Tax Policy

August 2019

  • G7 finance ministers reach agreement in principle on minimum and digital taxation
  • French Senate adopts national digital tax plan, Trump agrees on a truce with France
  • European Commission launches several tax infringement procedures against EU Member States

G7 finance ministers reach agreement in principle on minimum and digital taxation

On 18 July, G7 finance ministers reached a high-level political agreement on international corporate tax reform – including the broad outlines of a future digital and minimum tax framework.

The ministers agreed overall that the new rules should be “administrable and simple” and on the following:

  • On pillar one that taxing rights could be determined on criteria based on “businesses’ active participation in a customers’ or users’ jurisdiction, such as valuable intangibles or employment of a highly digitalized model”.
  • On pillar two and minimum taxation, that the tax level should be set depending on the “concrete design features of the rules”. OECD’s Pascal Saint-Amans speculated that the global minimum corporate tax rate would set at around the 12,5% mark. This would align the rate with the one currently in place in Ireland.
  • Tax certainty should be reinforced and aggressive tax planning should be limited, in particular for the transfer pricing of distribution activities (reportedly a request from the US). In order to avoid double taxation, a “robust and effective tax dispute resolution through mandatory arbitration” should be established.

G7 expects a global agreement in the Inclusive Framework on the “outlines of the architecture” of the international tax reform by January 2020. The 26 August G7 leaders’ summit in Biarritz further re-iterated the commitment to find an agreement in 2020.

European Commission

European Commission launches several tax infringement procedures against EU Member States

The European Commission has launched a number of tax-related infringement cases against several EU Member States. It announced the infringement procedures in its latest monthly infringement package.


Use of Article 116 of the TFEU in the context of tax reform proposals

  • Question by group of Green MEPs
  • Reply by Commissioner Moscovici

Commissioner argues that Article 116 cannot be used for tax harmonisation measures such as CCCTB or digital services tax.


C‑273/18: Right to deduct input VAT

Europe’s SMEs call for fair taxation of the digital economy

SME United, a Brussels-based association representing European SMEs, calls on EU policymakers to make sure that companies of all sizes – including in the digital sector – pay their fair share of tax.

SME United supports finding a solution to digital taxation at the OECD level. However, if this fails, SME United states that EU-only solutions might be a necessary alternative. Read more

Mauritius Leaks: new leaked documents reveal multinationals using Mauritius for tax avoidance

On 22 July, the International Consortium of Investigative Journalists (ICIJ) has launched the so-called Mauritius Leaks – a new tax avoidance-based scandal.

ICIJ published details of more than 200 companies as part of the investigation – including Whirlpool, Total S.A. and Mayo Clinic – that the Mauritius office of the law firm Conyers Dill & Pearman assisted. Read more

France and US set up new working group on digital taxation to seek OECD agreement

On 29 August, the OECD Secretary-General Angel Gurría and French finance minister Bruno Le Maire announced the establishment of a new working group between France, US and the OECD to prepare a proposal for international digital tax reform by the end of 2019.

This proposal would then form the basis for an international agreement at the OECD level during the first half of 2020.

The new working group would work on questions such as defining a company’s taxable presence or activities in a jurisdiction, tax levels, and what types of companies would fall under the scope.

French Senate adopts national digital tax plan, Trump agrees on a truce with France

On 11 July, the French Senate approved the government’s proposed digital tax that would impose a 3% turnover levy on over 30 digitalised businesses – including major US ones such as Google, Facebook and Amazon.

The US reacted to the measure with outrage and threatened France with possible trade restrictions on French wine imports.

The US digital businesses argue that the tax is discriminatory. However, they also urged France and the US to avoid escalating trade tensions.

Amazon France announced on 1 August that it would increase its referral fees in direct response to the French digital tax.

In the aftermath of the 26 August G7 leaders’ summit in Biaritz, France and the US reached a compromise that will leave the French tax in place until OECD agrees on an international solution.

According to the compromise, France would reimburse to the companies any difference between the French tax and an eventual OECD agreement.

US digital sector companies denounced the compromise soon afterwards.

France is not alone

France is not alone in introducing unilateral digital tax measures.

Over 10 countries are planning similar measures. See Accountancy Europe’s recent publication for an overview.

Most notably, the UK government re-iterated its own digital tax plans on the same day as the French Senate vote took place. This might hamper UK’s hopes for a post-Brexit trade deal with the US.

France to introduce flight tax, UK also discussing plans

France will reportedly introduce a tax on airlines flying from its airports from 2020. The tax is expected to generate EUR 180 million in revenue.

Similarly, the UK is planning to introduce a national flight tax in the form of a “carbon charge” to offset greenhouse gas emissions.This 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.