Update

Tax Policy

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Tax Policy Update

August 2019

 
 
 
 

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Get the latest news on SME, tax, technology, audit and sustainable finance.

 
 
 
 
 

Taxing the Digital Economy

 
 
 

This paper primarily summarises the EU’s Digital Services Tax and the OECD’s Digital Tax proposal.

 
 
 
 

Highlights

 
 
 
 
  • G7 finance ministers reach agreement in principle on minimum and digital taxation
  • French Senate adopts national digital tax plan, Trump agrees on a truce with France
  • European Commission launches several tax infringement procedures against EU Member States
 
 
 
 
 

Feature story

 
 
 
 

G7 finance ministers reach agreement in principle on minimum and digital taxation

On 18 July, G7 finance ministers reached a high-level political agreement on international corporate tax reform – including the broad outlines of a future digital and minimum tax framework.

The ministers agreed overall that the new rules should be “administrable and simple” and on the following:

  • On pillar one that taxing rights could be determined on criteria based on “businesses’ active participation in a customers’ or users’ jurisdiction, such as valuable intangibles or employment of a highly digitalized model”.
  • On pillar two and minimum taxation, that the tax level should be set depending on the “concrete design features of the rules”. OECD’s Pascal Saint-Amans speculated that the global minimum corporate tax rate would set at around the 12,5% mark. This would align the rate with the one currently in place in Ireland.
  • Tax certainty should be reinforced and aggressive tax planning should be limited, in particular for the transfer pricing of distribution activities (reportedly a request from the US). In order to avoid double taxation, a “robust and effective tax dispute resolution through mandatory arbitration” should be established.

G7 expects a global agreement in the Inclusive Framework on the “outlines of the architecture” of the international tax reform by January 2020. The 26 August G7 leaders’ summit in Biarritz further re-iterated the commitment to find an agreement in 2020.

 
 
 
 
 

EU Developments

 
 
 
 

European Commission


European Commission launches several tax infringement procedures against EU Member States

The European Commission has launched a number of tax-related infringement cases against several EU Member States. It announced the infringement procedures in its latest monthly infringement package.

 
 
 
 
 

MEP QUESTIONS & ANSWERS


Use of Article 116 of the TFEU in the context of tax reform proposals

  • Question by group of Green MEPs
  • Reply by Commissioner Moscovici

Commissioner argues that Article 116 cannot be used for tax harmonisation measures such as CCCTB or digital services tax.

 
 
 
 
 

CJEU – RULINGS


C‑273/18: Right to deduct input VAT

 
 
 
 
 

International Developments

 
 
 
 

Europe’s SMEs call for fair taxation of the digital economy

SME United, a Brussels-based association representing European SMEs, calls on EU policymakers to make sure that companies of all sizes – including in the digital sector – pay their fair share of tax.

SME United supports finding a solution to digital taxation at the OECD level. However, if this fails, SME United states that EU-only solutions might be a necessary alternative. Read more

Mauritius Leaks: new leaked documents reveal multinationals using Mauritius for tax avoidance

On 22 July, the International Consortium of Investigative Journalists (ICIJ) has launched the so-called Mauritius Leaks – a new tax avoidance-based scandal.

ICIJ published details of more than 200 companies as part of the investigation – including Whirlpool, Total S.A. and Mayo Clinic – that the Mauritius office of the law firm Conyers Dill & Pearman assisted. Read more

France and US set up new working group on digital taxation to seek OECD agreement

On 29 August, the OECD Secretary-General Angel Gurría and French finance minister Bruno Le Maire announced the establishment of a new working group between France, US and the OECD to prepare a proposal for international digital tax reform by the end of 2019.

This proposal would then form the basis for an international agreement at the OECD level during the first half of 2020.

The new working group would work on questions such as defining a company’s taxable presence or activities in a jurisdiction, tax levels, and what types of companies would fall under the scope.

 
 
 
 
 

National Developments

 
 
 
 

French Senate adopts national digital tax plan, Trump agrees on a truce with France

On 11 July, the French Senate approved the government’s proposed digital tax that would impose a 3% turnover levy on over 30 digitalised businesses – including major US ones such as Google, Facebook and Amazon.

The US reacted to the measure with outrage and threatened France with possible trade restrictions on French wine imports.

The US digital businesses argue that the tax is discriminatory. However, they also urged France and the US to avoid escalating trade tensions.

Amazon France announced on 1 August that it would increase its referral fees in direct response to the French digital tax.

In the aftermath of the 26 August G7 leaders’ summit in Biaritz, France and the US reached a compromise that will leave the French tax in place until OECD agrees on an international solution.

According to the compromise, France would reimburse to the companies any difference between the French tax and an eventual OECD agreement.

US digital sector companies denounced the compromise soon afterwards.

France is not alone

France is not alone in introducing unilateral digital tax measures.

Over 10 countries are planning similar measures. See Accountancy Europe’s recent publication for an overview.

Most notably, the UK government re-iterated its own digital tax plans on the same day as the French Senate vote took place. This might hamper UK’s hopes for a post-Brexit trade deal with the US.

France to introduce flight tax, UK also discussing plans

France will reportedly introduce a tax on airlines flying from its airports from 2020. The tax is expected to generate EUR 180 million in revenue.

Similarly, the UK is planning to introduce a national flight tax in the form of a “carbon charge” to offset greenhouse gas emissions.

 
 
 
 
 

Other news

 
 
EESC
 
New study on impact of corporate taxes on jobs and investment argues for lower rates
 
European Commission
 
Commission publishes study that provides an overview of transport tax frameworks in the EU
 
International
 
European financial markets association calls for harmonised EU tax incentives to promote investment and remove WHT obstacles
 
Council
 
Code of Conduct Group publishes its work programme for next six months
 
OECD
 
OECD invites taxpayer input on ninth batch of dispute resolution peer reviews
 
European Commission
 
Commission publishes competition policy report with overview of tax state aid cases
 
ESMA
 
ESMA publishes public statement on IAS 12 concerning income taxes
 
Corporate Accountability Network
 
New tax disclosure standard published for comments, includes public CBCR
 
European Court of Auditors
 
New report from EU auditors highlights problems in VAT e-commerce collection
 
European Commission
 
New update of EU VAT Cross-Border Rulings list
 
International
 
Oil industry joins a growing number of companies calling for a carbon tax
 
OECD
 
OECD releases latest results on preferential regimes and new results on no or only nominal tax jurisdictions
 
European Commission
 
Commission approves Austrian risk finance scheme for mid-sized business financing companies
 
OECD
 
Global Forum on tax transparency reveals new compliance ratings for nine jurisdictions
 
IASB
 
IASB proposes amendments to accounting for deferred tax
 
National
 
UK launches public consultation on tax intermediaries Directive implementation
 
OECD
 
OECD releases “stage 2” reports on tax dispute resolution
 
European Commission
 
New statistics for Mutual Agreement Procedures (MAPs) and Advance Pricing Agreements (APAs) published
 
International
 
CIAT database reflects progress made by 15 countries implementing BEPS recommendations
 
International
 
Uber created a $6.1 billion Dutch weapon to avoid paying taxes
 
National
 
Germany’s Kramp-Karrenbauer calls for green tax revolution
 
European Commission
 
General Court hearing on Apple tax state aid case scheduled for mid-September
 
National
 
Danish pension funds ban aggressive tax planning by external managers
 
OECD
 
Guinea, Namibia and Honduras join Global Forum on tax transparency
 
National
 
Germany to cut corporate tax for SMEs
 

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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