Commission plans for tax in 2016: speech by Commissioner Pierre Moscovici at the AGEFI Conference in Geneva – 12 November
Commissioner Moscovici has held a speech in which he provides indications on Commission’s plans for tax in 2016. He notably emphasises that tax transparency “determines everything that we wish to accomplish on the tax policy front over the next few years”, and that transparency is a key element in restoring public trust in tax systems. Commissioner Moscovici re-iterates his preference for public disclosure of Country-by-Country Reporting (CBCR) information, and confirms the already known fact that the Commission will decide what form of action to take on this in 2016 (probably early-March 2016). Moreover, the Commission will present a strategy for a European approach to the evaluation, selection and ranking of third countries in tax matters, in early-2016. Finally, he confirms Commission intentions for a C(C)CTB proposal in 2016. Non-related to the speech itself, other tax initiatives from Commission’s side that we can expect for next year include an anti-BEPS Directive (early 2016), a VAT Action Plan (possibly early-March), as well as an assessment on the regulatory needs for professions, including tax advisors.
Eurostat publishes statistics on environmental taxes in the EU – 25 November
According to latest Eurostat statistics, tax income from environmental taxes amounts to 6,3% of tax revenues in the European Union in 2013. Within that category, energy taxes contributed most, representing 77% of total revenue from environmental taxes. The share of environmental taxes in total tax revenue has decreased from 6,9% 10 years earlier, in 2003.
2016 European Semester launched with publication of Annual Growth Survey 2016 – 26 November
The European Commission has launched the European Semester for 2016, with the publication of the Annual Growth Survey (AGS). European Semester is the EU’s annual cycle of economic policy guidance and surveillance, whilst AGS – published during autumns – launch the Semester by putting forward a set of proposals for EU priorities for the upcoming year. The proposals and priorities notably cover economic and fiscal policies as well as economic reform needs. In the area of tax, the AGS notably prioritises tax systems addressing “disincentives to employment creation” and for them to be made fairer and more effective, as well as lowering the tax burden on labour in a “budgetary-neutral way”.
European Parliament adopts TAXE Committee report – 25 November
European Parliament (EP) Plenary has adopted the TAXE Committee report on tax rulings and measures similar in nature or effect, with 508 votes in favour, 108 against and 85 abstaining. The final vote added some changes to the final version of the report, but the overall message on key aspects remained unaltered. In terms of next steps, a TAXE II Committee was established on 2 December and will build on the work of its predecessor which de juro ceased to exist once the Parliament adopted the TAXE Committee report (for additional details, see below).
ECON Committee votes on its corporate tax report – 1 December
ECON Committee has voted on and adopted its draft report Bringing transparency, coordination and convergence to Corporate Tax policies in the Union. The vote saw a number of amendments adopted that will be introduced into the Committee report version that submitted for the Plenary’s attention. The Committee adopted the report with 45 in favour, three against and 10 abstentions. The draft report has changed slightly from the initial version. In its current form, the report notably calls for a proposal for country-by-country reporting on profit, tax and subsidies by June 2016; a proposal for introducing a “Fair Tax Payer” label; introduce a Common Corporate Tax Base (CCTB) as a first step, followed by consolidation subsequently (CCCTB); a proposal for a common European Tax Identification Number; a proposal for legal protection of whistle-blowers; improving cross-border taxation dispute resolution mechanisms; a proposal for a new mechanism whereby Member States should inform each other if they intend to introduce a new allowance, relief, exception, incentive, etc. that may affect the tax base of others; improving transparency of the Council Code of Conduct Group on Business Taxation; guidelines regarding “patent boxes”; common definitions for permanent establishment and economic substance; and for an EU definition of tax haven and counter-measures against those using them. Some amendments that were passed notably highlight the role of tax advisors in “aggressive tax planning” and calls for an investigation into the practices and conflicts of interest of tax advisory firms, call for the Commission to consider an obligation for tax advisory firms to report to national authorities when they develop and start promoting new schemes aiming to minimise companies’ tax obligations, as well as for the introduction of an EU-wide withholding tax “or a measure of similar effect”. In terms of next steps, the Plenary will vote on the report on 16 December.
