Changes to the consolidated EU list of third countries for tax purposes – 12 October
The European Commission (EC) has undertaken a technical update of the consolidated Member State list of third countries for tax purposes. The list has been updated with changes to Member State assessments of third countries’ tax good governance standards as well as amendments implemented by Member States into their national lists. The list is part of EC efforts to generate greater EU coordination in tax relations with non-EU members. Discussions are already ongoing between EC and Member States with regard to a common EU approach, and in 2016 EC is expected to publish a strategy paper assessing the external risks of tax avoidance.
Commission decides selective tax advantages for Fiat in Luxembourg and Starbucks in the Netherlands are illegal under EU state aid rules – 21 October
The European Commission (EC) has declared that Luxembourg and the Netherlands have granted unfair selective tax advantages to Fiat and Starbucks, respectively. It considers the tax advantages to constitute a breach in EU state aid rules, which strictly prohibit preferential treatment of companies by Member States. EC has assessed in both cases that the tax rulings issued by the two Member States led to an artificial reduction in the concerned companies’ tax obligations as they were not reflecting economic reality. EC has ordered the authorities of Luxembourg and the Netherlands to recover €20 to €30 million from each company. In addition, EC is continuing to look into tax rulings issued in all Member States, and if deemed necessary may initiate formal investigations. The ongoing formal investigations on tax rulings concern Belgium, Ireland (Apple) and Luxembourg (Amazon). According to Euractiv, Starbucks has already expressed its intention to appeal, blaming EC for errors in its assessment. Luxembourg is considering such action as well, according to the same article.
Stakeholders have already reacted to the announcement. The S&D group for example has expressed its support towards the EC decision. Peter Simon (S&D/GER), who is the S&D spokesperson for the TAXE Committee, has stated that the rulings “should send out the message that multinationals must pay the same tax rate as medium and small businesses”. Anneliese Dodds (S&D/UK) for her part stated that the rulings demonstrate that “the EU takes tackling tax dodging seriously and is beginning the process of getting multinationals to pay their fair share”.
Commissioner Vestager statement: http://europa.eu/rapid/press-release_STATEMENT-15-5881_en.htm
The Commission establishes a European Fiscal Board – 21 October
The European Commission (EC) has announced the establishment of an independent advisory European Fiscal Board (EFB). This anticipated measure is in accordance with the actions as outlined in the Five Presidents’ Report that was published earlier this year and sets up a wide action plan to improve economic convergence, performance and governance of the European Monetary Union (EMU). The overall goal is to achieve by 2025 a fully integrated and well-functioning EMU.
EFB falls under Stage 1 of the report titled “Deepening by doing”, and comes at the same time with other measures including a revised approach to the European Semester, introduction of national competitiveness Boards, a more unified euro area representation in international financial institutions, as well as additional steps towards completing the Banking Union such as a European Deposit Insurance Guarantee Scheme as well as measures aiming to further reduce the risks in the banking sector. The purpose of the new body will be to (1.) evaluate the implementation of EU fiscal framework, (2.) provide advice on the fiscal stance appropriate for the euro area as a whole, (3.) cooperate with Member States’ national fiscal councils, and (4.) provide ad-hoc advice at the request of EC President. The Board will be composed of five experts proposed by EC for a three-year mandate renewable once. The experts must be renowned international experts in the areas of macroeconomics, public finance, fiscal policy and budgetary management. The decision establishing the EFB is effective starting November this year, and is likely to be established during 2016. Additional measures aiming to take further steps towards a more integrated EMU and possibly requiring Treaty changes will be proposed in 2017.
Commission asks Poland to stop discriminatory tax treatment of pensions contributions paid to Individual Pension Insurance Accounts – 22 October
The European Commission (EC) has asked Poland to change its national rules with regard to taxation rules on certain private pension accounts. The current rules treat certain private pension accounts more favourably if they are opened in Polish financial institutions as opposed to in another Member State, granting them tax deductions. EC suspects that this tax deduction arrangement is in violation of the free movement of capital as well as freedom of service provision. If Poland fails to provide a “satisfactory” reply within the next two months, EC may refer the case to the Court of Justice of the EU.
TAXE Committee vote on draft report postponed to 26 October
The TAXE Committee vote on the draft own initiative report on tax rulings and measures similar in nature or effect has been postponed to 26 October. The vote was initially scheduled for 15 October. The postponement of the vote clearly reflects the political sensitivity of the dossier, as well as the need for MEPs to have more time in formulating compromise amendments that can garnish sufficient support. It is of course equally possible and equally true that the sheer number of amendments, a total of 1047 extending to over 600 pages, contributes to a particularly heavy workload that needs ample time and processing before advancing to subsequent stages.
