Communication on the collaborative economy published, tax implications – 2 June
The European Commission has published a communication on the collaborative economy. The communication includes non-binding recommendations to Member States on issues such as how to further foster the collaborative sector and collaborative platforms, ensure consumer protection and liability, and how to address the tax dimension. With regard to tax, the communication maintains (unsurprisingly) that the collaborative sector should indeed be subject to tax and VAT rules, and calls on collaborative platforms to cooperate better with national tax administrations in this regard. Moreover, Member States should assess their tax rules to create a level playing field for businesses providing the same services, whilst continuing simplification efforts, increasing transparency and issuing online guidance on the application of tax rules to collaborative business models. The Staff Working Document that accompanies the communication entails an overview of existing national tax rules for the collaborative economy, as well as impacts on tax administrations.
Staff Working Document: http://ec.europa.eu/DocsRoom/documents/16881/attachments/3/translations/en/renditions/native
Mandate of the Panama Papers inquiry Committee published, Committee approved in vote – 2/8June
The European Parliament Plenary has voted in favour of the establishment of a Panama Papers inquiry Committee, to consist of a total of 65 MEPs (with at least 20 from EPP, 17 from S&D, 6 from ALDE and 4 from Greens-EFA). The Committee will start serious work in Autumn, but is expected to hold a first meeting before the summer break.
In terms of mandate, the Committee will partially continue the work of the TAXE I and II Committees, but will overall be a new entity with a new allocation of MEPs, most of whom are still likely to come from the ECON Committee. The main purpose of the new Committee is to investigate “alleged contraventions” and “alleged maladministration” in the application of EU law in the areas of Anti-Money Laundering (AML), tax avoidance and tax evasion. It appears that the subjects of investigation are no longer multinationals and their tax optimisation practices per se, but rather public authorities (Commission, Member States, others) that have in the MEPs’ interpretation failed to properly implement and enforce existing legislation, as well as banks and other “financial institutions” that have played an enabling role in the creation of offshore accounts, shell companies, transfers etc. The Committee report, when published, will be legally non-binding. However, it will maintain and strengthen political pressure and momentum, draw attention onto the issues covered by its scope, and establish the European Parliament’s positions on key topics. Moreover, it is already evident that the Commission does not hesitate to initiate binding legislative action on the basis of European Parliament demands, if it deems there to be sufficient political momentum for it. Commission action targeting tax advisors is expected this year.
European Parliament study: Influence of EU Law on Taxation in the EU Member States’ Overseas Territories and Crown Dependencies – 6 June
The TAXE II Committee of the European Parliament has published a study titled Influence of EU Law on Taxation in the EU Member States’ Overseas Territories and Crown Dependencies. As the name suggests, the study focuses on how EU state aid rules, secondary EU tax law and the Overseas Association Decision influence the tax law and practice in Member States’ overseas territories. The study identifies mismatches in how these provisions apply in different types of overseas territories. It recommends the amendment of the Overseas Association Decision as a potential solution.
Plenary discussion and vote on ATAD – 7/8 June
The European Parliament has formally adopted its opinion on the Anti-Tax Avoidance Directive (ATAD). The report passed the Plenary vote with 486 in favour, 88 against and 103 abstentions. Prior to the vote, MEPs held a debate on the report and its recommendations. During the discussion, a number of MEPs from the Right side of the political spectrum (EPP, ALDE, ECR) expressed concerns that the ATAD could risk the competitiveness of EU businesses. On the other side (Greens, the Left), MEPs expressed frustration at the lack of progress and watering down of the ATAD by the Member States, and emphasised that “aggressive tax planning” leads to a competitive disadvantage for SMEs. With regard to tax advisors, MEPs including Eva Joly (Greens-EFA/FRA) and Paloma Lopez Bermejo (GUE-NGL/SPA) called for tougher sanctions. In his intervention during the debate, Commissioner Moscovici confirmed that the Commission will monitor Member States’ efforts to reform their patent box systems, and will propose separate legislation if no satisfactory progress has been made by the end of the year.
