Tax Policy

September 2021

  • Commission publishes major green tax proposals, postpones digital levy into the autumn
  • Commission launches public consultation on debt-equity bias
  • Slovenian Council Presidency publishes work programme with tax items, seeks tax reform compromise
  • International agreement on tax reforms reached, final details to be agreed on by October

Commission publishes Fit for 55 to help meet its climate goals

The ambitious policy measures aim to deliver on Commission’s (EC) commitment to cut EU’s emissions by 55% by 2030. The package, issued on 14 July includes a few tax measures, notably:

  • a proposal to revise the EU’s Energy Taxation Directive (ETD)
  • a proposal to introduce a carbon border adjustment mechanism (CBAM) to protect EU companies from competition from third countries with less ambitious climate goals

The revised ETD proposes to align the taxation of energy products with EU’s climate ambitions, promoting clean technologies, and removing outdated exemptions and reduced rates that encourage the use of fossil fuels. Its key elements include:

  • introducing an energy taxation system based on the energy content of the energy products and electricity, and their environmental performance;
  • putting an end to the energy tax exemptions enjoyed by maritime and aviation sectors; and
  • proposing tax exemptions and reductions for products that support EU’s climate objectives

The CBAM proposal will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage’.

Under CBAM, EU importers will buy carbon certificates corresponding to the carbon price that would have been paid had the goods been produced under the intra-EU carbon pricing rules. Conversely, if a non-EU producer can show that they have already paid a price for the carbon used in the production of the imported goods in a third country, the corresponding cost can be fully deducted for the EU importer.

European Commission

European Commission publishes Taxation trends in the European Union report

The EU continues to show a level of tax revenue significantly above other advanced economies, according to the EC.In 2019, tax revenue in the EU stood at 40.1% of gross domestic product (GDP). The taxation structure remained stable in the EU. Revenue was almost equally distributed among indirect taxes, direct taxes and social contributions. The distribution of revenues by tax base (consumption, labour and capital) was very similar to those of previous years (around 52 % from labour, 28 % from consumption and 20 % from capital). Read more

New VAT for e-commerce rules enter into force

The new EU VAT rules applicable as of 1 July aim to simplify cross-border e-commerce.

Some of the new changes include:

  • Removal of the EUR 22 exemption for extra-EU small consignments
  • Establishment of one common EU threshold of EUR 10,000 above which the VAT must be paid in the Member State where the goods are delivered
  • Online sellers may register for an electronic portal called ‘One Stop Shop’ (OSS) where they can take care of all of their VAT obligations for their sales across the whole of the EU

The rules will impact many SMEs in Europe, which is why Accountancy Europe with the help of DG TAXUD prepared a publication to inform SMEs’ accountants about them.

Commission launches public consultation on debt-equity bias in tax (DEBRA)

The consultation will gather information on the existence and magnitude of indebtedness due to the tax debt bias and potential impacts of the policy options. It also aims to gather views on appropriate anti-abuse rules linked to the measure.

The gathered information will comprise the definition of equity, the reasons for indebtedness of EU companies, possible solutions to address the tax induced debt-equity bias, the appropriate level of the notional interest rate for an allowance on equity, or the need for a higher rate for SMEs. Stakeholders have until 7 October to submit their responses. Read more

Commission postpones digital levy into the autumn

The digital levy, which was supposed to co-exist with an international Pillar 1 agreement and provide direct funding for the EU’s own coffers has been postponed into the autumn, following strong pressure from US administration.

The US had argued that the digital levy is discriminatory and threatens to undermine global efforts for an international tax reform agreement. A final international agreement is expected to be reached in October at latest. It remains to be seen whether and in what form the Commission will then propose the digital levy.

According to latest information, the levy would put a 0,3% tax on businesses operating in the EU with online sales of at least EUR 50 million. Read more

Brussels appeals against Amazon tax court ruling

EC has appealed against a court decision that quashed an order for Amazon to pay EUR 250 million in tax to Luxembourg, the Commission said in a statement on 22 July.

The General Court, the EU’s second-highest court, said last May the Commission was “incorrect in several respects” in its analysis of the 2017 case. The ruling said Brussels was not right to argue that the company’s tax bill was artificially reduced as a result of overpricing of a royalty payment. But in its appeal to the court, the European Commission said the court had “made a number of errors of law in its judgment”. Read more

European Parliament

FISC discusses new studies on harmful tax practices in the EU

FISC Committee heard presentations on 29 Juny on two studies commissioned by the Parliament. The first study focused on harmful tax practices within the EU and possible recommendations. The second study examined taxation challenges of professional football players.

Committee Members Pedro Marques (S&D/Portugal) and Claude Gruffat (Greens-EFA/France) inquired about using Article 116 TFEU on tax. Prof Dr Elly Van de Velde, University of Hasselt, responded that it will be very difficult to use the Art. 116, but it is a way out to go further. She believes that the EU can introduce Art. 116 by starting with environmental taxation and go further into a mechanism against market distortions. Read more (including recording of the hearing)

FISC public hearing on green taxation

The discussion took place on 12 July just ahead of the Commission’s proposals in this area.

