Parliament’s draft report on debt-equity bias reduction allowance published
The draft report, published in early December, was prepared by MEP Luděk Niedermayer (EPP/Czech Republic). Despite some reservations about the proposal, Niedermayer believes there is a solid economic reason to positively consider the debt-equity bias reduction allowance (DEBRA) proposal. To address some concerns, the option to roll out the rules gradually provides a good response in his view.
The rapporteur also introduces minor changes to the EC text, which aim to assist SMEs, such as only a gradual introduction of the limitation to interest deduction’s rule and the permanent full deduction of interests for small loans.
ECON vote on the draft opinion is currently scheduled for 21 March 2023. European Parliament only provides its non-binding opinion.
FISC Committee public hearing with the Cayman Islands
André Ebanks, Cayman Islands Minister of Financial Services and Commerce, defended his country’s tax policy on Monday, 14 November. Ebanks denied the label ‘tax haven’ during his hearing at the European Parliament’s FISC Committee.
“We are an investment hub, meaning a jurisdiction that facilitates the transit of investment through favourable fiscal conditions, including a stable legal environment and political regime”, he said, using definitions from the 2015 United Nations Conference on Trade and Development report.
FISC Committee chair Paul Tang (S&D/Netherlands) felt that Ebanks was refusing to face the truth. Tang pointed to the Cayman Islands’ poor rankings in various NGO lists, including the Tax Justice Network’s Financial Secrecy Index.
The Minister contested this list, considering the methodology behind the ranking does not follow any agreed international standards. “The mere fact that a country has a system of indirect taxation is enough to give it a high secrecy index”, he argued.
MEPs discuss with Czech MPs on EU tax initiatives
A delegation of Members of the Budget Committee of the Czech Parliament’s Chamber of Deputies travelled to Brussels to exchange views with Members of the FISC Committee on 14 November. The delegation was led by the Vice Chair, Vojtěch Munzar. They discussed tax policies in EC’s work programmes for 2022 and 2023, the OECD/G20 Inclusive Framework agreement on global tax reform, including a minimum tax rate for multinational companies (Pillar 2), the Unshell Directive and the priorities of the Czech Presidency.
The meeting took place in the context of the FISC Subcommittee’s endeavour to enhance the cooperation and interaction between the European Parliament and national parliaments.
ECON adopts position on shell entities proposal
MEPs adopted their opinion by 55 votes in favour, 1 against and no abstentions to EC’s Unshell Directive on 30 November.
In their opinion, MEPs amend EC’s proposal by slightly lowering the thresholds below which a company is exempt from the reporting requirements of the directive and by providing for penalties to be also levied on companies with zero or low revenue. Companies subject to the reporting requirements should be obliged to provide more detailed information according to MEPs.
MEPs also amended the information sharing requirements between member states to allow a better distinction between legitimate shell companies and those existing for tax purposes and to ensure better quality and completeness of exchanged data.
MEP Lidia Pereira (EPP/Portugal) prepared the Parliament’s draft opinion, which is legally non-binding. The final vote in the Plenary is currently scheduled for 16 January.
Amendments to Pandora Papers draft report published, ahead of January vote
FISC Committee’s amendments to the draft report on Pandora Papers: lessons learned were published in early December. MEP Niels Fuglsang (S&D/Denmark) prepared the draft report.
The 183 amendments mostly add to, rather than extensively modify, the draft report’s existing recommendations. ECON Committee is scheduled to vote on the draft report on 31 January 2023. This is a non-legislative procedure. Neither EC nor the member states are obligated to take legislative action based on the report’s recommendations.