With regard to the actual content of the Parliament ATAD report, the final version proposes a number of amendments to the initial Commission proposal. Of particular interest, the report proposes a threshold of 20% or €2 million for the interest limitation rule, drawing up a list of “tax havens” including EU countries, prohibition of the use of letterbox companies, introducing a common method for calculating the effective corporate tax rate across the EU, the creation of a European Tax Identification Number, and a quick implementation of the Common Consolidated Corporate Tax Base (CCCTB). The report and its recommendations, however, are not legally binding and commit neither the Commission or the Council for political action.
Amendments to TAXE II Committee draft report published – 8 June
A total of 541 amendments have been tabled for the TAXE II Committee report titled Tax rulings and other measures similar in nature or effect. The amendments touch upon all main sections of the report, and in particular with regard to tax advisors a great number of conflicting amendments have been submitted by different political Groups. In terms of next steps, the political Groups will negotiate on compromise amendments in the upcoming weeks, a Committee vote is scheduled for 21 June whilst a Plenary vote is for the time being expected for 4 July.
Financial transactions tax: state of play – 23 May
The Council of the EU has replied to a question asked by the MEPs Ramón Jáuregui Atondo (S&D/SPA) and Jonás Fernández (S&D/SPA) with regard to the status of the Financial Transaction Tax (FTT). In their question, the MEPs ask whether the issue of derivatives taxation has been resolved, what unresolved issues still remain, and which countries are not in favour of the most recent Presidency proposal on FTT. In its reply, the Council refers to the Council statement on FTT from 8 December 2015, in which the question of derivatives is brought up (see FEE Tax Policy Update from 18 December). Moreover, the Council confirms that it is not in a position to predict the outcomes of the FTT work and negotiations.
VAT rate applied to hairdressing and beauty services – 27 May
The European Commission has replied to a question asked by the MEP Brian Hayes (EPP/IRL) with regard to VAT on beauty services. In his question, Mr. Hayes asks the Commission whether it will consider allowing hair and beauty services to be subject to a single VAT rate, whether any mechanism to allow for such a single rate already exists, and whether the Commission will address the issue as part of its VAT Action Plan. In his reply, Commissioner Moscovici states that Ireland may not apply a rate below 12% on such services, and confirms the well-known fact that the Commission will provide Member States with the option of more freedom in setting up reduced rates.
Panama Papers — establishment of an international tax agency – 30 May
The European Commission has replied to a question asked by a group of Spanish GUE-NGL MEPs with regard to Panama Papers and the possibility of an international tax agency. In their question, the MEPs ask the Commission whether it would be ready to support an international tax agency under UN auspices to combat tax avoidance and tax competition between countries, with the power to impose penalties and to compel multinationals to pay taxes where they generate profits. In his reply, Commissioner Moscovici states that “good progress” can be achieved with the already existing OECD BEPS project which should encompass as many countries as possible, including from the developing world.
Judgment on ‘tax lease’ arrangement for shipbuilding – 30 May
The European Commission has replied to a question asked by the MEP Izaskun Bilbao Barandica (ALDE/SPA) with regard to the Spanish tax lease arrangement for shipbuilding. In her question, Ms. Bilbao Barandica refers to a General Court ruling which overturned an earlier Commission penalty against the Spanish ‘tax lease’ arrangement for financing shipbuilding. She therefore asks the Commission whether it will compensate for any losses or damages caused by its initial decision, whether it will assess the impact that the Commission decision had on the Spanish shipbuilding sector for the benefit of the Dutch one, and why it has not taken any action against the Dutch system for financing shipbuilding. In her reply, Commissioner Vestager points out that the Commission has appealed against the General Court ruling, and that although the Commission is currently investigating the Dutch tax system for the shipbuilding sector, it is fundamentally different from the Spanish one.
