FEE Tax Policy Update

October 2016


  • European Parliament: ECON hearing with Commissioner Vestager – 10 October
  • Council: ECOFIN decides on tax transparency, discusses VAT fraud, progress on FTT – 11 October
  • European Parliament: ECON vote on definitive regime and VAT fraud report – 11 October


European Parliament

MEPs quiz the Commission on conflicts of interest and “Bahama Papers” leaks – 4 October

The European Parliament Plenary has held a public hearing with Commissioner Moscovici on the Bahama Leaks and potential conflicts of interest within the Commission. As a reminder, the ex-Commissioner Neelie Kroes was shown by leaked papers to have been the director of a Bahama-based offshore company during her term (please refer to FEE Tax Policy Update from 30 September for further details on the leaks). In the end, the hearing focused mainly on the Commission’s internal code of conduct, with several MEPs calling for stricter new rules and enforcement of existing ones. Commissioner Moscovici, who was representing the Commission at the hearing, emphasised that he is taking the Commission’s codes of conduct seriously, and will investigate in what ways these rules can be further strengthened.

ECON hearing with Commissioner Vestager – 10 October

The ECON Committee of the European Parliament has held a public hearing with Commissioner Vestager. The hearing is part of Commissioners’ regular dialogue with MEPs. Naturally, the discussion whose purpose was to cover a wide range of Single Market competition questions also focused on the tax state aid cases as well as the recent Apple decision by the European Commission. Commissioner Vestager defended her approach, arguing that the cases are state aid matters rather than questions of taxation per se. With regard to the Apple Ireland case specifically, Commissioner Vestager re-iterated that the Commission is not questioning Ireland’s 12,5% corporate tax rate, but merely tries to ensure that tax rulings and benefits are not used to grant illegal state aid. Danuta Maria Hubner (EPP/POL) asked the Commissioner for clear guidelines on taxation and state aid. Commissioner Vestager replied that it is too early for guidelines on this.

ECON discussion on access to AML information by tax authorities – 11 October

The ECON Committee of the European Parliament has held a first exchange of views on the Parliament’s draft report related to the Commission proposal to grant tax authorities access to anti-money laundering (AML) information (for further details on the report, please refer to FEE Tax Policy Update from 30 September). The leading MEP on the dossier is Emmanuel Maurel (S&D/FRA). During the hearing, Mr. Maurel presented his draft report and gathered feedback from the other political Groups on the report’s content. He emphasised the importance of tax authorities also being able to share the AML information, not only to gain access to it for investigation purposes. Tom Vandenkendelaere (EPP/BEL) maintained that the added value of such information should be assessed first. Pirkko Ruohonen-Lerner (ECR/FIN) called for an assessment to ensure that the proposed changes on tax authority access to AML information, together with the AML Directive’s reform, does not amount to undue access to information that tax authorities should not have. In terms of next steps, the Committee vote is scheduled for 22 November, followed by a Plenary vote on 30 November. The report forms part of the consultation procedure, whereby the European Parliament’s opinion on a dossier is required in order for it to become EU law, but the actual contents of that opinion do not have to be included in the final legislation. The actual decision will be taken in unanimity by the Member States.

ECON vote on definitive regime and VAT fraud report – 11 October

The ECON Committee of the European Parliament has voted on the draft own-initiative report on VAT fraud and a definitive VAT regime (for more details on the report, please refer to FEE Tax Policy Update from 13 May). The MEP Werner Langen (EPP/GER) is leading the dossier. A number of amendments were adopted during the vote, and the consolidated version of the report will subsequently move to the Plenary, where a final vote is currently scheduled for 21 November. The report is legally non-binding as taxation at the EU-level remains subject to Member States’ unanimous decision-making. As such, the report commits neither the Commission or the Council to take action.

PANA Committee discussion on international standard-setting – 13 October

The PANA Committee of the European Parliament has held a public hearing with experts on international standard-setting on anti-tax evasion and money laundering rules. The speakers for the hearing were Michael Lennard form UN’s International Tax Cooperation Section, Caroline Malcolm from the OECD’s Centre for Tax Policy and Administration, Daniel Thelesklaf Committee on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), as well as Isabelle Vaillant from the European Banking Authority (EBA). The hearing itself focused mainly on better enforcement and implementation of international standards. Some discussion also took place on public Country by Country Reporting (CBCR), with UN’s Michael Lennard predicting that a global public CBCR framework will eventually emerge.


