FISC Committee discusses draft report on Pandora Papers
FISC Committee MEPs discussed the draft report on Pandora Papers on 9 January. MEP Niels Fuglsang (S&D/Denmark) prepared the draft. 183 amendments have been tabled to the draft report, and the political Groups have been in active negotiations to find compromises.
“The important thing is that we get a compromise supported by preferably a broad majority of this house where we come with some recommendations and some strong ideas for how we can fight this tax haven structure”, outlined MEP Fuglsang at the hearing. MEPs from the other political Groups wished for stronger information exchange provisions to avoid ‘naming and shaming’.
The vote in ECON Committee was initially scheduled for 31 January but has been postponed to 1 March.
FISC hears from experts on Single Market distortions linked to personal income tax
FISC hosted a group of experts to discuss potential distortions to the Single Market due to personal income tax (PIT), challenges for SMEs, and risks of harmful tax competition at the hearing on 9 January.
Achim Pross, Acting Deputy Director of the OECD Centre for Tax Policy and Administration, acknowledged the long-lasting neglect of the PIT issue in favour of corporate taxation. However, PIT also impacts the territory’s attractiveness, especially nowadays with the mobility of workers and remote working.
Sarah Godar, a researcher at the EU Tax Observatory, stated that since 1995 the number of preferential PIT regimes targeting foreigners has increased from 5 to 29 in the EU. These regimes consist of tax deductions.
200,000 people in the EU benefit from preferential tax regimes. “This is problematic because it undermines tax collection on revenue as a whole in the EU,” she explained. Ms Godar estimated this loss at EUR 4.5 billion per year. She noted tax regimes became more aggressive after the 2008 financial crisis.
Strong disagreements on DEBRA proposal in ECON
ECON Committee hearing on 12 January demonstrated a large variety of views from MEPs on EC’s proposal for a debt-equity bias reduction allowance (DEBRA). MEP Ludek Niedermayer (EPP/Czech Republic) prepared the Parliament’s opinion.
While the EPP and Renew Europe groups are in favour, the Greens group does not support it. “This asymmetry and tax treatment is one of the factors favouring the use of debt over equity for the financing of investment,” said Mr Niedermayer.
He referred to two studies claiming many companies relying on debt financing experience difficulties when faced with unexpected losses created by prices, particularly SMEs.
Evelyn Regner (S&D/Austria), represented by Spain’s Jonás Fernández, expressed concern about the measure’s cost, estimated by the European Commission at EUR 167 billion.
Parliament adopts position on shell entities proposal
With 637 votes in favour, 2 against and 6 abstentions, the European Parliament approved the opinion on the ‘UNSHELL’ Directive in a plenary session on 17 January. MEP Lidia Pereira (EPP/Portugal) prepared the adopted opinion.
European Parliament does not have co-legislative powers on this or any other tax files. Still, its non-binding opinion is needed for the proposal to become EU law. EU member states in the Council are still negotiating with no immediate agreement.
PETI Committee hearing: EC to discuss FATCA with US officials in February
European Parliament’s PETI (petitions) Committee made a 4-day mission to the US in July 2022. The purpose was to meet with local officials and policy-makers to discuss the impact of the US Foreign Account Tax Compliance Act (FATCA) on EU citizens. The PETI delegation published its report from the trip on 17 January 2023.
PETI Committee held a hearing to discuss findings from the mission on 25 January. The MEPs who participated in the mission were unanimous: progress must be made. According to Andrea Liesenfeld, Deputy Head of Unit at EC’s DG FISMA, the issue will be discussed at the next Joint Financial Regulatory Forum with the US on 7 and 8 February.
ECON hearing: Swedish Presidency aims for DAC 8 deal by the end of its term
ECON Committee hosted Elisabeth Svantesson, ECOFIN President and Minister for Finance of Sweden, on 24 January. The minister presented Sweden’s priorities for the country’s 6-month Presidency (see article below), including taxation.
The minister listed the main tax priorities. One focus is the Unshell Directive. The Council made progress on the technical analysis of the proposal last year and intended to continue that work. On VAT, they aim to take the newly presented VAT in the digital age package forward. Sweden considers this proposal crucial as the EU is estimated to lose EUR 93 billion annually, a significant part of it due to VAT fraud.
Another vital file concerns DAC 8. This will be an essential step to stop tax evasion. Svantesson hopes they could conclude negotiations during their term by July.
FISC discusses BEFIT with experts
MEPs heard experts and stakeholders on the latest thinking on an EU common tax base for businesses, the so-called BEFIT initiative, on 25 January.
The hearing, organised by FISC Committee, is the first such discussion on the initiative in the Parliament. EC’s legislative proposal is expected later this year (Q3-Q4).
Opening the hearing, FISC Chair Paul Tang (S&D/Netherlands) argued BEFIT would be a win-win situation, providing a single rule book to reduce the tax burden on businesses while allowing for a fairer allocation of taxation rights across the member states.
The stakeholder experts were Christian Kaeser, Chair of the Tax Committee of the Federation of German Industries, Gerhard Huemer, Director of Economic and Fiscal Policy of SMEunited, and Simon Loretz, Senior Economist at the Austrian Institute of Economic Research (WIFO).