FEE Tax Policy Update

August 2015

European Commission

Commission presses Member States on VAT revenue collection – 4 September

According to the figures of a recent European Commission study on the VAT Gap in the EU, VAT revenue collection has failed to show significant improvement across EU Member States. VAT collection figures for 2013 did not improve from 2012, and 11 Member States, including Poland and Estonia, saw deterioration in their VAT gap. The report estimates that the total amount of VAT lost across the EU is estimated at €168 billion. The Commissioner for Financial and Economic Affairs, Pierre Moscovici commented on the results by stating that they demonstrate the need for VAT collection reform in the EU. He linked the fight against VAT gap to ongoing political momentum directed against tax evasion and fraud.

According to Euractiv, one reason for the study was to assess the impact of a possible change to the rules governing VAT for European businesses. The Commission concluded that making companies automatically pay VAT on purchases made outside their own country would cause minimal costs to companies, whilst potentially increasing Member States’ yearly revenues by €40 billion.



Capital Markets Union could pose further obstacles to FTT – 7 September

Euractiv France has reported that voices from the Commission are expressing increasing scepticism towards a Financial Transaction Tax (FTT) in the context of the Capital Markets Union (CMU), on which the Commissioner for Financial Services, Jonathan Hill, is expected to present an action plan by the end of September. As stated in the article, whilst the purpose of a CMU would be to further unify the functioning of the financial markets across all 28 Member States, an FTT would on the contrary generate disparities between the financial markets of the 11 Member States currently working on the tax, and those not involved in the project.



President Juncker gives his first State of the Union Speech – 9 September

President of the European Commission Jean-Claude Juncker has held his long awaited first State of the Union speech at the European Parliament Plenary session in Strasbourg. Although much of his speech concentrated on the pertinent refugee crisis as well as the Greek situation, he specifically mentioned items of more direct relevance to the FEE. He notably stressed the urgent need for a more common deposit guarantee system on which the Commission will present a legislative proposal by the end of 2015. Furthermore, Juncker emphasized the importance of enhancing tax fairness in the EU, and in this regard called for the establishment of CCCTB in order to help tackle tax avoidance, for efforts to adopt modalities of a Financial Transactions Tax (FTT) by end-2015, and stated that the Commission is working with the Council to conclude an agreement on automatic exchange of information on tax rulings by the end of the year.



European Parliament

TAXE Committee debate – 7 September

The European Parliament (EP) has returned from its summer break for the first plenary and Committee sessions since mid-July. On the Plenary side, no developments of relevance from tax policy perspective took place. On the side of the Committees however, the EP TAXE Committee discussed a draft own initiative report on tax rulings and other measures similar in nature or effect (2015/2066(INI)). The draft report was published right before EP’s summer recess, and the debate on 7 September was the first occasion devoted to debating it.

The debate itself contained few surprises, as both S&D and ALDE MEPs expressed relatively strong support for the draft report. EPP representatives voiced concerns regarding specific elements such as Country by Country Reporting (CbCR) and public disclosure of tax rulings, but did not give the impression of particularly strong opposition to the proposals either. More critical voices emerged from GUE-NGL (far-Left) and the Greens, whose MEPs regretted the report not having gone further in its conclusions. Finally, several representatives brought up the possibility of naming and shaming, and the responsibility of Member States on creating opportune legal frameworks for tax system abuse. The accountancy profession did not come under particular criticism, although the role of PwC in the Luxleaks scandal for example was brought up. In terms of next steps, a subsequent debate on the report will take place on 17 September together with MEPs from the ECON Committee, and public hearings of President Juncker as well as Commissioners Moscovici and Vestager will be organised for the same occasion.



Recommendations to the Commission on Bringing transparency, coordination and convergence to Corporate Tax policies in the Union – 9 September

On 10 September a draft report with recommendations to the Commission on Bringing transparency, coordination and convergence to Corporate Tax policies in the Union (2015/2010(INL)) was published by two co-rapporteurs, Anneliese Dodds (S&D/UK) and Ludek Niedermayer (EPP/CZE), for the consideration of the ECON Committee. The draft report follows the Legislative initiative procedure, which stipulates that the European Parliament may request the Commission to submit proposals on matters on which it considers that a Union act is required for the purpose of implementing the Treaties. In case the Commission does not put forward proposals as requested, it is obliged to inform the EP of the reasons.

The report is structured around three main categories: Transparency, Coordination and Convergence. For each category, it provides rationale for action as well as specific recommendations for action from the Commission’s side with established deadlines in some cases. Of particular interest, the report calls for Commission proposals on public disclosure of Country by Country Reporting (CbCR) by June 2016, extension of automatic exchange of information on tax rulings to all rulings and with the publication of certain elements, and the establishment of a mandatory Common Corporate Tax Base (CCTB) by June 2016 with exemptions to SMEs. The report resonates with some positions in the TAXE Committee report on tax rulings, and they can consequently be seen as complementary pieces of work.



MEP Questions & Answers

Position of Luxembourg Presidency regarding tax reporting by multinationals on a country-by-country basis – 12 August

MEP Hugues Bayet (S&D/BEL) has asked a question from the Council regarding the Luxembourg Presidency’s stance on Country by Country Reporting (CbCR) by multinationals. In his question, Mr. Bayet refers to the European Parliament’s (EP) position in favour of public disclosure of CbCR by multinationals, as established in EP’s recent amendments to the Shareholders’ Rights Directive. In this regard, he asks the Council to give its views on the issue without delay. A reply is expected in the upcoming weeks.



