Interestingly, EU member states in the Council have been the most diligent ones on tax policy, with developments on aviation taxes and the financial transaction tax (FTT). Moreover, Finland took over the six-month presidency of the Council, and will thus steer its agenda, including on taxation, until the end of the year.
On aviation taxes, the Netherlands organised a conference on 20-21 June in The Hague to build support for a common European framework. As a follow-up, the Dutch government reportedly now intends to prepare a letter to the European Commission, calling on it to put forward a legislative proposal on the topic. The Dutch will attempt to get as many other EU member states as possible to co-sign its letter. It can expect support, at least, from Luxembourg, France and Belgium.
But any follow-up from the European Commission will have to wait. Prior to publishing a legislative initiative, the Commission goes through a lengthy impact assessment and stakeholder consultation process. Moreover, such a new proposal would also have to wait for the new European Commission to start its work in November.
On the FTT, the German finance minister Olaf Scholz provided an update to fellow EU finance ministers. Scholz appeared optimistic, and stated that a new draft law would be issued in autumn with the view of introducing FTT from 2021. The key objective now for Germany and France is to get as many other EU member states to participate in the FTT as possible. Some smaller member states with weak capital markets have questioned the added value to them from such a tax, given that the meek yields would hardly compensate for costs and effort stemming from implementation and enforcement. To appease such concerns, the French and the Germans now propose that any country whose FTT yields would be below €20m would get a ‘top-up’, paid for by countries whose FTT yields would exceed €100m. The next few weeks and months will show whether this top-up will be enough to convince smaller sceptics.
And finally, Finland took up the rotating Council presidency and announced its policy priorities for the next six months. In a generically worded work programme, the Finnish presidency commits to continue working on digital tax reform at the OECD level (Finland was one of the few EU countries opposed to unilateral EU work on this), and work against ‘harmful tax competition’, tax evasion and avoidance. Moreover, Finnish officials have stated that they would seek to find an agreement on the Commission proposal on VAT simplifications for SMEs.
Moving to the other two key EU institutions, the European Commission has now replied to the tax policy recommendations put forward by the European Parliament’s tax investigation Committee (TAX3). Although TAX3’s recommendations are not legally binding, the Commission has to provide a point-by-point reply to all the recommendations, to explain what action it will or will not take. The Commission’s reply is quite generic overall, but some interesting elements stand out.
First, the Commission hints that it is reviewing its public tendering rules to see whether they are robust enough against potential ‘conflicts of interest’. This indication was in response to the Parliament’s criticism that there is a conflict of interest when stakeholders that ‘promote tax avoidance’ are advising, guiding or conducting studies for the Commission on anti-avoidance related topics.
Second, the Commission announced that the results of its evaluation of the Directive on Administrative Cooperation (DAC) would be ready in autumn 2019. On the basis of the evaluation results, the Commission may consider further changes to DAC. As a reminder, DAC provides for the automatic exchange of tax information between EU member states’ tax authorities. Currently, the information includes tax rulings, country by country reporting under BEPS 13, cross-border tax arrangements and more.
Third and finally, the Commission will work on identifying and addressing remaining cross-border tax obstacles within the single market, and it will reflect on how best to take transfer pricing issues forward in the EU.
No indicative timeline should be expected on any of the above before the next Commission starts in November.
What of the European Parliament then? The final decision on whether or not to establish a permanent tax committee seems to have been postponed to after the summer – although the current apparent disinterest from the centre-left S&D Group to push for such a committee does not give room for optimism.
Nonetheless, tax – including role of tax intermediaries – is reportedly featuring high in negotiations between the Parliament’s political groups on what the next term’s priorities should be. Moreover, the S&D Group is going to get the chair’s position for the influential Economic Affairs Committee (ECON). The most probable candidate is the Italian socialist Roberto Gualtieri, who would thus renew his term as chair of ECON.