TAXE Committee publishes four studies on tax – October
In mid-October, four studies were published for the consideration of the TAXE Committee, each treating specific areas of tax policy. The first of the studies titled Nominal vs. Effective Corporate Tax Rates Applied by MNEs and an Overview of Aggressive Tax Planning Tools, Instruments and Methods concentrates on “aggressive tax planning” conducted by multinationals. More specifically, it looks into a number of techniques and methods employed by multinational corporations (MNCs) in aggressive tax planning, and puts forward empirical evidence in an attempt to demonstrate the scale and scope of the phenomenon. Finally, it looks at the international tax system and its weaknesses.
The second study titled Overview of Legislation Practices Regarding Exchange of Information between National Tax Administrations in Tax Matters takes a closer glance into information exchange between countries. In particular, it puts forward an overview of recent developments, looking also into automatic exchange. Furthermore, it covers the issue of protecting personal data and commercially sensitive information, and emphasizes the need for an international tax secret as an EU minimum standard.
The third study for its part is titled EU State Aid Law and National Tax Rulings. The name is self-explanatory – indeed, the study looks into potential state-aid issues caused by tax rulings, as under specific circumstances a tax ruling may be interpreted as illegal state aid. The challenge in determining potential breaches lies in the fact that a deviation from national legislation does not necessarily constitute evidence of selective aid.
And finally, the fourth study titled Overview of Existing EU and National Legislation on Topics Covered by TAXE Mandate looks into different tax arrangements, rulings and advance pricing agreements in general as well as in the EU in particular. It aims to identify legal and political limitations that should be taken into account by policy-makers attempting to tackle aggressive tax planning practices, whether at national, EU or global levels.
Motion for a European Parliament resolution on the Council agreement on tax rulings – 6 October
Several MEPs have expressed their dissatisfaction with the political agreement reached in the Council with regard to automatic exchange of information (AEOI) on tax rulings earlier this month. MEP Gianluca Buonanno (ENF/ITA) for example has published a Motion for a European Parliament (EP) resolution with regard to the Council agreement. In the motion for resolution, he regrets the Council decision to reduce retroactivity to a period of five years as well as the established threshold for companies with a below €40 million annual turnover and states that this is an “invitation” to continue “tax evasion”. He consequently calls on EP to reject the agreement. It is worth nothing however that EP is only submitting an opinion, and consequently cannot decide on the adoption or rejection of the recently agreed AEOI Directive.
ECON Committee votes on Automatic Exchange of Information – 13 October
The ECON Committee of the European Parliament (EP) has adopted the draft report of Markus Ferber (EPP/GER), following a consideration of and vote on tabled amendments to the report. The vote follows the political agreement on the dossier reached in the Council on 6 October, and paves the way for a final Plenary consideration and vote which is currently scheduled for 29 October. With regard to scope, MEPs would have wanted all rulings and not only those of cross-border nature to be included. The MEPs moreover planned a more active role and wider access to data for the Commission. With regard to retroactivity, MEPs are calling for all still valid rulings to be included, as opposed to the Council position on a five-year retroactivity period.
The Council however has no legal obligation to take into account the positions expressed by EP. The Council is expected to provide final endorsement for the Directive by the end of the year. Prior to this however, EP must put forward its opinion in accordance with procedural rules and EU case-law. Despite unhappiness from the MEPs’ side with the Council agreement, it is likely that the dossier will proceed within the expected timeline. The new rules will be applicable from 1 January 2017.
European Parliament discusses Digital Single Market and VAT – 13 October
A joint debate between IMCO (internal market and consumer protection) and ITRE (industry and research) Committees of the European Parliament (EP) on the Digital Single Market (DSM) took place on 13 October. IMCO is currently preparing its own-initiative report on DSM, with Kaja Kallas (ALDE/EST) and Evelyne Gebhardt (S&D/GER) as lead rapporteurs. During the joint-Committee debate, EPP group (centre-right) expressed enthusiasm for VAT simplification in order to enhance e-commerce. These calls were reflected by the ECR group (conservatives) and Vicky Ford (ECR/UK) in particular as well. During her intervention, Ms. Ford referred to VAT as a major barrier to cross-border e-commerce. Philippe Juvin (EPP/FRA) asked for a new tax (VAT) system that will “correspond to 21st century”. Birgit Collin-Langen (EPP/GER) agreed and explicitly mentioned that the different VAT systems deter proper delivery of goods across borders. Ms. Anna Maria Corazza Bildt (EPP/SWE) also asked for VAT simplification. As expected, there were no concrete proposals on how to take this forward. However, it is likely that the DSM dossier will add to arguments calling for changes to the current VAT regime. In terms of next steps, the own-initiative report is currently scheduled for a Committee vote on 14 December, whilst a Plenary vote is expected for 18 January.
