Inception Impact Assessment: Initiative on Improving Double Taxation Dispute Resolution Mechanisms – 30 June
The European Commission has published its roadmap for improving double taxation dispute resolution in the EU. A public consultation on the matter has been finalised recently, and the Commission was expected to come forward with a proposal by summer. However, according to the roadmap the proposal has been postponed to late-2016. The roadmap sheds light on what can be expected from the Commission’s side on this. The stated objectives for reforming the EU dispute resolution mechanism are enforceability (ensure the application of available dispute resolution methods); efficiency (improve the effectiveness of dispute resolution mechanisms); and scope (promote the implementation of effective mechanisms where they are not yet available). For this effect, the roadmap contemplates at four options:
The roadmap does not exclude the possibility of extending the mechanism to other areas of taxation. However, VAT is specifically excluded from the scope.
European Commission announces further measures to improve tax transparency and fight against avoidance and fraud – 5 July
The European Commission has announced further measures (in the form of a Communication) to tackle tax evasion, avoidance, fraud and money laundering, as a follow-up to the Panama Papers scandal. The measures are as follows:
The following elements from the Communication are of particular interest:
Inception Impact Assessment: Initiative on introducing effective disincentives for advisors, promoters and enablers of aggressive tax planning schemes resulting in tax avoidance or evasion – 5 July
As part of its wider package addressing the Panama Papers scandal (see above), the European Commission has published a roadmap on tax advisors in which it outlines its thinking and future measures to take action on the sector. A public consultation is planned for autumn 2016. For the consultation, the Commission is considering five options. It acknowledges that each of the options may target certain sectors/”categories of providers” more than others. The Commission, with this regard, acknowledges the need to in principle maintain a level playing field between different tax advice providers.
Tax challenges in the digital economy – 30 June
The TAXE II Committee of the European Parliament has published a report on the tax challenges in the digital economy. The paper analyses tax challenges emerging from the digital economy in light of the OECD BEPS project, and assesses whether special measures are required for the digital sector. The paper concludes that the BEPS measures are insufficient to appropriately address tax challenges in the digital sector, and consequently makes a number of recommendations for each of the BEPS Actions in order to better harness them for the particularities of the digital economy. A number of non-BEPS related recommendations are also put forward, including codes of conduct for tax advisors and ethical charters or “special training” for accountants. It also draws attention to possible conflicts of interest emerging from tax consultancy firms’ practices.
EU survey – majority of citizens want more action against tax fraud – 5 July
According to a recent survey published by the European Parliament, a significant majority (75%) of EU citizens would like the EU to do more against tax fraud. The endorsement of further action extends consistently throughout the bloc, ranging all the way from 52% in Austria to 91% in Portugal. The data seems to demonstrate that despite potential integration fatigue caused by a number of ongoing crises, including most recently the Brexit, there is great public appetite for coordinated action in the area of tax.
Plenary votes on TAXE II report – 5/6 July
The European Parliament Plenary has adopted the TAXE II Committee’s report on tax rulings and other measures similar in nature or effect (for recent developments on the dossier, please refer to the FEE Tax Policy Updates from 10 and 24 June). The report was adopted with 614 in favour, 68 against and 125 abstentions. The leading MEPs on the dossier were Jeppe Kofod (S&D/DEN) and Michael Theurer (ALDE/GER). There were a number of amendments tabled for the final vote. The final version of the report, in particular, calls for a common EU list of “tax havens”, addressing the misuse of patent boxes, greater clarity on transfer pricing guidelines, stronger protection of whistleblowers, for a compulsory and full Common Consolidated Corporate Tax Base (CCCTB), and EU-wide withholding tax, and a code of conduct for banks, tax advisors, law- and accounting firms. Earlier calls for the Commission to reform audit legislation have been replace by calls to closely monitor the implementation and effectiveness of the new rules with regard to the provision of non-audit services.
Automatic exchange of information – 28 June
The European Commission has replied to a question asked by the MEP Ludek Niedermayer (EPP/CZE) with regard to automatic exchange of information (AEOI). In his question, Mr. Niedermayer asks the Commission whether the new global rules on AEOI will provide Europe’s tax authorities with the same kind of information as the US FATCA, whether the information will include data about depositors and beneficiaries, and whether the Commission will take action against jurisdictions that do not sign up for AEOI. In his reply, Commissioner Moscovici states that the global standard on AEOI was in several respects inspired by the US FATCA, and that in many respects the global standard is even more comprehensive than FATCA. Furthermore, reportable accounts include accounts held by individuals and entities, and there is also a requirement to look through passive entities. The Commission is further looking into improving Anti-Money Laundering (AML) transparency. Finally, the Commissioner reminds that the Commission is currently working on a common EU list of non-cooperative jurisdictions.