Panama Papers — UK agreement on access to information on beneficial ownership – 31 May
The European Commission has replied to a question asked by the MEP Jeppe Kofod (S&D/DEN) with regard to a UK agreement on access to information on beneficial ownership. In his question, Mr. Kofod states that the UK has agreed with Commonwealth “tax havens” that it can access the beneficial ownership information of companies registered in those jurisdictions. He therefore asks the Commission how it will ensure that other EU Member States can access this same information, whether the UK has been in contact with the Commission on the agreement, and whether the Commission will request the Commonwealth jurisdictions to grant similar access to other EU countries. In his reply, Commissioner Moscovici confirms that the Commission is in contact with UK authorities on the matter but has no mandate to address the Commonwealth jurisdictions directly. He moreover lists measures that the Commission is undertaking both at EU and international levels in order to improve Member States’ access to beneficial ownership information.
Tax competition – 1 June
The European Commission has replied to a question asked by the MEP Louis Michel (ALDE/BEL) with regard to tax competition. In his question, Mr. Michel refers to the practice by US multinationals to funnel profits through “tax havens”, and asks the Commission how it will address the practice. In his reply, Commissioner Moscovici refers to the number of measures and proposals that the Commission has already taken to address tax optimisation by multinationals. He moreover states that the treatment of profit repatriation by third countries is fundamentally a matter for the third countries concerned, in this case the US, but that the issue can be addressed by adequate application of the OECD BEPS recommendations.
Questionnaire on tax regime in ports – 2 June
The European Commission has replied to a question asked by the MEP Kathleen van Brempt (S&D/BEL) with regard to the questionnaire on tax regime in ports. In her question, Ms. van Brempt refers to a questionnaire on tax regimes in ports sent by the Commission to Member States back in 2013. She asks the Commission whether it has investigated to what percentage of turnover the corporate tax paid by port managing bodies applies, and whether it has looked into possible exemptions and reasons for them. In her reply, Commissioner Vestager states that the results of the questionnaire show that there are substantial differences among EU countries in relation to ownership of ports, organisational structures, financing and tax treatment. Moreover, she confirms that the Commission is not aware of the percentage of turnover to which corporate tax paid by port managing bodies applies. Potential breaches of state aid rules will be assessed on a case-by-case basis.
Potential non-tariff barriers in food taxation – 2 June
The European Commission has replied to a question asked by the MEP Daniel Dalton (ECR/UK) with regard to non-tariff barriers in food taxation. In his question, Mr. Dalton asks the Commission whether it has examined to what degree different tax rates on different food product and ingredient types (such as sugar taxes, or taxes to benefit local products) constitute non-tariff barriers both within the Single Market and beyond. In his reply, Commissioner Moscovici states that the EU has strict rules on the application of special tax rates on different products, and these must not be discriminatory in nature. The Commission does not systematically monitor all non-harmonised indirect taxes, but will investigate whenever complaints are submitted.
Fiscal dumping relating to intellectual property issues (‘patent boxes’) – 2 June
The European Commission has replied to a question asked by the MEP Françoise Grossetête (EPP/FRA) with regard to patent boxes. In her question, Ms. Grossetête refers to a relocation of a HP department from France to Switzerland due to the latter having more generous tax rules, for example a preferential tax rate for intellectual property. She consequently asks the Commission whether it will take “fiscal counter-measures” against Switzerland, and what measures the Commission will take to reduce tax competition arising from patent boxes. She finally asks the Commission whether it is considering any measures to encourage the harmonisation of tax rates. In his reply, Commissioner Moscovici confirms that the Commission closely monitors that the patent box regimes in EU countries and beyond are in line with the nexus approach. Moreover, so far Commission suggestions for minimum effective taxation have not received high interest from Member States in the Code of Conduct Group.