Tabled amendments for Dodds-Niedermayer report on corporate tax transparency – 13 October
A total of 433 ECON Committee amendments for the draft report on corporate tax policies have been published. The amendments in particular strengthen the draft report’s calls for public Country-by-Country Reporting and information disclosure on tax rulings, criticise the tax advisory industry, call for sanctions against those promoting and conducting “aggressive tax planning”, demand for EU minimum tax rates, and urge to tackle VAT fraud. In terms of next steps, the Committee will vote on the amendments on 1 December, whilst a Plenary vote is scheduled for 19 January.
Tax rulings MEPs to multinationals: “One more chance to contribute to our work” – 16 October
MEPs of the TAXE Committee have invited representatives from several multinationals to attend its hearing with regard to corporate tax practices. The invitation follows an earlier hearing, which was attended by only four invited multinationals, angering the representatives of the special Committee and even leading to calls for banning lobbyists of non-cooperative multinationals from accessing the European Parliament. The new invitation to the hearing, which will take place on 16 November, is a a new chance for multinationals to demonstrate their willingness to cooperate, according to the TAXE Committee chair Alain Lamassoure (EPP/FRA).
List of invited multinationals: https://polcms.secure.europarl.europa.eu/cmsdata/upload/1e87b478-1d2c-4386-8726-657cfd114d93/Corporations%20invited_170715.pdf
Answer: VAT and VAT MOSS for digital services – 12 October
The European Commission has replied to a question asked in late-July by MEP Matt Carthy (GUE-NGL/IRL) with regard to VAT and VAT MOSS for digital services. In his question, Mr. Carthy refers to the administrative burdens and competitive disadvantages caused by the VAT MOSS rules on smallest companies due to a lack of thresholds. He therefore asked the Commission to elaborate how and when it will implement the new rules. In his reply, Commissioner Moscovici states that the Commission will propose a proposal in 2016 on modernising VAT for cross-border e-commerce which will notably include the extension of the current MOSS to cross-border supplies of tangible goods, the application of home country rules including invoice requirements, storage of data and audit, as well as the introduction of a VAT exemption threshold for start-up companies. Finally, the Commission has initiated “preparatory works” aiming to assess the functioning of the existing system and to identify possibilities for reform. This review will notably include “the effectiveness of the current domestic VAT exemption thresholds in the context of a destination-based VAT system and the possible ways to reduce the burdens for those businesses that are subject to VAT”.
Answer: Extended liability of Austrian hauliers/intra-Community subsequent deliveries – 15 October
The European Commission has replied to a question asked by MEP Franz Obermayr (ENF/AUT) in late-July with regard to the tax obligations of Austrian hauliers. In his question, Mr. Obermayr refers to a decision on appeal of Austria’s Independent Administrative Authority for Financial Affairs which ruled that Austrian hauliers “undertaking the clearance of goods subject to intra-Community subsequent delivery using their special VAT registration number must, in spite of following the correct procedures, pay the VAT due on imports if the recipient of the goods does not pay the purchase tax in the other Member State”; a move whose implications have been subject to heavy criticism from the Austrian haulage industry. In this regard, the MEP asked the Commission for its assessment of the described “extended liability” of Austrian hauliers, and how the Commission intends to help Austrian hauliers that have been negatively affected by the “one-sided distortion of competition”. In his reply, Commissioner Moscovici states that the Commission will evaluate the effectiveness as well as consequences of the measures introduced by Austria, and will take “appropriate actions” if deemed necessary.
G20 finance ministers endorse reforms to the international tax system for curbing avoidance by multinational enterprises – 9 October
The G20 finance ministers have given their blessing for the final package of BEPS reforms as proposed by the OECD. The ministers furthermore agreed to forward the measures to be further discussed in the G20 heads of state meeting taking place on 15-16 November in Antalya, Turkey.