Council – ECOFIN 11 October

ECOFIN Council decides on tax transparency, discusses VAT fraud

The EU Finance Ministers have made a number of tax related decisions during their latest ECOFIN meeting. Of particular interest, the Ministers adopted their conclusions on the Commission Communication to further enhance tax transparency in the aftermath of the Panama Papers (for further details on the Communication, please see FEE Tax Policy Update from 8 July).

More specifically, the Ministers endorsed the Commission’s announced plans to address the role of tax advisors through a consultation and a subsequent legislative proposal (e.g. in the form of amending the Directive on Administrative Cooperation) inspired by the BEPS Action 12 on the disclosure of tax planning schemes. They, however, urge the Commission to seek a “global approach” on this with EU’s international partners, and to be mindful of “appropriate legal safeguards”. In the same Conclusions, the Ministers also emphasise the need for tax certainty for businesses, and urge the Commission to take further EU-level action on whistle-blower protection.

On the VAT side of things, most Ministers opposed the proposal to include VAT fraud within the scope of the Directive on the protection of EU’s financial interests. The general feeling was that VAT fraud is primarily a challenge for national budgets, not the EU’s, and as such should be primarily addressed at the Member State level. Certain Member States (e.g. Austria, Finland, Netherlands and Portugal) are willing to compromise, however, if the Directive only touches on fraud cases above a €10 million threshold and involving two or more Member States.

Further progress made on FTT

The 10 participating Member States have given the European Commission a mandate to propose legislation on a Financial Transaction Tax (FTT). According to the German Finance Minister Wolfgang Schäuble, the participating countries have achieved an agreement in principle. The compromise text, however, still includes nothing on common tax rates or is lacking on technical details on the application of the FTT. These issues will have to be dealt with in later discussions. On the basis of the compromise, the European Commission will propose FTT draft legislation by the end of the year.

Monaco taxation agreement approved by EU

The EU Finance Ministers have approved without discussion the taxation agreement between the EU and Monaco. The agreement will grant the signatories’ tax administrations improved cross-border access to information on the financial accounts of each other’s residents. The agreement was signed already earlier in July.


Court of Justice of the EU

Ruling on the VAT treatment of human blood – 5 October

The Third Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the VAT treatment of human blood. The case code is C‑412/15. In its ruling, the Court establishes that supplies of plasma obtained from human blood may be subject to VAT if the plasma is not intended to be used for “direct therapeutic purposes” but, rather, for the production of medicinal products.

Ruling on the principle of fiscal neutrality – 5 October

The Seventh Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the principle of fiscal neutrality in VAT. The case code is C‑576/15. In its ruling, the Court establishes that national legislation may enable for tax authorities to presume that where goods are not in the warehouse of the taxable person to whom they have been supplied and the tax documents of relevance to those goods have not been recorded in the accounts of that taxable person, the taxable person subsequently sold those goods to third parties. Tax authorities can in such situations determine the taxable amount of the sale of those goods according to “factual information at hand”.

Ruling on the concept of ‘taxable person’ – 12 October

The Third Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the concept of a “taxable person”. The case code is C‑340/15. In its ruling, the Court establishes that under certain conditions, multiple civil-law partnerships must be regarded as independent undertakings which are taxable persons for VAT purposes. Such civil-law partnerships must:

  • Conduct themselves outwardly as such and independently in relation to their suppliers, public authorities and, to a certain extent, their customer;
  • Carry out their own production by using for the most part their means of production;
  • Market a large proportion of their products under a common trade mark through a limited company the shares in which are held by members of those civil-law partnerships and by other members of the family in question.



“Prime minister puts irresponsible capitalism ‘on warning’” – 5 October

As reported notably by the Financial Times (article only available to subscribers), the British Prime Minister Theresa May has announced her intention to clamp down “irresponsible capitalism” and “unfairness”. In practice, this means addressing certain companies’ and their tax advisors’ tax planning schemes. Labour Party MEPs have already reacted to the Prime Minister’s speech, stating that her words are mere empty talk if the UK does not implement the EU Anti-Tax Avoidance Directive (ATAD) even after a prospective Brexit.