Panama Papers scandal – 1 July
The European Commission has replied to a question asked by the MEP Miguel Viegas (GUE-NGL/POR) with regard to the Panama Papers scandal. In his question, Mr. Viegas asks the Commission what measures it is planning in order to address practices as revealed by the Panama Papers, and in particular against EU Member States who have signed double taxation agreements with Panama. Moreover, he asks the Commission whether it will take stronger action on the banking system with the aim of combating tax evasion. In his reply, Commissioner Moscovici maintains that transparency and exchange of information are key in fighting against such practices, and lists Commission initiatives (public Country by Country Reporting, reform of the Anti-Money Laundering Directive) that take further steps into that direction.
VAT rules on vouchers approved by Council – 27 June
The Council of the EU has adopted amendments to the VAT Directive concerning the treatment of vouchers. The purpose of the amending Directive is to improve legal certainty for transactions involving vouchers and to reduce the risk of mismatches, and for this effect introduces further harmonisation of national VAT rules in this area. The amended Directive defines single-purpose vouchers and multi-purpose vouchers and sets rules to determine the taxable value of transactions in both cases. The transposition deadline is 31 December 2018, and the provisions will only be applicable to vouchers issued after this date.
Code of Conduct Group issues guidance on hybrid permanent establishment mismatches in cases involving third countries – 4 July
The Council’s Code of Conduct Group on business taxation has issued guidance on hybrid permanent establishment mismatches in cases involving third countries. The guidance was endorsed by the ECOFIN (EU Finance Ministers) on 17 June. The guidance establishes, for example, when a permanent establishment is treated as hybrid, when a mismatch situation for a Member State and a third state exists, and under which circumstances non-taxation without inclusion arises. The Commission is expected to put forward its thinking on hybrid mismatches with regard to third countries after the summer break, at the request of several Member States.
Ruling on the repayment contingent on the existence of funds received from a tax – 30 June
The second chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the repayment contingent on the existence of funds received from a tax. The case code is C‑200/14. In its ruling, the Court notably establishes that Member States may not provide a repayment on a tax which has been held to be contrary to EU law by a judgment of the Court.
Ruling on inheritance tax – 30 June
The second chamber of the Court of Justice of the EU (CJEU) has issued a ruling on inheritance tax. The case code is C‑123/15. In its ruling, the Court establishes that Member States may provide for a reduction in inheritance tax if the estate includes assets that had already been acquired through inheritance and on the condition that inheritance tax was levied in the Member State on the earlier acquisition.
Ruling on the bilateral convention for the avoidance of double taxation – 30 June
The sixth chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the avoidance of double taxation. The case code is C‑176/15. In its ruling, the Court establishes additional conditions for situations where a Member State is allowed not to extend the benefit of advantageous tax treatment accorded to a resident shareholder as a result of a bilateral double taxation convention concluded between the Member State and a third country.
“IMF Presses For US Tax Reforms” – 24 June
According to Tax News, the IMF has called on the US to reform its current tax system. In particular, IMF recommends a reduction in income taxes, rendering individual taxes more progressive, and putting greater emphasis on indirect taxes. The underlying principle behind IMF’s recommendations is “an urgent need to tackle poverty”. Moreover, IMF calls for further measures against corporate tax avoidance, notably through limiting interest deductibility.
HMRC publishes guidance for businesses to disclose their tax strategies – 24 June
The UK HMRC has published guidance for businesses to publish their tax strategies. Amongst other things, the guidance covers areas such as the scope, what to include in the strategy, means and timing of publication as well as any applicable penalties.
“Italy Retrieves EUR30bn From Tax Evaders In 2015” – 28 June
According to Tax News, Italian tax authorities have discovered a total of €30 billion undeclared income in 2015. €21 billion related to investigations on false foreign residency declarations, €7 billion to false off-shore permanent establishments, and €2 billion to dubious transfer pricing.
“Starbucks’ European unit pays $15m UK tax” – 29 June
According to the Financial Times (article only available to subscribers), Starbucks has revealed that its London headquarters has paid $15 million in corporate taxes in 15 months. The company moved its European headquarters from Amsterdam to London back in 2014, following public outcry on suspected tax avoidance.