New web portal on automatic exchange of information – 15 October
The OECD has launched a new web portal on automatic exchange of information (AEOI) that will provide a comprehensive overview of the work on AEOI as conducted by the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes. In particular, the website will provide tax administrations and financial institutions with key information as well as legal, administrative and IT tools aiding in the implementation of the new Standard for Automatic Exchange of Financial Account Information in Tax Matters.
Regional network meeting on BEPS & Governmental Workshop – 21-23 October
In late-October the outcomes of the BEPS project and strategies for the implementation and monitoring of the proposals were discussed at the Eastern Europe and Central Asia Regional Meeting and Governmental Workshop on BEPS. The meeting took place in Tbilisi, Georgia, and hosted 65 participants representing 15 countries who gave feedback on the implementation of the BEPS proposals and insights into how to include other interested countries in implementing and monitoring the proposals in their jurisdictions.
Commission reaches agreement in principle with German authorities on state aid procedure concerning HSH Nordbank AG – 19 October
The European Commission and German authorities have reached an agreement in principle that will enable to conclude the Commission’s state aid procedure on HSH Nordbank and approve a €3bn guarantee increase. The agreed solution includes, notably, a split of the bank into a holding company taking over most of the guarantee fee payment obligations, as well as a subsidiary that will continue the normal operations of the bank. Moreover, the operating subsidiary will be privatised ahead of which it will be “restructured” to facilitate its selling. The procedure dates back to 2013, when the bank’s risk shield had to be increased from €7 billion to €10 billion, a measure approved by the Commission but subject to additional restructuring of the bank.
Ireland establishes a reduced corporate tax rate for certain intellectual property holdings – 13 October
According to Reuters, Ireland is establishing a reduced corporate tax rate of 6,25% on earnings from certain intellectual property holdings (IP) under a new patent-based tax regime. The move goes against the current general trend in Europe towards tougher taxation of multinationals across the continent. Ireland has been systematically criticised by other Member States for a generous tax system that arguably renders it into a European offshore tax haven. Moreover, the Commission is currently investigating the Irish tax system for suspected violations of state aid rules.
“UK taxpayers ‘paying wealthy foreigners to come’” – 20 October
According to Financial Times (article available to subscribers), the UK government’s independent migration advisory committee has declared that British taxpayers are de facto subsidising wealthy foreigners living in the UK. The critique is targeted at the so-called Golden Visa system, whereby wealthy foreigners will be granted UK citizenship with the condition of significant investments on British assets. Some of the foreign investors will be allowed to keep interest on their investment, thereby amounting to British citizens paying for them to come to the UK, argues Professor sir David Metcalf of the committee.
“China’s Record Capital Outflows Put Tobin Tax Back on the Agenda” – 22 October
According to Bloomberg, China has been considering the possibility of introducing a tax on foreign-exchange transactions with the view of tackling the pressure on the Chinese currency caused by large-scale capital outflows. According to the article, the deputy administrator of the Chinese State Administration of Foreign Exchange has stated that the Chinese authorities are in the process of studying the possibility of the Tobin Tax, but with no indications on possible timetables.
“Anheuser-Busch InBev Aims Its Tax-Trimming Skills at SABMiller” – 19 October
According to New York Times, the recent purchase of SABMiller by Anheuser-Busch InBev has raised questions about the tax arrangements applied on the companies. Following the merger, ABInBev will be controlling roughly 1/3 of the global beer markets, thereby inviting authorities to scrutinize not only the competition implications but the tax obligations as well. ABInBev for example currently pays a 1% tax on its profits reported in Belgium, despite an official corporate tax rate of 34%.
“EU’s highest court exempts Bitcoins from VAT” – 22 October
According to Euractiv, the Court of Justice of the EU has ruled that Bitcoins should be subject to the same VAT exemptions as currently applied on other transactions with traditional currencies. The Court argues that bitcoins constitute a means of payment, and therefore should enjoy the VAT exemptions as conventional currencies currently do.
03/11/2015, Economic Governance of the EU: Quo Vadis?, Bruegel, 09:00-17:00, Brussels.
05/11/2015, Taxation and EU State Aid Law: Current Practice and Policy Issues, UCL, 09:00-17:00, Brussels.
10/11/2015, POLITICO Brussels Playbook Breakfast event, Politico, 08:30-09:45, Brussels.
30/11/2015, The priorities of the Dutch Presidency of the Council, EPC, 08:00-09:30, Brussels.
24/11/2015, 2015 EBF Tax Conference, EBF, time N/A, Brussels.