The EU Finance Ministers have made a number of tax related decisions during their latest ECOFIN meeting. Of particular interest, the Ministers adopted their conclusions on the …
ECOFIN Council decides on tax transparency, discusses VAT fraud
The EU Finance Ministers have made a number of tax related decisions during their latest ECOFIN meeting. Of particular interest, the Ministers adopted their conclusions on the Commission Communication to further enhance tax transparency in the aftermath of the Panama Papers (for further details on the Communication, please see FEE Tax Policy Update from 8 July).
More specifically, the Ministers endorsed the Commission’s announced plans to address the role of tax advisors through a consultation and a subsequent legislative proposal (e.g. in the form of amending the Directive on Administrative Cooperation) inspired by the BEPS Action 12 on the disclosure of tax planning schemes. They, however, urge the Commission to seek a “global approach” on this with EU’s international partners, and to be mindful of “appropriate legal safeguards”. In the same Conclusions, the Ministers also emphasise the need for tax certainty for businesses, and urge the Commission to take further EU-level action on whistle-blower protection.
On the VAT side of things, most Ministers opposed the proposal to include VAT fraud within the scope of the Directive on the protection of the EU’s financial interests. The general feeling was that VAT fraud is primarily a challenge for national budgets, not the EU’s, and as such should be primarily addressed at the Member State level. Certain Member States (e.g. Austria, Finland, Netherlands and Portugal) are willing to compromise, however, if the Directive only touches on fraud cases above a €10 million threshold and involving two or more Member States.
Accountant Fined By HMRC For Obstructing VAT Fraud Probe – 6 October 2016
According to Tax News, an accountant has been fined by the UK’s HMRC for “obstructing” a VAT fraud investigation. HMRC claims that the accountant refused to assist investigators in a case involving his clients despite a legal obligation to cooperate. The fine amounts to £25,000. Should the accountant fail to pay, he may face up to 18 months in prison. The case is, according to the article, first of its kind for the HMRC.
Switzerland Reforms VAT Rules on Foreign Suppliers – 6 October 2016
According to Tax News, the Swiss Parliament has adopted new legislation that would require non-Swiss companies with a turnover exceeding CHF100,000 to introduce a VAT in their transactions with Swiss customers. The existing regime provides for an import VAT exemption for imported deliveries below CHF200. Finally, as part of the new legislation non-resident service providers in Switzerland will have to register for VAT purposes should their global annual income be above CHF100,000.
ECON vote on definitive regime and VAT fraud report – 11 October 2016
The ECON Committee of the European Parliament has voted on the draft own-initiative report on VAT fraud and a definitive VAT regime (for more details on the report, please refer to FEE Tax Policy Update from 13 May). The MEP Werner Langen (EPP/GER) is leading the dossier. A number of amendments were adopted during the vote, and the consolidated version of the report will subsequently move to the Plenary, where a final vote is currently scheduled for 21 November. The report is legally non-binding as taxation at the EU-level remains subject to Member States’ unanimous decision-making. As such, the report commits neither the Commission nor the Council to take action.
World Health Organisation urges all countries to tax sugary drinks – 11 October 2016
As notably reported by the Guardian, the World Health Organisation (WHO) has called on all countries to introduce a sugar tax on soft drinks. According to the WHO, an increase of 20% or more in the drinks’ prices would significantly reduce their consumption and, by extension, help tackle the obesity crisis that has reached alarming global proportions. Moreover, the organisation maintains that such a tax could not only increase countries’ tax yields, but also decrease healthcare costs with reduced obesity rates.
EU Cautioned on Plans to Regulate Tax Advisers – 12 October 2016
Bloomberg has published an article on the Commission’s plans to propose legislation on tax advisors. During the October ECOFIN meeting (see article above), EU Finance Ministers endorsed Commission plans to look into the role of tax advisors as a follow-up to the Panama Papers leaks. In the article, representatives of accountancy organisations as well as a tax lawyer warn that for any EU-level initiative, a level-playing field between different service providers (lawyers, accountants, etc.) across Member States and different legal frameworks must be ensured.