“Accountant Fined By HMRC For Obstructing VAT Fraud Probe” – 6 October

According to Tax News, an accountant has been fined by the UK’s HMRC for “obstructing” a VAT fraud investigation. HMRC claims that the accountant refused to assist investigators in a case involving his clients despite a legal obligation to cooperate. The fine amounts to £25,000. Should the accountant fail to pay, he may face up to 18 months in prison. The case is, according to the article, first of its kind for the HMRC.

“UK To Take New Fiscal Policy Direction From November” – 6 October

As reported notably by Tax News, the British Chancellor Phillip Hammond has announced a new fiscal policy direction for the UK. In particular, the new Government will abandon the current plan to restore fiscal balance by 2020. This will not, however, mean abandoning earlier plans to cut corporate tax down to 17%, but tax increases in other areas may be necessary.

“Switzerland Reforms VAT Rules On Foreign Suppliers” – 6 October

According to Tax News, the Swiss Parliament has adopted new legislation that would require non-Swiss companies with a turnover exceeding CHF100,000 to introduce a VAT in their transactions with Swiss customers. The existing regime provides for an import VAT exemption for imported deliveries below CHF200. Finally, as part of the new legislation non-resident service providers in Switzerland will have to register for VAT purposes should their global annual income be above CHF100,000.

“UK Parliament To Decide On New Tax Evasion Offense” – 12 October

According to Tax News, a new Criminal Finances Bill is about to go through the first reading at the UK House of Commons. The Bill entails a new tax evasion provision, which would hold senior management liable for the introduction of anti-evasion measures in order to prevent tax evasion by their own employees as well as external service providers. The law firm Pinsent Masons assesses that if implemented, the new provision would impose additional and heavy administrative burdens as well as risks for companies and their senior executives.

“Chinese Tax Breaks For Corporate Loan Restructuring” – 12 October

According to Tax News, China is planning to introduce tax breaks to Chinese companies with excessive debt burdens and undertaking capital restructuring. The breaks would take the form of debt to equity swaps. The Chinese authorities insist that the relief is only available to prospective companies facing short-term challenges, not to loss-making “zombie companies”.

“US modifies plans to crack down on tax inversions” – 14 October

According to Financial Times (article only available to subscribers), the US Government has made changes to its plans to tackle companies’ offshore de-localisation for tax optimisation purposes. The changes were made in order to minimise “collateral damage” to compliant companies. The measures aim to prevent inversion deals such as Pfizer’s failed takeover of Allergan (for further details, please refer to FEE Tax Policy Update from 4 December 2015). The announced measures, however, caused outrage within the business community, many members of which arguing that the changes would undermine their internal loans. The US Government has, consequently, decided to establish a much narrower focus on aggressive tax planning, and provide a number of exemptions.



OECD Secretary-General report to G20 Finance Ministers – 7 October

The OECD has published the latest report of its Secretary-General to the G20 Finance Ministers. As always, the report consists of two parts, the first of which provides an update on the progress by the Global Forum on Transparency and Exchange of Information for Tax Purposes. The second part of the report is an update on tax transparency, with particular focus on beneficial ownership information.

OECD publishes videos of its public consultation on the attribution of profits to permanent establishments – 11 October

As a follow-up to its discussion draft on the attribution of profits (see FEE Tax Policy Update from 19 September for further details), the OECD organised a public consultation in Paris with stakeholders to discuss the results and to seek additional guidance from relevant experts. As a follow-up to the public consultation event, the OECD has now published full videos of the event (both for the morning and afternoon sessions).



State Aid

State aid transparency: Why? What? When? Where? How? – 30 September

The European Commission has published a policy brief on new provisions entering into force on state aid transparency. The policy brief provides an overview of the State Aid Modernisation programme’s provisions requiring the granting authorities to provide information about individual aid awards that exceed €500,000. The authorities have six months to provide the information, although with tax advantages the notification period is extended to one year from the date of submission of relevant tax declarations.

