Tax Policy

November 2019

  • Major VAT compromises reached between EU member states
  • No agreement in sight on public CBCR
  • OECD launches consultation on minimum taxation

EU finance ministers find major compromises on VAT

On 8 November, EU finance ministers’ ECOFIN meeting reached a number of key decisions on VAT as well as the EU list of non-cooperative jurisdictions.

Fight against VAT fraud

First, the finance ministers agreed new measures to facilitate the fight against VAT fraud in the e-commerce sector.

These measures are introduced via amendments to the Regulation on administrative cooperation to fight against VAT fraud, and to the VAT Directive through new requirements on payment services providers.

For example, the now approved rules establish quarterly information exchange requirements for payment service providers that will allow the ‘Eurofisc’ network to exchange and analyse payment data on cross-border sales. Moreover, the European Commission will have to set up a ‘central electronic system for payment information’ (CESOP) to investigate suspected cases of fraud or detecting VAT fraud.

VAT alleviations for SMEs

The member states also approved new rules to create a special VAT scheme for SMEs. Until quite last minute it was still unclear whether or not an agreement could be reached, but in the end the Finnish Council Presidency found a way to bridge differences between countries.

Under the compromise, supplies of goods and services by small businesses with a national annual turnover of up to EUR 85,000 may be exempt from VAT. Moreover, member states that allow such an exemption to companies established in their territory will be required to apply the same exemption to supplies made in their territory by taxable persons established elsewhere in the EU, as long as their annual turnover from activities in the EU does not exceed 100,000 euros.

UK, Spain and Hungary are not completely happy with the outcome as they see the new thresholds and provisions as t meaningfully reducing administrative burdens. However, none of the three blocked the compromise in the end.

In the meanwhile, the Council’s legal service has recommended to the Finnish Presidency to consult the European Parliament again, given the big differences between the Commission’s initial proposal and the final outcome.

Amendments to EU list of ‘tax havens’

And finally, the finance ministers adopted changes to the EU list of non-cooperative jurisdictions on tax by removing Belize from the blacklist. EU member states believe that Belize has passed the necessary reforms to improve its tax regime for international business companies. The country is now placed on the ‘grey list’ to monitor its delivery on its commitments.

Moreover, the Council also found the Republic of North Macedonia to be compliant with all its commitments on tax cooperation following its ratification of the OECD multilateral convention on mutual administrative assistance. The country was therefore removed from the grey list.

The updated full list of non-cooperative jurisdictions can be consulted here.

European Commission

EU kerosene tax plans slowly advancing

European Commission’s administration continues to mull over its plans to end the tax exemption on kerosene for aviation and maritime sectors.

The current exemptions are based on a 75-year old treaty covering international flights.

Reportedly, under the EU plans the kerosene tax would only apply to flights within the EU, but not flights flying over the EU. Moreover, the Commission will have to reassure Baltic and Mediterranean member states that their economies – very reliant on airborne trade – would not be seriously hit by the measure.

EU finance ministers will discuss next month draft conclusions on this matter. Read more

European Parliament

ECON Committee discusses VAT fraud

On November 4, ECON Committee discussed two draft opinions on VAT requirements for payment service providers and measures to strengthen administrative cooperation in order to combat VAT fraud. Both were prepared by the MEP Lidia Pereira (EPP/Portugal).

At the discussion, Csaba Molnár (S&D/Hungary) proposed to add reference to AML to the administrative cooperation Directive in order to ensure all the necessary information is shared with competent authorities.

Ondřej Kovařík (RE/Czech Republic) called for measures to prevent double reporting and would prefer to avoid transaction by transaction reporting.

And finally, Eugen Jurzyca (ECR/Slovakia) called for an analysis of the effectiveness of national anti VAT fraud measures to understand why some EU member states have 50 times bigger VAT gap than others. He also warned against imposing high administrative burdens on payment service providers.

A vote in ECON for both reports is currently scheduled for 2 December, and a Plenary vote for the week of 16 December.


