As reported in the last Tax Policy Update, the European Commission is considering the option of new taxes to help fund the EU COVID recovery package – including a so-called “Single Market tax” (SMT) that has baffled the tax policy world.
Since then, further details have emerged on it might entail. According to Commissioner Hahn (budget) this annual SMT would target up to 70,000 companies with a global turnover above EUR 750 million that operate in the Single Market. The Commissioner hopes that such a tax would yield EUR 10 billion. The tax rate could reportedly be 0,2% of the companies’ turnover.
But there seems to be no unity even within the Commission, with reportedly Commissioner Breton (single market and SMEs) cautioning against it. A number of business associations have also warned that it might endanger Europe’s economic recovery.
Commissioner Gentiloni has re-iterated that the EU will proceed with proposals in 2021 on digital and minimum taxation if the OECD’s discussions fail to deliver this year. He also said at a webinar co-organised by the Greens that minimum taxation would be most impactful in terms of additional tax revenues for Europe.
At the same webinar, the Commissioner excluded the option of using “enhanced cooperation” for an eventual minimum tax proposal, saying it makes little sense if only countries with ‘good tax governance’ participate. He also reminded that the use of Article 116 is being studied by the Commission, which would allow tax proposals to be adopted by qualified majority rather than unanimity, if they try to fix disruptions in the Single Market. He did not specify whether the minimum tax proposal specifically would fulfil this condition.
On 9 June, ECON Committee of the European Parliament discussed the Commission’s proposed COVID postponements to the VAT e-commerce system (original proposals here and here). The new system should make it easier for consumers and businesses to buy and sell goods cross-border online as well as help Member States to collect VAT.
At the hearing, MEPs agreed to aim for a quick agreement on the two files in order to deliver the Parliament’s opinion ideally at the July Plenary. The files in the Parliament are led by MEPs Ondrej Kovarik (RE/Czech Republic) and Ludek Niedermayer (EPP/Czech Republic).
The Parliament’s opinion is necessary before the Commission’s proposals can enter into force.
On 11 June, the European Parliament’s Conference of Presidents agreed to set up a permanent tax Committee, to work under ECON.
Reportedly, the Committee’s mandate would focus on tax avoidance, fraud, evasion and transparency.
The exact seat allocation is to be confirmed, but our preliminary information indicates that EPP would get 8 seats, S&D 6, RE 4, Greens 3 and GUE-NGL 2. The Committee would be chaired by the MEP Paul Tang (S&D/Netherlands), but this is also to be set in stone. The total number of members would be 30, with 4 vice-chairs.
A confirmatory vote in Plenary is expected for Thursday 18 June.
On 2 June, the Council approved its position for the future of the Directive on Administrative Cooperation on tax (DAC). The Member States call for the following:
The Conclusions do not bind the European Commission, but gives it a political signal of what Member States expect from DAC in the future. Read more
On 3 June, EU ambassadors (Coreper) adopted with some changes the Commission’s proposed extensions to DAC 6 reporting deadlines. The changes give Member States the option to postpone by 6 months the communication and information exchange deadlines under DAC 6, and by 3 months for the communication of information under DAC2. The deadlines may be extended by a further 3 months if all EU countries agree. A final approval by the Council is expected for 1 July.
On the same day, the ambassadors also finalised their draft compromise texts on COVID extensions to the VAT e-commerce package.
For both initiatives, the European Parliament must submit its non-binding positions. It is currently aiming to do so on 18 June for DAC 6, and in July for the VAT extensions.
EU finance ministers and the Council Code of Conduct Group have finalised their progress reports on taxation (here and here, respectively) to EU heads of government. The reports give useful overviews on the state of play on key tax files.
For example, the ECOFIN report shows that finance ministers want to link CCTB work more to OECD’s reform work and describes main obstacles in the VAT definitive regime negotiations. The Code of Conduct Group’s report, for its part, for example describes the state of play on the EU list of non-cooperative jurisdictions.
The US has initiated investigations into digital taxes planned by a number of countries across the world – including the UK, believing that they are discriminatory. The US investigation might lead to tariffs against the jurisdictions concerned.
The US document describes the scope of its investigations, listing both EU and non-EU countries, as well as the European Commission’s proposal.
Despite the US investigation and threat of sanctions, at least Spain, France, Italy and Czech Republic already announced that they intend to continue with their national plans. Soon after, Spain’s lower house in fact voted in favour of a 3% tax.