However, whether the US government will change the rules to reflect the political desire of the lawmakers remains uncertain. Read more

Council

Germany’s Olaf Scholz calls for end to tax unanimity in EU decision making

The Chancellor spoke at the Prague University on 29 August, where he outlined his vision for the future of the EU. He emphasised that before the EU can enlarge even further, it must change its governance and decision-making procedures to ensure that it does not become paralysed with a larger membership. In this light, Scholz argued that for example the unanimity rule for tax decision-making should be scrapped. Read more

Multilateral Convention to implement Pillar One on track for delivery by mid-2023

Implementation of the international tax reform agreement to ensure multinational enterprises pay a fair share of tax wherever they operate is progressing, according to a report by the Organization for Economic Cooperation and Development (OECD) delivered to G20 finance ministers and central bank governors ahead of their meeting in July.

The Inclusive Framework will aim to finalise a new Multilateral Convention by mid-2023, for entry into force in 2024. This revised timeline, previously flagged by OECD Secretary-General Mathias Cormann and agreed by the Inclusive Framework is designed to allow greater engagement with citizens, business and parliamentary bodies which will ultimately have to ratify the agreement. Read more

EESC publishes two new tax opinions

The European Economic and Social Committee (EESC) published on 15 July its opinions on two tax files. The first one is about the taxation of teleworking in the EU, whilst the second one is on digital taxation.

Whilst EESC has no legislative powers on taxation (or indeed any other EU policy areas), it does have to be consulted on the matters. Moreover, EESC’s reports are the outcome of discussions between its members, bringing together civil society, trade unions and industry, as well as input from experts in the field.

Spain announces windfall tax on energy, finance firms to ease inflation pinch

A multi-billion-euro windfall tax for finance and energy firms to offset the toll of inflation was announced by Prime Minister Pedro Sánchez on 12 July. The extraordinary tax measure will be applied to financial entities in 2022-23 and energy firms in 2023-24 to bring in EUR 7 billion, including EUR 1.5 billion from the banking sector and EUR 2 billion from large energy firms each year. Read more

US to move ahead with minimum corporate tax

US House of Representatives approved on 12 August the Inflation Reduction Act of 2022 (IRA), which also includes a new minimum tax framework for corporations. US Senate already approved the bill on 7 August by a narrow 1-vote majority.

However, the design of the US minimum tax reportedly falls short of the OECD Pillar 2 framework and might even be “at odds” with how the agreement would work elsewhere. Read more