Commission to continue work on minimum effective taxation at international level

  • Question by MEP Aurore Lalucq (S&D/France)
  • Reply by Commissioner Moscovici

Fight against VAT fraud will remain a priority for the future Commission

  • Question by MEP Lídia Pereira (EPP/Portugal)
  • Reply by Commissioner Moscovici

Future Commission may look into ways to adopt digital tax without unanimity

  • Question by MEP Leszek Miller (S&D/Poland)
  • Reply by Commissioner Moscovici

Commission sees real progress in OECD digital tax discussions but will proceed unilaterally if OECD fails

  • Question by MEPs Lídia Pereira (EPP/Portugal) and José Manuel Fernandes (EPP/Portugal)
  • Reply by Commissioner Moscovici


No progress in sight on public CBCR

At a meeting of EU company law attaches on 25 October, it became apparent that a resolution to the public country by country reporting (CBCR) limbo should not be expected anytime soon.

Before the meeting, there was some optimism in the air as German finance minister Olaf Scholz had announced his support for public CBCR, and the Finnish Presidency had committed to finding a solution.

However, at the meeting it became apparent that a growing number of member states now believe that public CBCR should be a tax file.

These countries include Cyprus, Malta, Germany, Austria, Hungary, Estonia, Luxembourg, Latvia, Ireland, Poland, Sweden, Czech Republic, Slovenia, Portugal, Croatia and Lithuania.

On the other side, France, Spain, Belgium, Denmark, Netherlands, Italy, Romania, Bulgaria, Greece and Slovakia defend the proposed legal base. Finland, for its part, is on the fence as its government is internally divided on the matter.

The Finnish Presidency will now have to decide whether or how it takes the file forward. Read more

Czech Republic granted right to apply generalised reverse charge mechanism

On 6 November, EU member states showed green light to Czech Republic applying the VAT generalized reverse charge mechanism (GRCM) from 1 January 2020 to 30 June 2022.

The GRCM was introduced into EU legislation in 2018 after a long battle in the Council, which included Czech Republic taking the VAT for e-publications file as ‘hostage’ to other member states approving the GRCM provision.

The GRCM applies only to the supply of services and goods for transactions above EUR 17,500 and in a member state where missing trader fraud accounts for at least 25% of the VAT gap. Czech Republic fulfils all the above conditions, and its government the GRCM to yield almost EUR 400 million.

Nine EU member states call for action on taxing aviation

The Netherlands, Germany, Belgium, Bulgaria, Denmark, France, Italy, Luxembourg and Sweden have issued a joint statement in which they call on the European Commission to propose measures to increase the price of aviation.

The countries argue that air tickets’ prices do not reflect the negative emission externalities of flying as they are exempted for example from excise duties and VAT for international flights. They also highlight that aviation accounts for about 2.5% of global CO2 emissions.

Therefore, the countries call for aviation taxation or “similar policies” that also take into account existing national policies, the competitiveness of the sectors affected, as well as the geographical distribution of transport infrastructure across EU member states. Read more

OECD launches consultation on Pillar 2 minimum taxation

On 8 November, the OECD secretariat published its proposal for minimum taxation under Pillar 2, called Global Anti-Base Erosion (GloBE) proposal. It invites stakeholder input by 2 December, and a follow-up conference will be organised in Paris on 9 December to further discuss GloBE.

The consultation document invites stakeholder comments in particular on three technical design aspects of GloBE:

  • The use of financial accounts as a starting point for determining the tax base
  • The extent to which an MNE can combine income and taxes from different sources in determining the effective (blended) tax rate on such income
  • Stakeholders’ experience with, and views on, carve-outs and thresholds that may be considered as part of the GloBE proposal

This follows the publication a couple of weeks ago of the OECD secretariat’s proposals under Pillar 1, covering taxation of the digital economy. Read more

German finance minister calls for CCCTB as part of Banking Union concessions

Germany’s finance minister Olaf Scholz has put an end to his country block on a European deposit insurance scheme (EDIS), an initiative that is a part of the European Commission’s Banking Union project.

As part of his announcement, Scholz also called for the completion of the common consolidated corporate tax base (CCCTB) in Europe. It is not certain whether this is conditional to Germany supporting EDIS and if so, how strongly. Read moreThis curated content was brought to you by Johan Barros, Accountancy Europe policy manager since 2015. You can send him tips by email, follow him on Twitter and connect with him on LinkedIn.