TAXE II Committee established – 2 December
The European Parliament has agreed to establish a TAXE II Committee, following the end of the mandate of the first TAXE Committee upon the adoption of its draft report by the Plenary on 25 November. The vote follows an agreement of the Conference of Presidents (Political Groups of the European Parliament), which endorsed the establishment of a new TAXE Committee to notably continue the work of the previous one and to monitor progress in the application of the recommendations set up by the original TAXE Committee’s draft report. The final result of the vote was overwhelmingly in favour, with 561 MEPs endorsing, only 69 opposing and 5 abstentions. The TAXE II Committee will have a length of mandate of 6 months starting 2 December 2015, be composed of 45 MEPs (same ones as the original TAXE Committee), have the same structure as the original one, and will put forward a report summarising the Committee’s work.
In other words, de facto this constitutes an extension of the old TAXE Committee, however with a slightly different mandate. Overall, the mandate covers the main dimensions of the first TAXE Committee’s work but now includes further “powers” of inquiry, monitoring progress on the previous Committee’s recommendations, and gathering further evidence (documents, public hearings) of tax practices by Member States, third countries as well as the private sector. Of particular interest, the VAT dimension is missing altogether. This means that corporate tax will remain the main focus of the Committee in the next six months to come. MEPs of the TAXE II Committee will notably look into arranging a public hearing with Commission President Jean-Claude Juncker and the Eurogroup leader Jeroen Dijssebloem in order to get further answers on the tax practices of Luxembourg and the Netherlands, respectively.
VAT collection loophole in the EU – 20 November
The European Commission has replied to a question asked by the MEP Adam Szejnfeld (EPP/POL) with regard to VAT collection loopholes. In his question, Mr. Szejnfeld asked the Commission what it intends to do to tackle the growing loophole in VAT collection in the EU. In his reply, Commissioner Moscovici refers to the VAT Action Plan that the Commission is intending to adopt in 2016 (possibly March) which will address a number of VAT challenges, including initiatives on VAT rates, a proposal for VAT for e-commerce, and the establishment of the major principles of the definitive VAT regime for intra-EU trade. Furthermore, the Commission monitors Member States’ performance with regard to VAT collection and control, promotes cooperation and provides technical assistance.
Tax fraud – 20 November
The European Commission has replied to a question asked by the MEP Louis Michel (ALDE/BEL) with regard to tax fraud, and VAT fraud in particular. In his question, Mr. Michel asks the Commission what action it plans to take in order to convince Member States to set up a common fiscal framework with the purpose of tackling tax fraud and evasion in particular. In his reply, Commissioner Moscovici states that since tax is a Member State area of responsibility, Commission’s role is limited to providing them with “legal tools” to fight fraud and tax evasion, to offer technical assistance when requested and to share good practices on tackling specific VAT fraud schemes. A wide range of tools to tackle VAT fraud already exists in EU legislation, but the Commission is nevertheless aware of problems within the existing VAT system, and in particular with regard to VAT carousel fraud and missing trader fraud. The Commission is already thinking about solutions, and one criterion for an improved VAT system would be the simplification of VAT collection with the view of decreasing the VAT gap. With this in mind, the Commission plans to adopt a VAT Action Plan in 2016 (possibly early-March) which will notably include initiatives on VAT rates as well as a proposal on VAT for e-commerce. The Action Plan will furthermore establish the major principles for the definitive VAT regime for intra-EU trade.
Doing away with ‘letterbox’ companies – 24 November
The European Commission has replied to a question asked by the MEP Emmanuel Maurel (S&D/FRA) with regard to letterbox companies. In his question, Mr. Maurel refers to a call from a group of trade unions for a revision of the Services Directive, setting up of an EU registration system for companies, and abandoning plans for a Directive on single-member private limited liability companies. With this regard, he asks the Commission whether it intends to take these demands into account when drafting future legislation. In her reply, Commissioner Jourová confirms that the Commission is not planning to withdraw its proposal on single-member companies. However, the Commission will continue to tackle letterbox companies, as outlined in its recently published Single Market Communication.
Taxation of investment funds – 30 November
The European Commission has replied to a question asked by the MEP Neena Gill (S&D/UK) with regard to the taxation of investment funds. In her question, Ms. Gill refers to statistics according to which the average European mutual fund has approximately 50% higher managing costs than an equivalent fund in the US, and mentions experts according to whom this is mainly due to national fragmentation especially in taxation. She consequently asks for the Commission’s opinion on the matter and whether it intends to tackle the tax fragmentation. In his reply, Commission Hill confirms that the Commission is aware of the national fragmentation issue. He refers to the Capital Markets Union (CMU) Action Plan (AP) which announced plans to promote best practices and develop a code of conduct with Member States in the area of withholding tax relief procedures. Moreover, the Commission will conduct a study on discriminatory tax obstacles to cross-border investment by life insurance companies and pension funds. Finally, the Commission intends to launch a public consultation on the main barriers to cross-border distribution of investment funds in 2016. The consultation will in particular focus on disproportionate marketing requirements, fees, other administrative arrangements imposed by host countries, and the tax environment.