Cities and regions welcome modernisation and simplification of VAT rules – 12 October 2016
The Committee of the Regions (CoR) has published its non-binding opinion on the Commission’s planned VAT reforms as outlined in the VAT Action Plan earlier this year. The opinion expresses concern over the significant VAT gap in the EU, and calls on regional leaders to do more in terms of monitoring the activities of companies, the use of IT tools, and expresses concerns over giving Member States too much freedom on VAT rates and instead proposes to extend the list of goods eligible for reduced rates.
Italian Police Breaks Up Europe-Wide VAT Fraud Ring” – 14 October 2016
According to Tax News, Italian authorities have broken up a VAT fraud ring responsible for stealing €130 million in VAT and operating through 180 companies in 15 EU Member States. The ring employed numerous forms of carousel fraud. Out of the 180 companies involved, 145 were Italian and only 54 were real operations.
Italian tax gap at 34.2%, corporate tax rate to fall in 2017 – 17/18 October 2016
According to Tax News, Italy’s tax gap amounts to 34,2% for the period of 2010-2014. This represents an average of €108,7 billion, of which €88,1 billion is attributed to tax evasion and the rest due to errors or overdue tax debts. Unpaid VAT represented approximately 1/3 of all unpaid taxes, or €40,2 billion and 2% of the Italian GDP. In other news, the Italian Government has announced that the country’s corporate tax will fall from 27,5% to 24% in 2017. This will cost around €15 billion.
Commission proposes to approve Polish request for VAT derogation – 20 October 2016
The European Commission has published a proposal to the Council on a VAT derogation for Poland. The initial derogation was granted back in 2009, and enables Poland to grant a VAT exemption to taxable persons with an annual turnover below €30,000 applicable until 31 December 2018. Poland has now requested for the threshold to be raised to €40,000. The unanimous agreement of all EU Member States is necessary for any derogations from EU VAT rules.
UEAPME comments on the VAT Action Plan – 21 October 2016
The European Association of Craft, Small and Medium-sized Enterprises (UEAPME) has published a position paper on the European Commission’s VAT Action Plan. In the position paper, UEAPME endorses the Commission’s plans to simplify the EU VAT system as well as the VAT simplification package tailored for SMEs. Of additional interest, UEAPME is against a temporal reverse charge derogation as such a scheme could pose additional burdens for SMEs. On granting Member States greater freedom over their VAT rates, UEAPME states its support in principle supposing that this does not cause distortions to competition. And finally, UEAPME calls on the Commission to conduct a “broad impact assessment” on the different options for a definitive VAT regime.
European Commission publishes Working Programme for 2017 – 25 October 2016
The European Commission has published its Work Program 2017. The Commission has grouped its work in 21 new initiatives which fall under the 10 priorities (see also 2017 EC Infographic). The set out priorities are mostly based on the Commission’s previous work as well as the current political and financial crises that need to be tackled. Overall, there are no big surprises in the proposals. In the area of taxation, a fair and efficient tax system remains a priority. The Commission will continue working on key taxation issues such as the list of non-cooperative jurisdictions, tackling tax fraud and evasion, and addressing VAT cross-border fraud.
VAT exemption on electric and hybrid electric vehicles – 26 September 2016
The European Commission has replied to a question asked by the MEP Tibor Szanyi (S&D/HUN) with regard to VAT exemption on electric vehicles. In his question, Mr. Szanyi asks the Commission whether VAT reduction and VAT exemption on electric and hybrid electric vehicles are in conflict with EU law. In his reply, Commissioner Moscovici states that the VAT Directive does not provide for special rules for electric vehicles, and as such the general VAT rules apply on them, i.e. such vehicles are subject to the standard VAT rate. However, Commissioner Moscovici points to the Commission’s planned 2017 reform of EU VAT rates which would give Member States greater flexibility on setting their national rates.