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First initiatives expected by February 2025, with further plans on taxation to be unveiled soon. Find more below
The new European Commission (EC) started to work on its new priorities as of 2 December.
One of the immediate actions of the new EC will be to deliver on the administrative burden reduction agenda, with first initiatives on this to be expected on 26 February 2025. In parallel, the EC continues its work to evaluate the functioning of the Directive on Administrative Cooperation (DAC) and the Anti-Tax Avoidance Directive (ATAD), and possible next steps for those should be announced in the course of 2025.
In the next weeks the new EC’s additional plans in the area of taxation should become clearer.
The EC has concluded three in-depth State aid investigations into transfer pricing tax rulings granted by Luxembourg to Fiat and Amazon, and by the Netherlands to Starbucks. Following judgments by the EU Courts, the EC found that the tax rulings did not grant the companies selective advantages.
In 2015 and 2017, the EC found that Luxembourg granted selective tax advantages to Fiat and Amazon, and the Netherlands to Starbucks, in breach of EU State aid rules. In each case, the EC concluded that a tax ruling issued by the respective national tax authority artificially lowered the tax paid by each company and therefore granted them a selective advantage over other companies. However, the EU Courts ultimately annulled the EC’s original decisions in all three cases, leaving in-depth investigations open.
On 28 November and taking into account the guidance of the EU Courts, the EC adopted three final decisions closing its in-depth investigations and confirming that Luxembourg and the Netherlands, when granting the respective tax rulings, did not provide Fiat, Amazon and Starbucks with selective tax advantages contrary to EU State aid rules.
On 18 November, the European Parliament’s (EP) ECON Committee held its Economic Dialogue and exchange of views with Mihály Varga, ECOFIN President and Minister of Finance of Hungary. The focus was on the priorities of the Hungarian Presidency of the European Council.
After presenting the Presidency priorities, the Minister explained that in terms of the ECOFIN, the Hungarian Presidency is focused on the issues of competitiveness and how to increase economic growth. He pointed to the ongoing work on the fiscal framework as well as work on legislative files and the Capital Markets Union (CMU).
During the subsequent debate with MEPs, he was often asked about the situation in Hungary, notably in relation to corruption, as well as about the energy tax directive and the EU’s new fiscal rules.
The Minister also referred to the recent Council agreement on the VAT in the Digital Age (ViDA) proposals (see last Tax Policy Update). He explained that since the Council’s final agreement differs significantly from the original EC proposal, the EP would be asked to provide a new non-binding opinion. The EP has already finalised an opinion on ViDA in the past, but that was on the basis of the EC’s proposal. As a result, there will be a delay before ViDA formally becomes EU law, as the EP’s opinion is needed before it can be published in the EU Official Journal.
María José Garde, chair of the code of conduct group on business taxation in the Council of the EU, said she hoped to have a proposal on beneficial ownership transparency before the end of her term in February 2025, during her exchange of views with the EP’s Subcommittee on Tax Matters (FISC) on 3 December.
When questioned by MEP Matthias Ecke (S&D/Germany), Ms Garde acknowledged that this was “an essential criterion in the fight against tax fraud”. She reported, “[t]he group has been conducting an internal review for a year. […] There is a discussion between us, and we need to define the information we need to analyse to check whether a particular jurisdiction is cooperating.”
*Article originally published in Agence Europe – read more
The draft report from finance ministers (ECOFIN) on taxation issues to EU heads of governments has been published. As usual, the report provides a one-stop-shop overview of the state of play on all the key ongoing tax files.
For example, negotiations on the Unshell Directive are ongoing, with some Member States emphasising the need to clarify its connection to the Directive on Administrative Cooperation (DAC), and ensure it does not increase administrative burden on companies or tax administrations.
Work also continues on the transfer pricing proposal, as well as at a technical level on the Business in Europe: Framework for Income Taxation (BEFIT) proposal.
Meanwhile, the proposed Head Office Tax (HOT) System for SMEs has faced strong objections from Member States, despite broad support for its underlying objectives.
G20 leaders met in Rio de Janeiro on 18-19 November to discuss and deliberate on major global challenges and crises and to identify common solutions. After the meeting, a “Leaders’ Declaration” was published.
On taxation, the Declaration highlights the importance of “progressive taxation” and confirms that the G20 countries will “seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed”, while respecting national sovereignty. The leaders notably call on the Inclusive Framework on BEPS to “consider working” on this issue.
The average level of tax revenues among OECD countries was largely unchanged in 2023 as governments sought to ease cost-of-living pressures amid growing spending challenges related to climate change and ageing populations, according to a new report released on 21 November.
OECD’s Revenue Statistics 2024 report shows that the average tax-to-GDP ratio for OECD countries was 33.9% in 2023, 0.1 percentage points (p.p.) below its level in 2021 and 2022, but above its pre-pandemic level of 33.4% in 2019.
In 2023, the tax-to-GDP ratio increased in 18 of the 36 OECD countries for which preliminary data are available, declined in 17, and remained unchanged in one. The largest increases (of at least 2.5 p.p.) occurred in Luxembourg, Colombia and Türkiye, while the largest declines (of at least 3.0 p.p.) were observed in Israel, Korea and Chile.
Strengthening the EU’s defence measures against harmful tax regimes and corporate tax avoidance has not closed all the gaps, according to a new report published by the European Court of Auditors (ECA) on 28 November.
The report examines the EU efforts to combat harmful tax regimes and corporate tax avoidance. Within its limited competences in the area of direct taxation, the EU adopted a legal framework and uses supporting instruments as a first line of defence against systemic harmful tax practices.
However, ECA identified shortcomings in how the rules were implemented and noted the absence of a common performance monitoring framework at EU and national level. ECA recommends ways to improve EC’s oversight and close existing loopholes, thus helping it to tackle these harmful tax practices, and provide enhanced support to member states to ensure consistent application of the legislation.
Accountancy Europe is pleased that ECA has found its 2019 publication on tax dispute resolution mechanisms insightful, and has included it in its report.
Australia has approved one of the world’s strictest tax disclosure laws for multinational companies, forcing them to reveal details of their finances in dozens of jurisdictions.
The tax law passed by the senate on 28 November will require companies to report revenues and profits in 41 countries and financial centres that “are typically associated with tax incentives, tax secrecy and other matters likely to facilitate profit shifting activities”, according to Australia’s Treasury. The new law is broadly based on a tax standard developed by the Global Reporting Initiative (GRI).