“EU Transaction Tax Falters as Austria-Imposed Deadline Nears” – 25 November
According to Bloomberg, many issues and disagreements still remain on the table as 11 Member States aim for a December agreement on the Financial Transactions Tax (FTT). Unresolved issues include notably “what trades to tax, how to calculate levies or how to treat pension funds and government bond-related transactions”. Additional details on the points of disagreement, as well as the various positions held by different participating Member States, is available in the article. In addition, below is a Council document outlining the state of play and “key open issues” in the FTT process.
Council document: http://data.consilium.europa.eu/doc/document/ST-14942-2015-INIT/en/pdf
December ECOFIN to discuss FTT, the future of the Code of Conduct Group on business taxation and BEPS – 30 November
On 8 December a Council meeting will take place that gathers together the Ministers of Economics and Finance of Member States (ECOFIN). Amongst other items, the Ministers will notably discuss the Financial Transactions Tax (FTT) for which some form of agreement is hoped to be achieved, the future of the Council’s Code of Conduct Group on business taxation, as well as BEPS.
European collaboration to tackle VAT fraud – 19 November
Authorities from Germany, Netherlands, Poland as well as a number of other European counterparts have taken coordinated action targeting a “criminal network responsible for defrauding EU citizens of approximately EUR 320 million in tax revenues via a sophisticated carousel fraud scheme”. The action involved over 49 searches and 27 hearings of witnesses and defendants in a number of EU Member States.
“Pfizer’s $155bn takeover of Allergan set to prompt tax row” – 23 November
The Guardian writes about the recent tax debacle prompted by Pfizer’s takeover of Allergan and consequent relocation of Pfizer’s headquarters to Ireland. According to the article, the deal is yet another example of tax inversion, whereby a US company de facto relocates its headquarters to another jurisdiction with lower corporate tax rates. The move has already been criticised by Democrat candidates for the US Presidency, Hillary Clinton and Bernie Sanders, and is likely to further spark ongoing debates on corporate tax practices that are on the agenda in the US, the EU and even globally (through the OECD BEPS project notably).
“Volkswagen faces probe over suspected tax evasion” – 24 November
According to Financial Times (article only available to subscribers), German prosecutors are going to investigate suspected tax evasion by Volkswagen, related to the recent emissions scandal. According to suspicions, the understatement of carbon dioxide emissions by 800.000 VW cars led to lower tax rates for the vehicles.
“Deutsche Bank created complex tax avoidance strategies” – 29 November
According to Financial Times (article only available to subscribers), Deutsche Bank has been actively devising tax avoidance schemes for some of its corporate clients. The scheme was targeted to a number of the bank’s clients with offices in Brazil, and is based on investments into a new Austrian entity that would use the invested funds to lend them back to the corporate client in another jurisdiction with more favourable withholding tax rules. According to the article’s sources, the purpose of the mechanism was to simulate a commercial rationale.
“Demand overseas territories crack down on tax dodging shell firms, PM told” – 30 November
According to the Guardian, a number of civil society organisations including Oxfam and ActionAid have written to David Cameron to demand that he discussed cracking down tax dodging, corruption and money laundering with British overseas territories. They organisations refer in particular to shell companies that have been established on certain territories to avoid obligations related to taxes, anti-money laundering and –corruption.
New regional network meeting on BEPS held in Costa Rica – 17/18 November
A regional network meeting on BEPS for the Latin American and Caribbean took place in mid-November. The meeting brought together 49 attendees representing 16 countries, who discussed and shared experiences on the delivery of the BEPS package. The discussions notably focused on options for an inclusive implementation framework as well as toolkits to meet countries’ particular needs.
Mutual Agreement Procedure Statistics for 2014 – 24 November
OECD has published its 2014 statistics for Mutual Agreement Procedure (MAP) cases under tax treaties. The statistics notably reveal the number of new cases annually, and the publication of the data is a part of OECD’s efforts to generate greater transparency of the MAP process, thereby ultimately aiming to improve the overall process for resolving tax treaty disputes.
Israel and Niue join international efforts to boost transparency and end tax evasion – 24 November/27 November
Israel and Niue have become the 91st and 92nd jurisdictions, respectively, to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The Convention notably provides administrative assistance in tax matters, exchange of information on request as well as spontaneously, tax examinations abroad, as well as assistance in tax debt collection. It was created by the OECD and the Council of Europe (not to be confused with European Council or Council of the EU) in 1988 to promote greater international cooperation and coordination in tackling tax challenges.
