The UK HMRC has published new guidance aimed at tax advisors. The guidance is aimed at all who “promote tax compliance” and offer “to represent or give advice to other taxpayers”…
HMRC publishes new Standards for tax advisors – 3 August 2016
The UK HMRC has published new guidance aimed at tax advisors. The guidance is aimed at all who “promote tax compliance” and offer “to represent or give advice to other taxpayers”. According to the guidance, such “agents” should for example disclose “all relevant information”, to fully comply with relevant legislation, and to consider the reputational risks behind providing advice on tax planning schemes.
HMRC Consultation: proposals for increased sanctions on tax advisors – 17 August 2016
The UK HMRC has launched a consultation document proposing a “new penalty” to enablers of tax avoidance and changes to current penalty rules on users of tax avoidance schemes that have been defeated. The document for example considers increasing the fine for using defeated tax avoidance schemes to 100% of the benefit gained. Penalties could also be applied directly to the tax advisers themselves. Avoiders and their advisers must, moreover, take “reasonable care” to ensure that their schemes are in line with rules and not using already defeated methods. The consultation attempts to clarify further what the principle of “reasonable care” entails. The deadline for providing views on the consultation document is 12 October. As a side-note, some elements of the consultation document may ‘spill over’ and inspire the debate on tax advisors at the EU-level as well. The Commission published earlier in July its Communication on Panama Papers and will launch a public consultation on tax advisors on October. Moreover, the European Parliament has been consistently vocal in calling for greater sanctions and preventive measures to address not only the use of but also the advice provision on tax avoidance schemes.
Goods applicable for VAT return – 23 August 2016
The European Commission has replied to a question asked by the MEP Margot Parker (EFDD/UK) with regard to goods applicable for a VAT return. In her question, Ms. Parker laments that EU VAT rules prevent the UK from removing VAT on a number of non-luxury items. She therefore asks the Commission whether the Commission will make it easier for Member States to remove VAT from non-luxury products that “should never have had VAT on them in the first place”. In his reply, Commissioner Moscovici maintains that the VAT Directive makes no reference to ‘luxury’ or ‘essential’ goods, but provides for a number of exemptions and reliefs. With regard to future plans for VAT rates, the Commissioner refers the MEP to the VAT Action Plan for details.
ECON Workshop on the definitive VAT system and VAT fraud – 31 August 2016
A public workshop titled Towards a definitive VAT system and fighting VAT fraud took place at the ECON Committee of the European Parliament. As the name of the workshop implies, the focus was firstly on the VAT reforms envisioned by the Commission in its VAT Action Plan published earlier this year, which includes plans for the establishment of a definitive EU VAT regime based on the destination principle. The second area of focus was VAT fraud and best means to fight against it; in this context, the question of the reverse charge mechanism emerged. The workshop brought together as speakers the leading MEP on the dossier, Werner Langen (EPP/GER); George Karakatsanis from the European Court of Auditors (ECA); Gerhard Huemer from UEAPME (European association representing SMEs); Martin Janeček from the Czech tax administration; as well as Sebastian Fiedler from the German Federal Criminal Police Union.
George Karakatsanis presented the ECA report published in March which identified a number of limitations in the current EU VAT system and put forward a number of recommendations to better tackle intra-community VAT fraud (see FEE Tax Policy Update from 3 March for further details). Mr. Karakatsanis argued that although the EU VAT system and means to tackle fraud are robust as a concept and overall sound, there are severe limitations in practice and the application of rules. For example, there are no effective cross-checks between customs and tax data, severe limitations exist in the exchange of relevant information between Member States’ authorities, and there is no system for systematic statistics on intra-community fraud and missing trader fraud.
Gerhard Huemer emphasised the importance of a simple and robust VAT system for SMEs, especially those seeking to do business cross-border. He warned against the implementation of a temporal, partial reverse charge mechanism only applied in some Member States (NB Czech Republic has been calling for the authorisation for a reverse charge pilot project to tackle VAT fraud), fearing the undue burdens and uncertainty that such a system could pose upon SMEs. He was moreover concerned that Commission plans to give greater leeway to Member States on VAT rates (as announced in the VAT Action Plan) could also prove burdensome for SMEs to comply with.
Martin Janeček defended a partial implementation of a reverse charge mechanism through a pilot project, and argued that reverse charging has managed to reduce carousel fraud by up to 98% in Czech Republic in those sectors where applied. In response to this, a representative from the European Commission defended their preference for taxation of intra-EU supplies over reverse charging, as the latter option would merely move fraud to the end of the supply chain. Sebastian Fiedler was not dismissive of the potential of reverse charging, but emphasised that this would have to be applied universally across the EU for it to be effective and not burdensome for companies – a point shared by UEAPME as well. Mr. Fiedler also emphasised the need of better cooperation and coordination cross-border on VAT fraud, and for this purpose called for a European Public Prosecutor.
Afterwards, MEPs working on the dossier expressed their views. Pervenche Beres (S&D/FRA) was sceptical about reverse charging, whilst the ECR Group (Eurosceptic conservatives and nationalists) defended the approach for its potential. Petr Jezek (ALDE/CZE) speaking on behalf of the liberal-democrats but of Czech nationality, defended reverse charging and the pilot project as the only means of addressing carousel and missing trader fraud. The EPP (centre-Right) MEPs appeared more fragmented. Whilst Ludek Niedermayer (EPP/CZE) urged EU leaders to opt for one option or the other as soon as possible without “experiments”, the lead-rapporteur Werner Langen (EPP/GER) did not completely dismiss the prospect of pilot projects.
In terms of next steps, a vote on the draft report on the same topic is scheduled for 10 October. A Plenary vote, in turn, is likely to occur on 21 November. For further details on the draft report, please refer to the FEE Tax Policy Update from 13 May.
Modifying VAT for feminine hygiene products – 31 August 2016
The European Commission has replied to a question asked by the MEP Josep-Maria Terricabras (Greens-EFA/SPA) with regard to VAT on feminine hygiene products. In his question, Mr. Terricabras states that in Spain certain female hygiene products are currently subject to a reduced VAT rate of 5%, with no possibility of exemptions even though such exemptions exist in other Member States. He therefore asks the Commission what steps it will take to regulate tax rates on essential items such as hygiene products used by women in order to ensure equality and fairness. In his reply, Commissioner Moscovici reminds that the VAT Directive does not make any reference to whether a good or a service is ‘essential’. Ireland is the only Member State currently exercising a zero-rate on women’s sanitary products – the result of a temporary derogation granted to it since the rate was in force before January 2016. However, the Commission’s VAT Action Plan and subsequent reform of EU VAT rates policy propose increased flexibility for Member States on rates, including the possibility of introducing a zero rate for sanitary products.