Tax Policy

March 2023

  • FISC Committee hosts OECD’s Achim Pross to discuss Pillars 1 and 2 
  • ECON Committee adopts position on Pandora Papers draft report 
  • French prosecutors raid banks’ offices in dividend payment tax investigation 

FISC Committee discusses Pillars 1 and 2 with OECD

European Parliament’s FISC Committee exchanged the views with Dr. Achim Pross, Deputy Director of the OECD Centre for Tax Policy and Administration, on 28 March. The hearing focused on the state of play on implementing the OECD agreement on a two-pillar global tax reform. MEPs also asked about the situation in the US and other topics on the OECD’s agenda. 

Dr. Pross highlighted that the revenue gains are higher than previously expected. Revenue of Pillar 1 is between 13 and 36bn for 2021, and then 12-25bn per year. The low- and middle-income jurisdictions are also gaining more than the high-income jurisdiction, percentage-wise, as a share of the existing corporate taxes. 

A multilateral convention is being built for Pillar 1. They will have to see if they get there. While not so many gaps can be bridged, some still remain. Dr. Pross could not assess whether this was happening quickly. 

On Pillar 2, collectively, the revenue impact is 220bn annually. It is about 9% of the global corporate income tax. Dr. Pross noted a “coexistence” between the US GILTI and Pillar 2 should be operationally possible.

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New Commission Communication on Single Market flags tax measures as key simplification tools

The Communication, published on 16 March, looks at the status of the EU Single Market and challenges linked to competitiveness in Europe. It maintains that the Commission (EC), through initiatives such as the VAT in the digital age and the BEFIT, seeks to ensure the functioning of the Single Market and promote SMEs’ competitiveness. 

Whilst the Communication is not a legislative proposal, it does demonstrate how EC sees its role in improving the business environment through specific tax initiatives.

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European Parliament

ECON adopts position on Pandora Papers draft report

MEPs adopted a comprehensive set of recommendations from the lessons learnt from the Pandora papers and other similar data leaks on 21 March. 

The report was authored by MEP Niels Fuglsang (S&D/Denmark) and adopted by Parliament’s ECON committee by 46 votes in favour and 7 abstentions. It calls for continued momentum to enact proposed tax legislation, more commitment to correctly implement and enforce what has already been agreed, and makes suggestions for a host of new reforms considered essential. These include additional requirements for tax intermediaries. 

The final vote in the Plenary is scheduled for 8 May. The report’s recommendations are non-legislative, but the Commission (EC) will be required to respond and explain what measures it intends to take in relation to the recommendations, or if it takes no measures, then to explain why.

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FISC meets with members of German parliament to discuss tax matters

MEPs of the FISC Committee continued their series of hearings with national representatives regarding their country’s tax policy, this time focusing on Germany, on 28 March. 

The meeting heard from Daniel Fehling from Germany’s Federal Ministry of Finance, Reinald Koch, Professor on taxation at the University of Eichstaett-Ingolstadt, and Bettina Rodenberg, Henkel’s Head of Global Tax and Trade. It follows similar meetings which focussed on the tax policy of the Netherlands, another on Ireland and a third on Luxembourg.

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FISC Committee discusses VAT fraud with EPPO

The FISC Subcommittee exchanged the views with Ms Laura Kövesi, European Chief Prosecutor from the European Public Prosecutor’s Office (EPPO), on the “Enhancement of available tools in the fight against VAT Fraud” on 28 March. 

The EPPO’s recent and so far most prominent intervention in relation to VAT carousel fraud, the ‘Operation Admiral’, revealed the scale of VAT fraud in the EU. It showed a scheme estimated to have cost governments €2.2 billion and involved organised crime groups in 14 Member States. The complexity of such cross-border schemes requires elaborate tools and close cooperation between prosecutors in multiple countries to fight against them. 

This exchange of views aimed to shed light on VAT carousel fraud in the EU, costing around €50 billion annually in tax losses to the Member States and on EPPO’s daily mission to uncover these fraud schemes.

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EU publishes response to UN tax resolution

EU Council published its response to the United Nations (UN) resolution on promoting inclusive and effective international tax cooperation on 20 March. It constitutes the Commission’s and EU member states’ formal response. 

In the response, the EU recognises the importance of global standards, coordination, and the UN’s role. At the same time, the EU also reiterates its commitment to the OECD’s framework and the 2-pillar solution.

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EC reiterates possibility of EU-only proposal in absence of Pillar 1

  • Question by MEP Olivier Chastel (RE/Belgium) 
  • Reply by Commissioner Gentiloni

EC says application of VAT rules to non-fungible tokens is to be discussed in EU VAT Committee 

  • Question by MEP Morten Løkkegaard (RE/Denmark) 
  • Reply by Commissioner Gentiloni

Accountancy Europe publishes factsheet on VAT in the digital age

Accountancy Europe published a factsheet summarising the main changes from the European Commission’s (EC) proposals to modernise the European VAT systems on 14 March. The proposals were issued in December 2022 with the intention to: 

  • make the VAT system more suitable for e-commerce 
  • help fight fraud and improve fairness 
  • reduce administrative burden 
  • overall make VAT reporting more efficient 

The proposals’ main area of change is to promote e-invoicing and have a near real-time reporting system for intra-EU cross-border commerce by 2028. Implementing the provisions will challenge many tax authorities and businesses, especially SMEs. 

This publication aims to support businesses and their advisors, who should take note of the potential changes as soon as possible.

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Group of economics and MEPs call for fair taxation of the ultra-rich

A group of high-profile economists and Members of the European Parliament (MEPs) have called for the taxation of highnetworth individuals. The purpose is to arrive at an international or European framework to “reduce social inequalities while financing the necessary investments for the ecological and social transition”.

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French prosecutors raid banks in tax fraud probe

French prosecutors raided the Paris offices of BNP Paribas, Société Générale and several other large banks as part of an investigation into alleged tax evasion tied to dividend payments on 28 March. 

In the biggest raid ever orchestrated by French financial prosecutors, investigators said they had dispatched 150 agents to search emails and documentation at the banks, including HSBC, Natixis and BNP-owned brokerage Exane.

Read moreThis curated content was brought to you by Johan Barros, Accountancy Europe Senior Manager since 2015. You can send him tips by email, follow him on Twitter and connect with him on LinkedIn.