FISC Committee discusses tax and Brexit with UK Task Force
FISC Committee was updated on the tax aspects of the EU-UK trade agreement by the European Commission’s Task Force for Relations with the UK on 26 January.
Paulina Dejmek-Hack, Director of the Task Force, explained that the agreement includes a good governance clause, with legally binding commitments on both parties. These include
- following OECD BEPS standards,
- the UK committing to maintain EU’s public CBCR rules for financial institutions (but not extractive industries),
- key elements of the EU’s ATAD (e.g. interest limitation, hybrid mismatches and control foreign companies rules).
DG TAXUD’s Benjamin Angel said at the hearing that the Commission would support addressing in the future the inclusion of zero tax jurisdictions in the EU list.
Full recording here
FISC holds hearing on tax impacts of Brexit
Several MEPs expressed concerns about the UK turning into a ‘tax haven’ at the EU’s doorstep post-Brexit during a FISC hearing on tax impacts of Brexit on the same day.
In response, Jeremy Green from University of Cambridge said the UK is more likely to be strategic about its tax policies, focusing on particular regions and sectors rather than a general slashing of corporate tax rates. Dr Pasquale Pistone from IBDF and Alex Cobham from Tax Justice Network underlined the importance of a EU minimum effective tax rate in helping to counter UK’s tax manoeuvres.
DG TAXUD’s Benjamin Angel underlined that the UK will remain an important partner for the EU in OECD discussions. He was also confident that tax advisors would not be able to avoid DAC6 provisions as most of them have offices in the EU.
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Draft report on digital taxation published
The report was prepared by MEPs Andreas Schwab (EPP/Germany) and Martin Hlaváček (RE/Czechia). It will set out the Parliament’s position on international and European digital taxation.
The MEPs, for example, call for the following:
- Include a virtual element in permanent establishment
- Cover not only highly digital business models but also, more broadly, large consumer facing businesses
- Create a new ‘tax nexus’ model, which is predominantly based on sales instead of physical presence
- Have the Commission and Council prioritise tax matters in their dealings with the new US administration
ECON Committee is currently scheduled to vote on the draft report on 23 March. It will be a legally non-binding position.
ECON Committee calls for stronger tax provisions in EU-UK trade agreement
The ECON Committee adopted its position on the EU-UK trade agreement with 47 votes in favour, 4 votes against and 8 abstentions on 1 February. As expected, the MEPs criticise the deal for what they see as too weak tax provisions. The ECON resolution notably regrets the absence of tax measures in any dispute resolution and rebalancing mechanism, including a non-regression clause in corporate taxation.
The MEPs urge EU member states to use the anti-tax avoidance tools at their disposal, in particular CFC rules, to protect their tax revenues. They also call on the EU to integrate “in relevant areas” “robust commitments” on anti-tax evasion and avoidance regarding the UK’s different tax jurisdictions and its overseas territories.
ECON approves draft resolution on exchange of tax information
ECON adopted the resolution with 49 votes in favour, 4 against and 6 abstentions on 4 February. It was prepared by the MEP Sven Giegold (Greens-EFA/Germany).
The resolution is about the Commission proposal on exchanging tax information of online sellers and platforms (DAC 7).
As a next step, EP Plenary is scheduled to vote on the final resolution on 8 March. The Parliament’s position is non-binding, but EU member states already reached an agreement in December and the Parliament’s opinion is needed before the file can become EU law.
FISC hearing on taxation of the digital economy
EP’s FISC Committee held a workshop on digital taxation to help inform MEPs’ work on their draft report (see article above) on 12 February.
At the hearing, Jeffrey Owens from Vienna University said it is impossible to say whether an international agreement can be found by July 2021. He also underlined that the EU should not be content with any global agreement, but assess whether an agreement is aligned with its priorities.
Professor Anne Van De Vijver, for her part, reflected on Article 116 and argued that it might be justifiably used for digital taxation. She referred to EU case law according to which at least the predecessor of Article 116 could be used to eliminate generic, not only specific, distortions to competition.
Read more (full recording here)