Swedish interest deduction limitation rules – 6 June
The European Commission has replied to a question asked by the MEPs Rina Ronja Kari (GUE-NGL/DEN) and Malin Björk (GUE-NGL/SWE) with regard to the interest limitation rules in Sweden. In their question, the MEPs state that the Commission ordered Sweden earlier to amend its interest limitation rules as it saw these as a breach of EU law; according to the MEPs however, Sweden has not taken such action yet. They consequently ask the Commission whether it will take further steps to ensure that Sweden will comply. In his reply, Commissioner Moscovici confirms that the case is still ongoing and as such he cannot comment on the details. However, should Sweden fail to adequately address the concerns raised, the Commission may refer it to the Court of Justice of the EU.
The ‘Panama Papers’ affair – 6 June
The European Commission has replied to a question asked by the MEP Claude Rolin (EPP/BEL) with regard to the Panama Papers. In his question, Mr. Rolin asks the Commission whether it will include countries such as the US or Switzerland on the upcoming list of non-cooperative jurisdictions. In his reply, Commissioner Moscovici states that the screening process to identify such potential jurisdictions is still ongoing, and as such the Commission may not comment yet which countries are going to be included on the common EU list.
Panama Papers – 7 June
The European Commission has replied to a question asked by the MEP Daniel Buda (EPP/ROM) with regard to the Panama Papers. In his question, Mr. Buda asks the Commission what instruments it has at its disposal to ensure that multinationals declare their beneficiaries and people evading taxes can be held accountable for their actions. In his reply, Commissioner Moscovici lists a number of transparency and exchange of information measures and initiatives that the Commission has undertaken both at EU and OECD levels.
“EU financial transaction tax progress stalls” – 5 June
According to the Financial Times (article only available to subscribers), progress on the Financial Transaction Tax (FTT) has been slow, with officials admitting that there has been little progress in the past six months. The deadline for an agreement is set for June. Following Estonia’s departure from the group of 11 countries that agreed to jointly work on the FTT, both Belgium and Slovenia have shown signs of wavering. Key reservations relate in particular to the structure and scope of applicability of the FTT. The European Commission, in the meanwhile, maintains that the FTT remains a political priority.
ECOFIN on 17 June to focus on ATAD, FTT, and reverse charge mechanism – 10 June
EU Finance Ministers will meet on 17 June for an ECOFIN session. On the agenda, approval for the Anti-Tax Avoidance Directive (ATAD) which the Member States failed to agree on last month. The Dutch Presidency together with the Commission has worked hard to address some final reservations that remain (see FEE Tax Policy Update from 27 May for further details). Another point on the agenda is the Financial Transaction Tax (FTT), and the Finance Ministers will receive an update on the state of play and progress on the negotiations (see article above for additional details). And finally in the are of VAT, the Finance Ministers will discuss “possible broader uses” of the reverse charge mechanism, in particular at national level for domestic transactions.
Ruling on withholding tax on dividends received by non-resident pension funds – 2 June
The First Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on withholding tax on dividends. The case code is C-252/14. In the ruling, the Court notably establishes that dividends distributed by a resident company may be subject to a withholding tax if the dividends in question are paid to a non-resident pension fund.
VAT ruling on agricultural engineering works – 2 June
The Eighth Chamber of the Court of Justice of the EU (CJEU) has issued a ruling VAT in agricultural engineering works. The case code is C-263/15. In the ruling, the Court notably establishes that agricultural engineering works by a non-profit company which engages in such commercial activities only on an ancillary basis does constitutes an economic activity. Moreover, the Court argues that
Ruling on Incurrence of a customs debt as a result of non-fulfilment of an obligation – 2 June
The First Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on customs debt. The codes of the cases covered by the ruling are C‑226/14 and C‑228/14. In the ruling, the Court establishes that VAT on goods which have been re-exported as non-Community goods is not due if those goods have not been removed from the customs arrangement. By extension, the Court concludes that no one is liable to pay VAT in the cases described in the ruling.
Ruling on gift tax – 8 June
The First Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on gift taxes. The case code is C-479/14. In the ruling, the Court notably prohibits national rules providing for the recourse to a method of calculation of tax by the application of a lower tax-free allowance in the case of gifts between non-residents.