The hearing hosted institutional and academic perspectives on this broad subject. The first panel featured Kurt Van Dender (OECD) and Tatiana Falcão (University of Münster), who focused on the review of ETD and how this can contribute to the goals of the European Green Deal.

The second panel featured Alice Pirlot (University of Oxford) and Carlo Stagnaro (Instituto Bruno Leoni) to discuss the potential of green taxation in the overall tax mix, to fund Europe’s recovery after the pandemic, notably through the Recovery and Resilience Facility. Read more (including recording of the hearing)

ECON adopts draft report on harmful tax practices

The report, adopted with 44 votes in favour, 6 against and 8 abstentions on July 13, was prepared by MEP Aurore Lalucq (S&D/France).

The draft report’s key proposal is to completely rewrite the existing EU Code of Conduct, and replace it with a new Code called ‘Framework on Aggressive Tax Arrangements and Low-rates’ (FATAL). Other key provisions include scoping in individuals’ income, a minimum tax rate below which tax practices would be considered harmful, an economic substance criterion and simpler criteria for determining whether a tax regime is harmful.

A final Plenary vote on this non-legislative report is currently scheduled for 13 September. Read more

Slovenia to seek compromise with tax reform hesitant Member States

ECON Committee held an exchange of views on 13 July with Andrej Šircelj, ECOFIN President and Minister for Finance of Slovenia. The hearing focused on the priorities of the Slovenian Council Presidency on financial affairs and taxation policies.

At the hearing, MEP Markus Ferber (EPP/Germany) lamented that EU countries Ireland, Hungary and Estonia have so far refused to sign up to the global agreement on international tax reform. In response, Slovenia’s finance minister stated that he would invite the finance ministers of the three countries for negotiations. They will seek to reach a compromise, which he believes would be secured by October this year. Read more

BUDG hearing: Commissioner Hahn says digital levy to come “anyway”

The Commissioner made this remark at a 31 July hearing on EU’s post-COVID recovery with BUDG Committee MEPs. EC was initially supposed to propose the digital levy in July, as part of a new own resources package, but this was postponed to after October (see article above). EC’s plan is to then issue the proposal whether or not there is an international agreement and if there is, to tweak it accordingly.

The Commissioner also explained that the digital levy would be a small percentage on the revenue generated at point of sale, in the country where the deal is made and where the customer is located.

Finally, the Commissioner said that a financial transaction tax (FTT) might be a part of EC’s second 2024 proposal on own-resources. Read more

MEP questions & answers

Council says FTT possibly on the table as own-resource in next MFF, open for new EC proposal

EC not planning measures to address discriminatory (tax) treatment of hygiene products for women

  • Question by MEP Samira Rafaela (RE/Netherlands)
  • Reply by Commissioner Dalli (equality)

EC says WTO dispute settlement only acceptable means for US to challenge EU countries’ digital taxes

COVID support: EC assesses EU countries’ compliance with country-specific recommendations, also on tax

EC wants to strengthen the criteria used in EU’s tax blacklist listing process

  • Question by MEPs Monika Beňová & Miroslav Číž (S&D/Slovakia)
  • Reply by Commissioner Gentiloni

EC is assessing options to bar companies with tax haven links from public procurement

  • Question by MEP Niels Fuglsang (S&D/Denmark)
  • Reply by Commissioner Breton

EC is assessing whether to challenge Danish supreme court ruling on taxing exchange rate fluctuations

  • Question by MEP Søren Gade (RE/Denmark)
  • Reply by Commissioner Gentiloni

EC has put digital levy “on hold” until an international tax reform agreement reached in October

  • Question by MEP Carmen Avram (S&D/Romania)
  • Reply by Commissioner Gentiloni


ECOFIN publishes tax report for EU heads of governments

EU finance ministers (ECOFIN)’s report describes their tax legislation progress in the past 6 months. It gives a helpful and comprehensive overview of all the pending key tax files on the Council’s table, including on direct taxation and VAT. Read more

Code of Conduct Group reports on its work, Council indicates priority areas

The Council’s Code of Conduct Group (CoCG) has published a report of its work and activities to EU heads of governments. As with the ECOFIN report (see above), this report gives a helpful overview of all the key aspects of CoCG’s work, including on the revision of its mandate.

Draft Council Conclusions on CoCG have also been published. They re-iterate the Council’s commitment to continue work on revising the scope of CoCG’s mandate. They also call on CoCG to continue its work on defensive measures against non-cooperative third jurisdictions.

Slovenian Presidency to work on digital tax and CBAM

Slovenian ambassador for the EU elaborated on his country’s work priorities for the upcoming Slovenian Council Presidency during the European Policy Centre webinar on 10 June. The Presidency starts its 6-month mandate in July.

On tax, the ambassador singled out the upcoming digital levy and carbon border adjustment mechanism (CBAM) as files that Slovenia would like to progress on during its mandate. Both proposals are expected for 14 July, including also revision of the Energy Tax Directive (ETD). Recording here

EU finance ministers discusses VAT rates reform

There was no meaningful progress on the proposed VAT rates reform at the 18 June meeting of EU finance ministers. The rates reform would grant EU Member States more freedom in setting their national VAT rates.

