The Commission requests Austria to amend its tax rules – 22 July
The European Commission has published its monthly infringements package for July. In the package, the Commission announces two tax rule corrections it has requested Austria to undertake in order to ensure the country’s compliance with relevant EU rules. The first one concerns the VAT treatment of resale rights of works of art. Currently in Austria, the resale of works of art is subject to VAT. However, since there is no contractual relationship between the buyer and the artist, the Commission considers that such a provision is an infringement of the VAT Directive. The second case relates to rules requiring non-resident taxpayers to appoint fiscal representatives. Currently in Austria, non-resident taxpayers must appoint representatives to administer their tax affairs on their behalf. However, persons resident in Austria do not have to comply with this legislation. The Commission therefore considers that the rules result in discriminatory treatment on the grounds of nationality. For both cases, Austria has two months to provide a “satisfactory reaction” or face the risk of being referred to the Court of Justice of the EU (CJEU).
PANA Committee Chair and Vice-chairs appointed – 12 July
The members of the newly established investigative PANA Committee have voted for the Chair and Vice-chairs of the Committee. They are as follows:
Moreover, the following co-rapporteurs are currently the most likely candidates for the Committee report:
Cash accounting method of paying taxes as an instrument to strengthen financial liquidity, especially for SMEs in the EU – 7 July
The European Commission has replied to a question asked by the MEP Adam Szejnfeld (EPP/POL) with regard to cash accounting method of paying taxes. In his question, Mr. Szejnfeld emphasises the potential benefits for companies of being able to use cash accounting when determining the tax to be paid. He consequently asks the Commission whether it is considering “legislative steps” to change the current legal provisions that require tax to be paid in accordance with the accrual method. In his reply, Commissioner Moscovici points out that the VAT Directive already provides for the possibility of using cash accounting under certain circumstances, optional for Member States and “widely applied”. Moreover, the Commission will put forward a proposal by the end of 2017 to review the special scheme for SMEs under the VAT Directive. This review will entail simplification measures, possibly including streamlining the provisions on cash accounting.
Aggressive tax planning – 11 July
The European Commission has replied to a question asked by the MEP Stelios Kouloglou (GUE-NGL/GRE) with regard to “aggressive tax planning”. In his question, Mr. Kouloglou asks the Commission how it will address tax planning by multinational companies, and tackle profit shifting. In his reply, Commissioner Moscovici refers to current Commission action against dubious tax practices in the state aid context, and lists measures such as the Anti-Tax Avoidance Directive (ATAD) as well as the External Strategy as examples of Commission efforts in the area of tax. Finally, Commissioner Moscovici refers to the upcoming re-launch of the Common Consolidated Corporate Tax Base (CCCTB) as a “holistic solution” to tax avoidance in the EU.
Rules governing tax on goods and services – 14 July
The European Commission has replied to a question asked by the MEP Jarosław Wałęsa (EPP/POL) with regard to rules governing tax on goods and services. In his question, Mr. Wałęsa refers specifically to VAT fraud by companies, and asks the Commission what measures it will take to address this issue and to ensure a level-playing field on the Single Market. In his reply, Commissioner Moscovici lists the measures it has already taken to tackle corporate tax fraud, including the Anti-Tax Avoidance Directive (ATAD). Moreover, he states that the upcoming re-launch of the Common Consolidated Corporate Tax Base (CCCTB) will further address the issue. With regard to VAT specifically, Commissioner Moscovici states that EU legislation already provides ample tools to fight against fraud, and re-iterates Commission commitments to further improve administrative cooperation between relevant Member State authorities.
Tackling tax evasion and avoidance – 14 July
The European Commission has replied to a question asked by the MEP Pablo Zalba Bidegain (EPP/SPA) with regard to tax avoidance and evasion. In his question, Mr. Zalba Bidegain asks the Commission whether it will take measures, including sanctions, against countries that fail to implement the international standards on transparency and exchange of tax information. In his reply, Commissioner Moscovici states that the EU will be preparing its own list of non-cooperative jurisdictions in 2017, which will complement similar work undertaken by the OECD and G20. The Code of Conduct Group on business taxation will clarify the exact criteria for the EU list in autumn 2016. The possibility of sanctions will be discussed in the same context as well.