Ruling on deduction of input tax – 9 June
The Fourth Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the deduction of input tax. The case code is C‑332/14. In the ruling, the Court notably establishes that in the case of buildings used to carry out output transactions in respect of which VAT is deductible and others in respect of which it is not, Member States do not have an obligation to “prescribe that the input goods and services used for the construction or acquisition of that building must” be assigned exclusively to one or other of those types of transactions.
“French finance minister rules out Google tax deal, more firms could be targeted”
As reported by a number of media sources, the Finance Minister of France, Michel Sapin, has stated that he will not be seeking deals with multinationals on unpaid taxes and will instead “apply the law”. This is in contrast with the tax deal struck between the UK and Google in January. French authorities have already conducted raids the French headquarters of Google and McDonald’s.
“French tax authorities seek €356m from Booking.com” – 1 June
As reported notably by the Guardian, the French tax authorities are aiming to recover up to €356 million in unpaid taxes from the online accommodation booking website, Booking.com. The tax authorities argue that Booking.com has had a permanent base in France, and are consequently attempting to recover unpaid income tax and VAT. Priceline Group, the owner of Booking.com, argues in turn that it is in full compliance with relevant tax laws.
“Spanish Welcomes Surge In Voluntary Tax Disclosures” – 2 June
According to Tax News, the Spanish tax authority has indicated that over €2,6 billion in unreported cash assets, €1 billion in property and €10,1 billion in financial instruments were declared in 2015. The discovery of the unreported assets is the outcome of the so-called Form 720, introduced in 2013, that requires taxpayers with overseas assets above a certain threshold to provide information on their offshore accounts, investment and real estate. Although criticised by a number of stakeholders and under scrutiny by the European Commission, the Spanish tax authority maintains that it has discovered over €141 billion in previously undeclared offshore assets since the introduction of the Form 720.
“US Senators Push For Public CbC Reporting Requirement” – 8 June
According to Tax News, four US Senators (including Bernard ‘Bernie’ Sanders) have called on the US Government to propose public Country by Country Reporting (CBCR). The Senators acknowledge the need for “appropriate measures” to avoid the disclosure of business sensitive information, but state that generic key information such as profits, taxes paid and number of employees should not be a problem. A proposal for CBCR was issued in December 2015 by the Internal Revenue Service (IRS).
OECD releases discussion draft on the multilateral instrument to implement the tax-treaty related BEPS measures – 31 May
OECD has published a request for input on the development of a multilateral instrument to implement tax-treaty related BEPS measures. The consultation relates to the BEPS Action 15 (developing a Multilateral Instrument to Modify Bilateral Tax Treaties). The multilateral instrument is currently aimed to be opened for signature by the end of the year. The request for input outlines the background and purpose of the multilateral instrument and describes briefly the technical issues arising from its development. The deadline for providing input is 30 June.
Brazil, Jamaica and Uruguay expand their capacity to fight international tax avoidance and evasion – 1 June
Jamaica and Uruguay have signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. In parallel, Brazil has deposited its instrument of ratification of the Convention (meaning that the convention will be in force in Brazil from 1 October 2016 onwards). The Convention notably provides administrative assistance in tax matters, exchange of information both on request, spontaneously and automatically, tax examinations abroad, simultaneous tax examinations as well as assistance in tax collection.
Commissioner Vestager delivers speech on state aid investigations – 3 June
Commissioner Vestager has delivered a speech on the Commission’s state aid investigations. In her speech, Commissioner Vestager argues that multinationals not paying their “fair share” of taxes is a threat to the Single Market and fair competition. She therefore calls for multinationals to consistently apply the ‘arm’s length principle’. Whilst the Commissioner acknowledges practical difficulties in figuring out what the market prices are under certain circumstances, she maintains that what truly matters is that “the transfer pricing methodology used to calculate the profits of a group leads to a reliable approximation of a market-based price”.