“Sweden To Revamp VAT Legislation” – 29 June
According to Tax News, the Government of Sweden is intending to review the country’s VAT legislation with the intention of improving the functioning of the tax system. A major issue identified by the authorities is complexity and difficulty of applying VAT rules for companies. The Government has issued a request for a VAT plan, to be prepared by April 2019, in order to shed light into measures that would render the Swedish VAT system more transparent, simpler and better aligned with EU rules.
“New Zealand Sets Out Limited BEPS Response” – 29 June
According to Tax News, the Government of New Zealand has argued that the country’s tax system is already well designed to address BEPS issues, and as such there is no need to address every recommendation issued by the BEPS project. The Government has issued a Cabinet paper, which maintains that several BEPS initiatives have already been or are about to be implemented in New Zealand.
“U.S. Treasury, IRS Move Quickly to Implement OECD BEPS Agreement, Finalizing Rule Requiring Country-by-Country Reporting by Multinationals” – 29 June
According to the organisation Global Financial Integrity (GFI), the US is moving ahead with BEPS implementation, including Country by Country Reporting (CBCR). The US Treasury has issued a rule implementing the CBCR provisions for the US, as established in BEPS Action 13.
“Spanish tax inspectors raid Google’s Madrid office” – 30 June
According to the Financial Times (article only available to subscribers), the tax inspectors in Spain have raided Google’s offices in Madrid as part of their investigations into the company’s tax practices in the country. The raid comes only few weeks after authorities in France conducted a similar raid into Google’s offices. Google Spain, for its part, has issued a statement in which it emphasises its compliance with Spanish tax laws.
“George Osborne puts corporation tax cut at heart of Brexit recovery plan” – 3 July
As reported notably by the Financial Times (article only available to subscribers), the UK Finance Minister George Osborne has announced plans to cut the corporate tax rates down to 15%, down from the current 20%. The announced plans have already raised some concerns in Germany and the OECD (see articles below for further details).
Democratic platform draft includes financial transactions tax – 6 July
As reported notably by Investment News, the US Democrats are planning to endorse a financial transactions tax during their upcoming convention later in July. The planned “levy on securities sales” has been defended by its proponents, including the presidential candidate Hillary Clinton, for its potential to tone down high-frequency trading, thereby bringing greater stability into the financial system.
“Germany warns of EU tax race after Osborne’s 15% plan – 6 July”
According to Euractiv, Germany’s Finance Minister Wolfgang Schäuble is concerned about the prospect of a new tax war in Europe due to the announcement by George Osborne that the UK would cut its Corporate tax rates down to 15% (see article above). Mr. Schäuble stated that Germany is not opposed to tax competition per se, but maintains that it should be “fair”.
Guidance on the Implementation of Country-by-Country Reporting – 29 June
The OECD has issued additional guidance on the implementation of BEPS Action 13 on Country by Country Reporting (CBCR). The document is structures in a Q&A format, and clarifies questions on areas such as transitional filing options, applicability of CBCR on investment funds and partnerships, as well as the impact of currency fluctuations on the established threshold of €750 million. With regard to the currency fluctuations, the issued guidance identifies no need for periodic reviews of the threshold in non-euro currencies due to the wording of “near equivalent” amount in Action 13.
First meeting of the new inclusive framework to tackle Base Erosion and Profit Shifting marks a new era in international tax co-operation – 30 June
Representatives from over 80 countries held a meeting in Kyoto, Japan, in order to discuss and further foster improvements to the global tax rules. The meeting de facto inaugurated the new inclusive framework for BEPS implementation (see FEE Tax Policy Update from 4 March for further details). The inclusive framework will, in particular, focus on the implementation of the BEPS project’s minimum standards on harmful tax practices, tax treaty abuse, Country by Country Reporting (CBCR) and dispute resolution. Furthermore, during the Kyoto meeting, five countries (Argentina, Curacao, Georgia, South Korea and Uruguay) committed to the Multilateral Competent Authority agreement on CBCR, bringing the total of committed countries to 44.
The Platform for Collaboration on Tax releases discussion draft on effective capacity building on tax matters in developing countries – 30 June
IMF, the OECD, UN and World Bank have developed a set of recommendations to address a G20 request for fostering tax capacity building in the developing world. These recommendations have been compiled into a discussion draft, to which the four organisations are now requesting comments from stakeholders. The discussion draft seeks to identify core elements of successful tax capacity building programmes, as well as the enabling factors that help to produce such successes. The deadline for providing comments is 8 July.