Panama papers – 20 July
The European Commission has replied to a question asked by the MEP Maite Pagazaurtundúa Ruiz (ALDE/SPA) with regard to the Panama Papers scandal. In her question, Ms. Pagazaurtundúa Ruiz asks the Commission whether the Panama Papers revelations will affect its work on fighting against tax abuse, and whether it will “seek clarifications” from Commissioner Miguel Arias Cañete (Climate Action and Energy) with regard to the potential involvement of his “immediate family” (wife) in the Panama Papers revelations. In his reply, Commission President Juncker maintains that the company involving the wife of Commissioner Cañete has been inactive since 2010, and the Commission does not consider it necessary to further investigate the issue at this stage. The Commission is moreover not intending to change the scrutiny process for Commissioners.
ECOFIN adopts ATAD, discusses future tax measures – 12 July
EU Finance Ministers have given their final approval to the Anti-Tax Avoidance Directive (ATAD), thereby formally closing the dossier (for further details on the Council compromise, please see FEE Tax Policy Update from 24 June). The Ministers also discussed “further measures” to improve tax transparency – likely reference to the recently issued Panama Papers Communication (see FEE Tax Policy Update from 8 July for further details). Finally, the Ministers provided final approval for the deal on automatic exchange of tax information between Monaco and the EU.
Ruling on taxation of interest – 13 July
The fifth chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the taxation of interest. The case code is C‑18/15. In its ruling, the Court notably allows for a withholding tax at source on income received by non-resident financial institutions, whilst resident financial institutions are not subject to such withholding tax, provided that the tax is justified by an overriding reason in the general interest and does not go beyond what is necessary to attain the objective pursued.
“Spain set for corporate tax rise as Madrid tackles deficit” – 12 July
According to the Financial Times (article only available to subscribers), Spain is planning to increase its corporate tax yield by €6 billion in a bid to tackle the country’s public deficit. This would be achieved by the introduction of a minimum corporate tax rate. An additional €1 billion is hoped to be collected through tackling tax evasion.
“EU Politicians Call For MNE Tax Transparency” – 12 July
According to Tax News, key members of EU Member States’ parliaments have called for stronger tax transparency in the form of public Country by Country Reporting (CBCR) in an open letter intended for their governments. The signatories come from the parliamentary financial affairs committees of Germany, Hungary, Finland, Norway and Slovakia, as well as senior MPs from the Netherlands, Czech Republic and Bulgaria.
The Netherlands launches consultation on simplifying tax refund on uncollectable receivables – 12 July
The Dutch Government has opened a consultation on the simplification of VAT refund on uncollectable environmental tax receivables. One of the proposed changes establishes that an entrepreneur will be automatically entitled for a VAT refund if the client has still not paid a renumeration after one year of the deadline. Comments to the consultation are invited until 14 August.
“Chinese Tax Agency To Monitor Tax Compliance Closely” – 14 July
According to Tax News, China will launch a guideline to evaluate tax compliance by both domestic and foreign companies, as well as their eligibility for tax incentives. The move forms part of a wider project to establish a credit information database by 2020, to which all companies and individuals are to be included. The credit assessments will be updated on a yearly basis.
“IMF Urges Action On US Corporate Tax Reform” – 15 July
According to Tax News, the International Monetary Fund (IMF) has urged the US to reform its corporate tax system. IMF maintains that the current system is too complex, its marginal rate is too high, its scope too narrow, has too many exemptions, is tipped in favour of debt financing, and provides ample incentives for tax avoidance. IMF consequently calls for a number of measures to improve the corporate tax system, including a reduction of the tax rate to 25%, eliminating a number of tax incentives, and establishing a territorial system notably through the exclusion of dividends from foreign subsidies from the US tax base. IMF also called for the introduction of a Federal level VAT.