The Portuguese Presidency proposed to include a ‘standstill clause’ that would allow all Member States to continue to apply their current VAT derogations on reduced, zero and super-reduced rates, save those harmful to the environment.

Belgium, Estonia, Ireland, Greece, Spain, Croatia, Slovenia, Lithuania, Finland, Slovakia, Poland, the Czech Republic, Bulgaria, Romania and Luxembourg showed their support for this Presidency compromise. But notably France, Germany and Sweden objected, fearing it would open the door for new derogations.

Most Member States supported Portugal’s proposal of phasing out environmentally harmful goods from reduced rates, including pesticides, chemical fertilisers, firewood and natural gas. Read more

Finance ministers progress on COVID VAT alleviations file but no conclusion yet

At the same meeting, ECOFIN welcomed the Portuguese Presidency’s proposal to limit the EC’s proposal to exempt from VAT the goods and services that the EU makes available to Member States and citizens in times of crisis to the COVID crisis only. The EC regretted the Council’s limitation to COVID.

After the meeting, the Portuguese Presidency welcomed progress made but lamented that there was for now no unanimity. All Member States reportedly agreed that progress on this file should be swift but no timeline for progress was provided. Read more

Global tax deal reached despite vocal opposition

The world’s largest economies agreed on 1 July to sweeping changes to the global tax system, despite staunch opposition from low-tax jurisdictions such as Barbados, Ireland, Estonia and Hungary.

A total of 130 countries signed up to the deal, which the OECD announced soon after. The initiative aims to introduce a global tax for the world’s 100 biggest companies with a turnover of at least EUR 750 million, and set an international minimum effective corporate tax rate of at least 15%.

All G20 countries, including the US, China and France, further confirmed their backing for the deal at their 9-10 July summit. However, many of the details, such as possible exemptions for the financial industry and manufacturing, have been left out of the current pact and will now be hammered out by October.

LuxLetters scandal emerges

A series of articles were published on 1 July by renowned newspapers such as Le Monde, Süddeutsche Zeitung and El Mundo, arguing that certain Luxembourg based tax advisory firms have directly sidelined EU rules on reporting of tax rulings to tax administrations. The allegations are based on revelations by a group of media organisations as well as NGOs such as Tax Justice Network. Read more

EU Tax Observatory assesses impact of substance carve-outs on minimum tax

EU’s Tax Observatory (a new EU tax research institute set up by the Commission) published a report on 21 July with the following key findings:

  • a carve-out would reduce tax revenues by 15% to 30% in the EU relative to a minimum tax without carve-out, depending on the rate
  • 5% carve-out would reduce revenues:
    • Of a 25% minimum tax from EUR 168 billion to EUR 132 billion
    • And of a 15% minimum tax from EUR 48 billion to about EUR 41 billion
  • 5% carve-out would reduce revenues:
    • Of a 25% minimum tax from EUR 168 billion to EUR 115 billion
    • And of a 15% minimum tax from EUR 48 billion to about EUR 37 billion

Read more

New OECD data highlights the importance of the international tax reform discussions

New data released in the OECD’s annual Corporate Tax Statistics publication on 29 July, underlines the importance of the two-pillar plan being advanced by over 130 members of the OECD/G20 Inclusive Framework on BEPS to reform international taxation rules.

The data shows the importance of the corporate tax as a source of government revenues, especially in developing and emerging market economies. On average, the corporate income tax accounts for a higher share of total taxes in Africa (19.2%) and in Latin America and the Caribbean (15.6%) than in OECD countries (10%). The data also points to evidence of continuing base erosion and profit shifting behaviours. Read more

Ireland seeks input on OECD tax proposals’ impact on Irish tax policy

The October deadline for an OECD/G20 led international agreement on global tax reform is approaching. In this context, the Irish government has opened a public consultation seeking stakeholder input on how the proposed changes might impact the Irish economy.

The consultation was opened on 20 July, and will run until 20 September. It has particular political significance as Ireland is one of just 3 EU countries (also Hungary and Estonia) that have so far refused to support the current version of the proposed tax reforms. Read more

Hungary explains its reservations over global tax reform agreement

A Hungarian government representative, Norbert Izer, has explained in his article to EU Observer why his country is for the time being holding back its support for the proposed OECD/G20 international tax reform deal.

He argues that while Hungary supports the fight against base erosion and profit shifting, this should not turn into a fight against tax competitiveness. He also says that there are still too many details and questions to be settled before an October deadline for a deal. Read more

Top German court confirms cum-ex trades were illegal

Germany’s Federal Court of Justice in Karlsruhe dismissed the appeal of two British traders on 28 July, confirming that so-called “cum-ex” transactions are illegal, in a key ruling in what has become the biggest tax scandal in the country’s history involving hundreds of suspects.

The court also upheld the decision of the Bonn district court, which issued a EUR 14 million fine for one of the traders and ordered the private bank MM Warburg to pay back EUR 176 million. 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.