“Ireland Steadfast On Apple Ruling” – 5 October

As reported notably by Tax News, the Irish Government has reiterated its commitment to appeal against the Commission decision regarding suspected selective tax state aid granted to Apple. The Irish Finance Minister, Michael Noonan, addressed the Senate in arguing that the decision has damaged the country’s reputation, maintaining that it is “simply untrue” that Ireland provided favourable tax treatment to Apple, and hinting that the tax income from Apple would probably be payable in the US, rather than Ireland.

Commission publishes 2014 letter on its investigation into Gibraltar’s corporate tax regime – 7 October

The European Commission has published the text of a letter, dated 1 October 2014, in which it informed the UK of its decision to investigate Gibraltar’s corporate income tax regime. The letter contains, amongst other things, a description and Commission assessment of the Gibraltarian scheme, an outline of the UK’s position, and Commission’s arguments for claiming that up to 165 individual rulings provided by Gibraltar under its corporate tax regime constitutes illegal state aid.


Other News

World Health Organisation urges all countries to tax sugary drinks – 11 October

As notably reported by the Guardian, the World Health Organisation (WHO) has called on all countries to introduce a sugar tax on soft drinks. According to the WHO, an increase of 20% or more in the drinks’ prices would significantly reduce their consumption and, by extension, help tackle the obesity crisis that has reached alarming global proportions. Moreover, the organisation maintains that such a tax could not only increase countries’ tax yields, but also decrease healthcare costs with reduced obesity rates.

“US markets braced for trading tax grab from Democrats” – 11 October

Gregory Meyer has written an article in the Financial Times (only available to subscribers) on the Democratic Party’s plans for a financial transaction tax (FTT). Whilst some Democratic politicians have called for a more comprehensive FTT that would include within its scope trades of stocks, bonds and derivatives, Hillary Clinton is aiming for a smaller scale tax on high-frequency trading (HFT). Whilst the defenders of various forms of FTT see in such schemes the potential to tone down high-risk speculation whilst increasing tax income, critics argue that these two goals (driving down the volume of trading whilst seeking higher tax yields) are contradictory.

“EU Cautioned on Plans to Regulate Tax Advisers” – 12 October

Bloomberg has published an article on the Commission’s plans to propose legislation on tax advisors. During the October ECOFIN meeting (see article above), EU Finance Ministers endorsed Commission plans to look into the role of tax advisors as a follow-up to the Panama Papers leaks. In the article, representatives of accountancy organisations as well as a tax lawyer warn that for any EU-level initiative, a level-playing field between different service providers (lawyers, accountants, etc.) across Member States and different legal frameworks must be ensured.


MEP Questions & Answers

VAT exemption on electric and hybrid electric vehicles – 26 September

The European Commission has replied to a question asked by the MEP Tibor Szanyi (S&D/HUN) with regard to VAT exemption on electric vehicles. In his question, Mr. Szanyi asks the Commission whether VAT reduction and VAT exemption on electric and hybrid electric vehicles are in conflict with EU law. In his reply, Commissioner Moscovici states that the VAT Directive does not provide for special rules for electric vehicles, and as such the general VAT rules apply on them, i.e. such vehicles are subject to the standard VAT rate. However, Commissioner Moscovici points to the Commission’s planned 2017 reform of EU VAT rate reform, which would give Member States greater flexibility on setting their national rates.



18/10/2016, Tax transparency: Do new global standards really provide a level playing field?, Euractiv.

  • Source: tbc

20/10/2016, Public Country-by-Country Reporting: Tax disclosures in the spotlight, Federation of European Accountants (FEE), Brussels.

25/10/2016, Fair and Sustainable Taxation in the EU, FairTax, Brussels.

10/11/2016, International conference on responsible taxation in development finance, Eurodad, Oxfam, Brussels.

15/11/2016, C(C)CTB: Is the path clear?, Federation of European Accountants (FEE), Brussels.

17-18/11/2016, Taxation, investment and innovation: a triptych for balanced growth, European Commission, IMF, Brussels.

21-22/11/2016, Tax Audit Forum, International Tax Center, Munich.