Corporate taxation system in the EU: answer by Commissioner Moscovici – 1 September

Commissioner Moscovici has given an answer to a question asked by MEP Andrejs Mamikins (S&D/LAT) on 30 June regarding the corporate tax system in the EU. In his question, Mr. Mamikins referred to the Commission action plan for fair and efficient corporate taxation in the EU, and asked the effects of the new system to the competitiveness of Member States. In his reply, Commissioner Moscovici provides details on the Commission’s revised approach to the Common Consolidated Corporate Tax Base (CCCTB). In this new approach, the Commission proposes for Member States to initially focus on elements relating to the OECD Base Erosion and Profits Shifting (BEPS) project, prior to moving on to other elements of the tax base and eventual consolidation. Mr. Moscovici however reiterates the Commission’s commitment to eventual consolidation, with its potential benefits in notably helping tackle aggressive tax planning. Overall, in the Commissioner’s view a CCCTB would reduce opportunities for artificial profit shifting between Member States.



Tax amnesties in the EU: answer by Commissioner Moscovici – 4 September

Commissioner Moscovici has given an answer to a question asked by Tibor Szanyi (S&D/HUN) in early July in regards to tax amnesties in the EU. In his question, Mr. Szanyi asked whether the Commission is intending to put forward a common definition of tax amnesty. In his reply, Commissioner Moscovici stated that the Commission does not intend “at this time” to establish such a definition, but the Commission will nevertheless keep on ensuring that Member States’ tax amnesties are not incompatible with EU law.




Meeting of the High Level Working Party (Taxation) – 2nd September

On 2 September, a meeting of the High Level Working Party on Taxation took place. Several items on the meeting’s agenda resonate closely with core priorities on the tax debate agenda. For example, during the meeting topics such as minimum effective taxation as well as OECD BEPS project were discussed. Of particular interest, the meeting also considered the presence of tax in non-tax dossiers, with particular reference to the Shareholder Rights Directive (SHRD). This relates to the inclusion of the amendment on Country by Country Reporting (CbCR) of tax information in the SHRD by the European Parliament (EP) recently. However, views on CbCR were not exchanged during the meeting, as the discussion was purely for flagging the Working Party members on the EP’s move. Negotiations on the issue will continue in subsequent weeks between representatives from EP, the Council and the Commission.



Meeting of the Working Party on Tax Questions (Direct Taxation) – 9th September

On the 9th of September, a meeting of the Working Party on Tax Questions (Direct Taxation) took place. No minutes of the meeting itself are currently available, but several items on the meeting’s agenda deserve more detailed attention. In particular, the Working Party discussed automatic exchange of information in the field of taxation, a hot topic which closely resonates with ongoing EU-level political momentum on tax issues. FEE will continue to monitor tax debates and discussions at the EU-level, including any developments in the Council.




Spain Exempts Bitcoin from VAT – 26 July

According to an article from the International VAT Association, the Spanish Tax Authorities have put forward a binding ruling in which they confirm that trading of virtual currencies such as Bitcoin is exempt from VAT. The Authorities consider that virtual currencies such as Bitcoin must be included within the meaning of “other negotiable instruments” since they act as a means of payment and confer a future entitlement to a certain amount of money, just like any other official currency. Consequently, the transfer of Bitcoin must be exempt from VAT in Spain.




Abolition of the reduced VAT rate in the Netherlands – 22 June/26 July

From 1 July, new rules regarding reduced VAT rates (6% instead of 21%) for renovation and repair of private dwellings older than two years came into force in the Netherlands. The reduced rate now only applies to painting, plastering and the installing of energy-saving materials in dwellings. The measure has encountered stark criticism from SMEs from the construction sector notably, with a petition signed by 15.000 people submitted to the Dutch parliament. However, the parliament has decided to move on with the measure.

In addition, a proposal by the Dutch Government to remove the reduced rate as a whole from the VAT Act has been withdrawn by the State Secretary of Finance, following opposition from several political parties. According to the defeated proposal, the reduced 6% VAT rate would have only applied for groceries, whilst barbers, hotels as well as farmers would have been affected by the reduced rate’s abolition.



Regular Sales and Services in Hungary – 26 July

According to the International VAT Association, Hungary is planning to introduce new regulations for regular sales of goods and services. The new rules will be applied for accounting, tax consulting and audit services starting 1 July, and for other goods and services from 1 January 2016. Before the change, the date of supply of goods and services sold for a fixed time period was set as the payment deadline of the invoice from VAT point of view. This meant that VAT payments of domestic supplies could be postponed until the due date, but not longer than one year. With the changes from 1 January 2016 onwards, the date of supply is the last day of the period in question unless both the date of invoice and the due date is earlier than the last day of the period in question in which case the invoice date is the date of supply, or if the payment is due after the period in question the date of supply is set as the due date but at latest the 30th day following the last day of the period.




14/09/2015, Liberal Breakfast with the Prime Minister of Luxembourg Xavier Bettel, FNST, 08:30-10:00, Brussels.

24/09/2015, Corporate Tax Transparency: A necessary responsibility of global corporations, CEPS, 13:15-14:30, Brussels.

29/09/2015, Priorities for the forthcoming Single Market Strategy, EPC, 14:00-17:00, Brussels.

19/10/2015, ECFIN Annual Tax Workshop: Political economy of tax reforms, European Commission, 08:30-17:00, Brussels.