Tax Policy

May 2020

  • European Commission launches COVID recovery package, considers new taxes
  • France and Germany call for CCTB and minimum taxation as part of COVID recovery
  • Pascal Saint-Amans hints at bumpy road ahead for OECD digital tax agreement
  • Upcoming Council Presidencies to hold tax high on the agenda

European Commission launches COVID recovery package, considers new taxes

On 27 May, the European Commission published its long-awaited COVID recovery plan to help rebuild Europe’s economy. It includes a one-off EUR 750 billion recovery instrument to help finance member states’ economies that have been weakened by the ongoing pandemic. Of this, EUR 500 billion would be in the form of grants, and EUR 250 billion in loans.

Interestingly, the Commission intends to consider several tax measures as options to help finance the recovery funding:

  • A carbon border tax
  • An “own resource based on the operation of large companies” – dubbed a “Single Market tax” that could yield up to EUR 10 billion
  • A digital tax based on OECD’s work or EU’s own action if OECD fails. According to initial estimates, a tax on large digital companies like Facebook and Google could generate about EUR 1 billion annually
  • Simplified VAT
  • A plastics tax that is expected to yield up to EUR 7 billion.

The Commission also commits to stepping up the fight against “tax fraud and other unfair practices”, and underlines the potential benefits of a common consolidated corporate tax base (CCCTB).

Beyond the references above, the Commission’s package did not include any tax proposals as such, but they do give indications to what is to be expected from the 15 July tax package as well as any subsequent tax initiatives. Read more

European Commission

European Commission points at 6 EU Member States for tax avoidance

The European Commission has singled out six EU member states for facilitating tax avoidance, as part of its latest European Semester package. Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands are all named as countries that have features of their tax systems commonly used to lower tax bills artificially.

The European Semester is a non-binding periodic review in which the Commission gives its assessment on and recommendations to improve EU member states’ economies. The practice of singling out member states for ‘problematic’ tax systems is a relatively new concept. Read more

European Commission launches public consultation on VAT scheme for travel agents

On 25 May, the European Commission launched a public consultation to review the special VAT regime for travel agents.

The consultation aims to gather views on how the special scheme meets its objectives, and to which extent existing rules are still relevant and aligned with stakeholders’ needs. The consultation also seeks to identify potential distortions of competition and the regulatory costs and benefits for businesses taxed under the special scheme.

The deadline for submitting comments is 14 September. Read more

European Parliament

Vestager hints at digital tax being used as EU’s own resource

On 25 May, Commission Vice-President Margrethe Vestager participated at a hearing of ECON Committee to discuss the economic impact of and response to COVID.

Responding to questions on digital taxation from a number of MEPs, Vestager re-iterated that should the OECD fail to agree on digital taxation, the Commission will step in. She also mentioned the possibility of using a EU digital levy as an own-resource to the Commission, but emphasised that first and foremost the priority must be to agree on a digital tax framework in the first place.

Vestager also told MEPs that the Commission cannot include tax related conditionalities on businesses that receive COVID financial aid.


France and Germany call for tax reforms to help fund EU corona recovery fund

On 18 May, Germany and France launched their joint proposals for a EU COVID recovery fund, which the Commission published on 27 May (see article above). In their proposals, France and Germany call for EUR 500 billion to be handed to hardest hit EU member states in the form of grants.

Interestingly, the Franco-German proposals also highlight the importance of “fair taxation” in helping to fund COVID recovery, and in particular call for:

  • Effective minimum taxation
  • “Fair taxation” of the digital economy
  • Establishing a “Common Corporate Tax Base” (CCTB) – presumably without the “Consolidation” part which has been subject to most controversy in the Council negotiations

Although France and Germany cannot, naturally, directly dictate the way forward on their own, a number of other EU member states are aligned with their proposals. Having said that, as always on taxation a unanimity of all EU member states would be required for anything to happen. Read more

Upcoming Council Presidencies to keep minimum taxation high on the agenda

According to a leaked draft work programme seen by Accountancy Europe, the Council agenda under the future presidencies of Germany, Portugal and Slovenia will have taxation as a high priority. The document states, in particular, that “fair taxation”, digital and minimum taxation, fight against tax evasion and energy taxation will be priorities for the three Council presidencies that run from July 2020 all the way until January 2022.

The Council is presided every six months by a different member state on a rotating basis. The presiding member state controls the agenda and priorities of the Council’s work. It is usual for three consecutive presidency holders to agree on a joint work programme in order to ensure continuity and long-term planning of the Council’s work.

International agreement on digital taxation looking increasingly complicated

According to the OECD’s tax director Pascal Saint-Amans, an international agreement on tax reform looks rocky. For example, the US continues to send contradictory signals, as its multinationals call for delays due to COVID and its administration continues to flaunt the safe harbour proposal, opposed by most other countries. Moreover, Mr. Saint-Amans said that some countries are now re-visiting the idea of ring-fencing digital businesses. Read more

France To Impose Digital Tax Only If OECD Process Fails

The French finance minister, Bruno Lemaire, has re-iterated that France will go ahead with its planned digital services tax only if the OECD fails to agree on a plan for taxing digital giants by 2021. He also stated that due to COVID, “never has a digital tax been more legitimate and more necessary”. 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.