Johan Barros, Accountancy Europe (johan@accountancyeurope.eucom)
Interestingly, EU member states in the Council have been the most diligent ones on tax policy, with developments on aviation taxes and the financial transaction tax (FTT). Moreover, Finland took over the six-month presidency of the Council, and will thus steer its agenda, including on taxation, until the end of the year.
On aviation taxes, the Netherlands organised a conference on 20-21 June in The Hague to build support for a common European framework. As a follow-up, the Dutch government reportedly now intends to prepare a letter to the European Commission, calling on it to put forward a legislative proposal on the topic. The Dutch will attempt to get as many other EU member states as possible to co-sign its letter. It can expect support, at least, from Luxembourg, France and Belgium.
But any follow-up from the European Commission will have to wait. Prior to publishing a legislative initiative, the Commission goes through a lengthy impact assessment and stakeholder consultation process. Moreover, such a new proposal would also have to wait for the new European Commission to start its work in November.
On the FTT, the German finance minister Olaf Scholz provided an update to fellow EU finance ministers. Scholz appeared optimistic, and stated that a new draft law would be issued in autumn with the view of introducing FTT from 2021. The key objective now for Germany and France is to get as many other EU member states to participate in the FTT as possible. Some smaller member states with weak capital markets have questioned the added value to them from such a tax, given that the meek yields would hardly compensate for costs and effort stemming from implementation and enforcement. To appease such concerns, the French and the Germans now propose that any country whose FTT yields would be below €20m would get a ‘top-up’, paid for by countries whose FTT yields would exceed €100m. The next few weeks and months will show whether this top-up will be enough to convince smaller sceptics.
And finally, Finland took up the rotating Council presidency and announced its policy priorities for the next six months. In a generically worded work programme, the Finnish presidency commits to continue working on digital tax reform at the OECD level (Finland was one of the few EU countries opposed to unilateral EU work on this), and work against ‘harmful tax competition’, tax evasion and avoidance. Moreover, Finnish officials have stated that they would seek to find an agreement on the Commission proposal on VAT simplifications for SMEs.
Moving to the other two key EU institutions, the European Commission has now replied to the tax policy recommendations put forward by the European Parliament’s tax investigation Committee (TAX3). Although TAX3’s recommendations are not legally binding, the Commission has to provide a point-by-point reply to all the recommendations, to explain what action it will or will not take. The Commission’s reply is quite generic overall, but some interesting elements stand out.
First, the Commission hints that it is reviewing its public tendering rules to see whether they are robust enough against potential ‘conflicts of interest’. This indication was in response to the Parliament’s criticism that there is a conflict of interest when stakeholders that ‘promote tax avoidance’ are advising, guiding or conducting studies for the Commission on anti-avoidance related topics.
Second, the Commission announced that the results of its evaluation of the Directive on Administrative Cooperation (DAC) would be ready in autumn 2019. On the basis of the evaluation results, the Commission may consider further changes to DAC. As a reminder, DAC provides for the automatic exchange of tax information between EU member states’ tax authorities. Currently, the information includes tax rulings, country by country reporting under BEPS 13, cross-border tax arrangements and more.
Third and finally, the Commission will work on identifying and addressing remaining cross-border tax obstacles within the single market, and it will reflect on how best to take transfer pricing issues forward in the EU.
No indicative timeline should be expected on any of the above before the next Commission starts in November.
What of the European Parliament then? The final decision on whether or not to establish a permanent tax committee seems to have been postponed to after the summer – although the current apparent disinterest from the centre-left S&D Group to push for such a committee does not give room for optimism.
Nonetheless, tax – including role of tax intermediaries – is reportedly featuring high in negotiations between the Parliament’s political groups on what the next term’s priorities should be. Moreover, the S&D Group is going to get the chair’s position for the influential Economic Affairs Committee (ECON). The most probable candidate is the Italian socialist Roberto Gualtieri, who would thus renew his term as chair of ECON.
Johan Barros, Accountancy Europe (johan@accountancyeurope.eucom)
.jpg?sfvrsn=335a554c_0 "300 x 250 (MPU)")
