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Evaluation exercise announced during the release of its 2024 work programme
On 17 October, the European Commission (EC) released its 2024 work programme, offering a preview of the upcoming year’s initiatives.
The programme makes several references to outstanding tax proposals in both direct taxation and VAT. Interestingly, the programme also indicates EC’s intention to evaluate the Directive on administrative cooperation (DAC) under its efforts to reduce reporting burdens of EU legislation. However, no timeline is indicated for this evaluation exercise.
EC’s latest VAT gap report, published on 24 October, indicates that most EU Member States made progress in the enforcement of VAT compliance in 2021. The study shows that Member States lost around €61 billion in VAT in 2021, compared to €99 billion in 2020.
This figure represents revenues lost mainly to VAT fraud, evasion and avoidance, non-fraudulent bankruptcies, miscalculations and financial insolvencies, among other drivers.
The 2023 report shows that while some revenue losses are impossible to avoid, targeted policy responses seem to have made a difference, particularly those related to digitalisation of tax systems, real-time reporting of transactions and e-invoicing. At the same time, temporary factors such as government support measures implemented during the COVID-19 pandemic, which were often contingent on paying taxes, may also have played a role in driving this positive change.
The draft report was prepared by MEP Herbert Dorfmann (EPP/Italy). He made several suggestions to further change the EC’s withholding tax proposal (FASTER), such as:
The vote in ECON Committee is currently set for 23 January 2024. European Parliament (EP) only provides its non-binding opinion.
ECON Committee met on 24 October to vote on its own initiative draft report on the role of tax policy in times of crisis. The report has been prepared by MEP Kira-Maria Peter Hansen (Greens/Denmark).
The draft report was adopted, as amended, with 30 votes in favour, 18 votes against and 4 abstentions. A final vote in Plenary is currently set for 11 December.
ECON Committee also voted on 24 October on its own initiative draft report on further reform of corporate taxation rules. This report was prepared by MEP Isabel Benjumea (EPP/Spain).
The draft report was adopted, as amended, with 46 votes in favour, 5 votes against and 2 abstentions. A final Plenary vote is likewise expected for 11 December.
And finally, ECON adopted on 24 October its opinion on the VAT in the Digital Age (ViDA) proposal prepared by MEP Olivier Chastel (RE/Belgium). The opinion is divided into 2 separate draft reports available here and here.
The draft report on the proposal for a Regulation was adopted, as amended, by unanimity with 53 votes in favour. The draft report on the proposal for a Directive was adopted, as amended, with 47 votes in favour and 5 abstentions.
A final Plenary vote is currently set for 20 November for both reports. EP’s opinion is non-binding, but it is nonetheless needed for ViDA to become EU law.
ECON Committee met on 24 October for a consideration of draft report and decision on procedure regarding the EC proposal on VAT rules for taxable persons who facilitate distance sales of imported goods and the application of the special scheme for distance sales of goods imported from third countries, and special arrangements for declaration and payment of import VAT.
The proposal aims to further adapt the EU VAT framework by expanding the range of supplies covered by the Import One Stop Shop (IOSS), Special Arrangements and deemed supplier regime by removing the EUR 150 threshold, which currently limits their application and effectiveness. Therefore, the IOSS could be used to declare and remit the VAT due on all distance sales of imported goods into the EU, irrespective of their value, but not including products subject to excise duties, which remain excluded from the scheme. This proposal also aims to reduce compliance costs for businesses and create a level playing field for sellers operating online.
At the meeting, every MEP who spoke agreed to move forward with a streamlined process for this file, no amendments. The final Plenary vote is set for 20 November.
Members of the FISC Committee travelled to Washington DC from 30 October to 1 November, led by the subcommittee’s Chair MEP Paul Tang (S&D/Netherlands).
The delegation met with representatives of key institutions, such as the US Treasury Department, the Internal Revenue Service, bi-partisan representation of the US Congress, the Department of Economic and Social Affairs of the United Nations, the International Monetary Fund, as well as stakeholders from the private sector, civil society, experts, and journalists.
The discussions focused on topical international tax issues and challenges, such as the implementation of the two-pillar tax reform agreed by the OECD/G20 Inclusive Framework, the role of tax incentives in the Inflation Reduction Act, the Foreign Account Tax Compliance Act (FACTA), the exchange of tax information, the taxation of crypto-assets, and the US approach to combating tax havens, tax evasion, and aggressive tax practices.
ECON committee met on 7 November to discuss the draft report on the “FASTER” proposal, prepared by MEP Herbert Dorfmann (EPP/Italy). As mentioned above, he made some suggestions to change the EC’s withholding tax proposal (FASTER) and addressed the issue of better clarifying the interaction between FASTER and the SHELL directives. He also stressed the need for a better protection of taxpayers’ personal data, and a coordinated understanding of “comparable legislation” when it comes to the registration of a financial intermediary located in a third country.
The deadline for amendments is 15 November, and a vote in ECON Committee is currently set for 23 January 2024. EP may only provide its non-binding opinion.
The EU Finance Ministers adopted the eighth revision of the Directive on the exchange of tax information between Member States (DAC8). This revision was already agreed at a previous Council meeting in May. It extends the scope of the Directive, to now include crypto-assets and electronic transactions.
The ministers also amended the EU list of non-cooperative jurisdictions. They decided to add Antigua and Barbuda, Belize and Seychelles to the list, whilst removing British Virgin Islands, Costa Rica and Marshall Islands.
The OECD/G20 Inclusive Framework released on 11 October a new multilateral convention that updates the international tax framework to co-ordinate a reallocation of taxing rights to market jurisdictions, improve tax certainty, and remove digital service taxes. The release of the convention brings the international community one step closer to finalising of Two-Pillar Solution, tackling tax challenges arising from the digitalisation and globalisation of the economy.
The EU Tax Observatory’s 2024 Global Tax Evasion report based on research collaboration that builds on the work of more than 100 researchers globally. Some of the key findings include the following:
The report also makes six proposals to address the identified issues. Read more
On November 9, Advocate General Pitruzzella recommended setting aside the General Court’s judgement on tax rulings between Ireland and Apple. He suggested referring the case back to the General Court for a new decision on the merits.
According to the Advocate General, the General Court committed a series of errors in law when it ruled that the Commission had not shown to the requisite legal standard that the intellectual property licences held by ASI and AOE and related profits, generated by the sales of Apple products outside the USA, had to be attributed for tax purposes to the Irish branches. The Advocate General also believes that the General Court failed to assess correctly the substance and consequences of certain methodological errors that, according to the Commission decision, vitiated the tax rulings.
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