DG Competition working paper on state aid and tax rulings – 3 June
DG Competition of the European Commission has published a working paper on the state aid tax ruling investigations. The working paper notably provides rationale and background for the Commission’s state aid tax investigations, some preliminary findings on transfer pricing rulings that the Commission has discovered during its investigations, and concludes by repeating the argument according to which preferential tax treatment is a matter of Single Market competition policy and as such fall under the Commission’s area of competence.
European Commission publishes “non-confidential” versions of its decisions to open in-depth investigations into McDonald’s and Fiat Luxembourg – 6/8 June
The European Commission has published the so-called non-confidential versions of its decisions to investigate the transfer pricing practices of McDonald’s and Fiat in Luxembourg. The decisions to open the investigations were made on 3 December 2015 and 21 October 2015, respectively. Both published decision documents outline the procedure followed, a description of the aid measures suspected to be in breach of state aid rules, and the final Commission decision.
The Netherlands is a tax haven, argues a new report by the Dutch Oxfam
The Dutch branch of Oxfam has published a report in which it argues that the Netherlands should be classified as a tax haven. The report bases its claims on criteria for the identification of such jurisdictions established by the European Commission on its Anti-Tax Avoidance Package (ATAP). It argues that the Netherlands fulfils a total of 17 out of 33 criteria put forward by the Commission. Of additional interest, the report discusses the role of tax advisors, and in particular of the big four. It argues that tax advisors are often found advising the government as well as the European Commission, whilst working to optimise the tax obligations for their corporate clients. As a solution, the report calls for example for public Country by Country Reporting (CBCR) and a Common Consolidated Corporate Tax Base (CCCTB) with a minimum corporate tax rate.
The report has already been noted by stakeholders, and for example the MEP Hugues Bayet (S&D/BEL) asked a question from the Commission by reference to the report, inquiring in particular for Commission plans to regulate tax advisors. The Commission will deliver a reply to the question in the upcoming weeks.
Original report (in Dutch): http://www.oxfamnovib.nl/Redactie/Downloads/Rapporten/Nederland_belastingparadijs.pdf
MEP question by Mr. Bayet: http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2016-004159&format=XML&language=EN
“The overselling of financial transaction taxes” – 6 June
Kenneth Rogoff argues in the Guardian that there are highly unrealistic expectations for financial transaction taxes (FTT). He points to arguments in favour of FTTs maintaining that such a tax would amongst other things reduce the volatility of financial markets. Professor Rogoff, however, argues that such claims are unfounded as practice has demonstrated that FTTs are not particularly effective in crisis prevention or mitigation. He instead calls for tighter and better financial markets regulation to curb volatility.
“Middle-Market Firms Concerned About BEPS Shortcomings” – 08 June
According to Tax News, a survey conducted by the consulting firm RSM US shows wide concerns amongst middle-market businesses (revenues ranging from $5 million to $1 billion) towards the BEPS recommendations. The survey involved 494 international business leaders, and demonstrated that up to 72% of the respondents foresee a 5-10% increase in their effective taxes, whilst 92% anticipate increased costs of compliance.
“Multinational tax avoidance cost Australia $6bn in 2014, Oxfam report claims” – 9 June
As reported notably by the Guardian, a new report by Oxfam argues that Australia lost approximately $6 billion due to tax avoidance in 2014. In addition, the report’s data demonstrates companies based in Australia invest increasing amounts into offshore “tax havens”, with an increase from an estimated $56.4 billion in 2009 to $79.1 in 2014.
15/06/2016, 3rd Global Tax Policy Conference, Maastricht University, Maastricht.
15/06/2016, Fair taxation and sustainable development, group of NGOs, Brussels.
29/06/2016, Taxation in the digital economy, EIF, Brussels.
29/06/2016, Tax is a feminist issue!, Greens-EFA Group, Brussels.
6-7/09/2016, Bruegel Annual Meetings, Bruegel, Brussels.
13/10/2016, EPC 20th Anniversary Conference, EPC, Brussels.
11/2016, Tax Day, Federation of European Accountants, Brussels.