“Tax haven route won’t work for post-Brexit UK, OECD says” – 3 July
According to Reuters, an internal OECD memo argues that the UK is not likely to turn itself into a “tax haven” in the eventuality of a Brexit. OECD’s Tax Director Pascal Saint-Amans states in the memo that although the UK has taken steps towards this direction (such as the recent announcement to cut the corporate tax rate), there are significant practical and political barriers for it to turn into a “tax haven type of economy”.
Release of BEPS discussion drafts on attribution of profits to permanent establishments and revised guidance on profit splits – 4 July
The OECD has published and launched a consultation on two of its discussion drafts – on the Attribution of Profits to Permanent Establishments, and the other on the Revised Guidance on Profit Splits. The first one of these relates to the OECD BEPS Action 7, and the other to Actions 8-10. The deadline for submitting responses is 5 September.
Public review sought of BEPS Conforming Changes to Chapter IX of the OECD Transfer Pricing Guidelines – 4 July
The OECD has opened a public consultation on the changes to the Chapter IX of the OECD Transfer Pricing Guidelines. The changes relate to BEPS Actions 8-10 and 13. The deadline for providing comments to the consultation is 16 August.
Public comments received for the discussion draft on the development of a multilateral instrument to implement the tax treaty related BEPS measures – 4 July
OECD has published a compilation of responses to its discussion draft on a multilateral instrument to implement the tax treaty related BEPS measures. A total of 37 responses were received from relevant stakeholders, including Business Europe and ICAEW. For further details on the consultation, please refer to the FEE Tax Policy Update from 10 June.
European Commission publishes its Starbucks decision – 27 June
The European Commission has published the public version of its earlier ruling which concluded that Starbucks Netherlands has received a selective advantage from the Dutch authorities in the form of a tax ruling granted back in 2008. In the published decision, the background and reasoning for the Commission decision are elaborated on. The Commission published its ruling last October, and ordered the Dutch authorities to recover up to €30 million in lost tax income.
Commission finds Hungary’s food chain inspection fee and tax on tobacco sales in breach of EU rules – 4 July
The European Commission has ruled that certain progressive tax rates in the Hungarian tobacco sector and a food chain inspection fee are in breach of EU state aid rules. The Commission argues that they grant a selective advantage to companies with a lower turnover than their competitors, thereby constituting an unequal treatment of specific companies within the same sector.
Commission decides Spanish professional football clubs have to pay back incompatible aid – 4 July
The European Commission has assessed that public support measures, including certain tax privileges, granted to Spanish football clubs are in breach of EU state aid rules. As a consequence, the Commission has ordered Spain to recover the illegal state aid from a total of seven clubs.
Commission opens in-depth investigations into tax exemptions for Belgian and French ports – 8 July
The European Commission has initiated an in-depth investigation into tax exemptions granted for ports in Belgium and France. As always with the state aid investigations, the Commission will in particular assess whether the granted tax exemptions constitute advantageous treatment of the recipient ports compared to their competitors. The aid schemes have been in place since before the establishment of the EU since 1958, and as such the relevant authorities cannot be requested to recover tax income from the ports, should the investigation confirm the Commission’s suspicions.
11 Reasons to Be Transparent on Tax – 16 June
The International Federation of Accountants (IFAC) has published an English-version of the article on tax transparency written by Eelco van der Enden, chair of the FEE’s Tax Policy Group (TPG). The original Dutch version of the article was flagged in the FEE Tax Policy Update from 13 May. As the name implies, the article provides 11 reasons for why companies should not shy away from tax transparency, including public Country by Country Reporting (CBCR).
“UK VAT Compliance Burden To Rise, Says RPC” – 24 June
According to Tax News, RPC Businesses maintains that VAT compliance burdens will increase in the UK as a consequence of Brexit. This is for example due to the fact that the UK Government will have greater leeway in its VAT policy, whilst insecurity will emerge as to whether or not EU VAT jurisprudence will continue to apply in the UK or not. However, RPC adds that the risks of such uncertainties may incentivise the UK to maintain its VAT system on par with the EU’s as far as possible.
ETUC report: the impact of letterbox-type practices on labour rights and public revenue – 5 July
The European Trade Union Confederation (ETUC) has published a report assessing the impact of letterbox companies on public income and labour conditions. The report argues that the use of letterbox companies in Europe is wide-spread, and amongst other things facilitate tax avoidance. It also highlights the role of consultancy firms, such as the Big 4, in facilitating the use of letterbox companies, and point to a potential conflict of interest emerging from these companies servicing both taxpayers and tax law makers. The study is funded by the European Commission.
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.