“Germany Adopts Law On CbC Reporting And Tax Rulings” – 15 July
According to Tax News, Germany has adopted a new law implementing the OECD BEPS Action 13 as well as the related EU amendment to the Directive on administrative cooperation. The new provisions, covering Country by Country Reporting (CBCR) and the exchange of CBCR information between tax administrations, will be applicable to multinationals with a consolidated annual turnover of €750 million.
“Austria To Rein In Bank Tax” – 22 July
According to Tax News, Austria has proposed to reduce the potential burdens caused by its banking levy by basing its calculation on earnings rather than assets. The Austrian Finance Minister Hans Jörg Schelling has emphasised the importance of aligning the levy better with the German bank tax system.
OECD announces further developments in BEPS implementation – 11 July
A number of BEPS Project developments has recently taken place. First, the OECD launched a discussion draft on Action 4 (interest deductions and other financial payments) focusing on the design and operation of the group ratio rule. The deadline for providing comments is 16 August. Second, the OECD launched a standardised IT format for the exchange of tax rulings under BEPS Action 5 (harmful tax practices). And finally, Angola and Seychelles have joined the BEPS Inclusive Framework, bringing the number of signatory jurisdictions up to 84.
Panama decides to sign multilateral tax information sharing convention – 18 July
Panama has decided to sign up for the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The decision was formally announced to the OECD by the Vice-President of Panama in a letter on 15 July. The Convention is according to the OECD “the most comprehensive multilateral instrument” on tax cooperation, and entails strong safeguards for taxpayer protection. The Convention provides for all forms of administrative co-operation between states in the assessment and collection of taxes, in particular with the view of fighting tax avoidance and evasion. So far, 98 other jurisdictions have joined the Convention.
OECD publishes report on tax systems as drivers of economic policy – 20 July
The OECD has published a new report arguing that Governments should make better use of tax policy for economic policies that foster growth and ensure a more equal division of wealth within societies. The report is titled Tax Design for Inclusive Economic Growth, and focuses on the role of tax systems in promoting “inclusive growth”. The report puts forward a number of recommendations for this effect, including broadening tax bases and removing tax spending that is not well-targeted at redistributive goals; enhancing the progressivity of tax systems beyond personal income tax and taking into account the overall progressivity of the tax and benefit systems; taking steps to affect pre-tax behaviours and opportunities, including those that induce individuals to develop and optimally build up and use human capital and skills; and enhancing tax policy and administration, notably by bringing workers from informal sectors into the tax network through well-designed policies.
“Ireland Expects EU Decision in Apple State Aid Case This Fall” – 13 June
According to the Wall Street Journal (article only available to subscribers), the Finance Minister of Ireland, Michael Noonan, has stated that a final Commission decision on the Apple Ireland case is expected for autumn – September of October. The Minister spoke following a meeting with Commissioner Vestager. The Commission opened an investigation into a tax ruling granted by Ireland to Apple two years ago, and will assess whether the tax arrangement amounts to illegal state aid.
“Brexit: what does it mean for digital VAT in the EU?” – 27 June
Taxamo has published an article focusing on the VAT implications of Brexit on the EU. The article is organised in a Q&A format, and attempts to address questions such as the implications on digital service providers, options for non-EU businesses, and the Mini One Stop Shop (MOSS) registration.
“Big 4 “accountants of fortune” must be broken up” – 11 July
Tax Justice Network has published an article about the “concentrated market power” of large accountancy firms, especially the Big Four. The article refers to the Big Four as “the greatest vectors for tax injustice the world has ever seen”, and argues for breaking them up in order to break their dominating status.
Transparency International publishes study on public CBCR – 13 July
Transparency International has published a study on public Country by Country Reporting (CBCR) which argues that such a reporting requirement does not pose undue harm for business competitiveness. According to the report’s findings, a majority of the screened companies maintained or improved their revenue performance during the assessment period.
6-7/09/2016, Bruegel Annual Meetings, Bruegel, Brussels.
28/09/2016, From tax transparency to responsible tax behaviour, CSR Europe, Brussels.
13/10/2016, EPC 20th Anniversary Conference, EPC, Brussels.
20/10/2016, Public Country-by-Country Reporting: Tax disclosures in the spotlight, Federation of European Accountants (FEE), Brussels.