Corporate tax revenues falling, putting higher burdens on individuals – 3 December
OECD has published new statistics as part of its annual Revenue Statistics publication, according to which corporate tax income has been decreasing throughout OECD countries since the global economic crisis. This has put individual taxpayers under greater pressure. In average, corporate tax income fell from 3,6% to 2,8% of GDP during 2007-2014, whilst income from individual income tax increased from 8,8% to 8,9% during the same period. At the same time, VAT revenue grew from 6,5% to 6,8%.
Netherlands appeals against Starbucks decision, Luxembourg considering – 27 November/1 December
According to Financial Times (article only available to subscribers), Luxembourg is considering to appeal against Commission’s decision with regard to the tax ruling issued by the Government to Fiat which in Commission’s interpretation constitutes illegal state aid. The Dutch authorities decided to initiate an appeal procedure already on Friday 27 November, with regard to a similar Commission decision on a tax ruling granted to Starbucks.
Commission opens formal investigation into Luxembourg’s tax treatment of McDonald’s – 3 December
The European Commission is continuing its tax investigations from a state aid perspective, this time targeting tax arrangements between Luxembourg and McDonald’s. In Commission’s assessment, a tax ruling granted by Luxembourg to McDonald’s may constitute advantageous tax treatment and consequently in potential breach of EU state aid rules. The Commission will now investigate further whether its suspicions hold ground.
“Belgium braced for order to claw back €700m in corporate taxes” – 3 December
According to the Financial Times (article only available to subscribers), it is highly likely that Belgium will be requested to collect back €700m in corporate taxes from multinationals. The assessment comes from the Belgian minister of finance, Johan Van Overtveldt. The companies concerned notably include the British American Tobacco and AB InBev. According to the article, if confirmed the decision would constitute additional costs to several European companies, thereby countering US criticism that the Commission’s state aid investigations are targeting US companies more systematically.
TAXAMO publishes White Paper on “Standardizing International Digital Tax Compliance” – 20 November
TAXAMO has published a White Paper titled Standardizing International Digital Tax Compliance, which focuses notably on the challenges posed by the emerging digitalisation of economies for tax authorities and taxpayers alike. In particular, the White Paper argues that countries must design legislation for digital tax rules that is easy to comply with, thereby ultimately contributing to increasing tax returns from the digital economy. A key concern moreover is unilateral action taken by countries with disregard to the international nature of the digital economy, which causes negative practical impacts on businesses as well as compliance challenges.
“Another big corporation is flagrantly dodging tax. This must be outlawed” – 24 November
The Guardian’s journalist Simon Jenkins has written an opinion piece in reaction to the Pfizer-Allergan deal. In his article, Mr. Jenkins calls for making tax havens illegal in international law, and for the establishment of sanctions on tax haven jurisdictions.
“The fine line between tax evasion and avoidance” – 1 December
John Kay writes in the Financial Times (article only available to subscribers) about the difference between tax evasion and avoidance, in reference to the Pfizer-Allergan deal. He argues that the line between evasion and avoidance is often blurry, caused notably by the complexities and un-clarities in tax legislation. Mr. Kay concludes by stating that opportunities for tax avoidance are inherent to existing income and corporate tax systems, whilst at the same time business has become more globalised and digitalised. Consequently, in order to address avoidance, a more comprehensive and “wide-ranging reform” of tax rules is necessary.
“The window tax — an open and shut case” – 4 December
Tim Harford writes in the Financial Times (article only available to subscribers) about the relationship between architecture and tax rules. The key point is that tax incentives may have steep, counter-intuitive and often unpredictable effects on people’s behaviour and other societal factors (such as, indeed, architecture). According to Mr. Harford, these lessons are useful to consider in the context of carbon taxes, in which the hope is for people’s behaviours to change in their efforts to avoid them.
09/12/2015, EU Tax Policy – Evolution or Revolution?, ICAEW, 12:00-14:30, Brussels.
10/12/2015, The OECD/G20 Base Erosion and Profit Shifting (BEPS) Action Plan: Latest developments and implications for the EU, ERA, 08:45-17:30, Brussels.
10/12/2015, The Fight against the Shadow Economy and Tax Evasion, EY, 10:30-12:00, Brussels.
28/01/2016, 7th Annual European E-Commerce Conference, Forum-Europe, 09:30-18:00, Brussels.