The European Commission has published a taxation paper on tax certainty. The paper analyses main sources of tax uncertainty, reviews the economic and empirical literature on the …
Commission publishes taxation paper on tax certainty – 7 April 2017
The European Commission has published a taxation paper on tax certainty. The paper analyses main sources of tax uncertainty, reviews the economic and empirical literature on the effects of tax uncertainty, and examines certain policy measures to tackle the issue at the domestic, international and EU levels. The paper concludes that in order to improve tax certainty, policy makers should focus their attention on planning tax reforms and tax changes properly, clearly communicating their content and timing, and more generally establishing a structured approach in managing the tax policy process. At the international level, the best policy answers are boosting cooperation on tax matters, developing common approaches to fighting aggressive tax planning , and agreeing on a clear and sustainable distribution of tax revenues for cross-border investment, and more transparent and non-harmful tax competition.
Taxation papers are written by European Commission staff or experts working in association with them. They are intended to increase awareness of the work being done by the staff and to seek comments and suggestions for further analyses. The views expressed in Taxation Papers do not necessarily reflect the views of the European Commission.
Link to the paper: https://ec.europa.eu/taxation_customs/sites/taxation/files/taxation_paper_67.pdf
UK National Audit Office publishes report on VAT fraud in e-commerce, impact on Council negotiations – 19 April 2017
The National Audit Office (NAO) of the UK has published a new report on VAT fraud in e-commerce. The report states that between £1 and £1.5 billion pounds were lost in tax revenue in 2015-16 due to online VAT fraud and errors. A particular challenge is posed by so-called fulfilment houses – warehouses within the EU to which goods are imported before they are bought by EU consumers through online marketplaces. This ensures a speedier delivery of the goods to the final consumers.
A British delegation presented these findings to their EU colleagues at a recent technical level meeting in the Council on the Commission s VAT for e-commerce proposals published in December 2016. The delegation argued that goods destined for fulfilment houses are often customs-cleared for example through bulk imports, but the goods are frequently under-valued or described wrongly. This makes it difficult to determine the VAT value of such supplies, thus leading to VAT income losses. Since fulfilment houses are separate entities from the suppliers of the goods, they are not obliged to collect VAT. The UK called on the Commission and fellow Member States to consider the challenge of fulfilment houses as part of the VAT for e-commerce negotiations. Reportedly several Member States were taken by utter surprise by the very existence of such practices.
Link to the report: https://www.nao.org.uk/wp-content/uploads/2017/04/Investigation-into-overseas-sellers-failing-to-charge-VAT-on-online-sales.pdf
Progress achieved on the proposal on VAT rates for e-publications – 26 April 2017
At a later meeting focusing, specifically, on the Commission proposal for reduced VAT rates for e-publications, visible progress towards a final agreement was achieved. The Maltese Presidency is aiming for a full agreement in June, and has expressed optimism in this regard. At the same time, the Czech Republic remains a major obstacle as it considers the e-publications proposal’s fate to be interlinked with that of the (domestic) reverse charge mechanism. As a reminder, the Czech Republic is unhappy with the proposed criteria for eligibility to apply the reverse charge mechanism as it does not currently fulfil them. Hungary would like to be able to apply reduced rates for online services; Austria is sceptical in principle towards reduced rates, whilst the UK is expected to resume its calls for reduced rates on certain hygiene and sanitary products.
ECON Committee votes on reduced VAT rates for e-publications – 3 May 2017
The ECON Committee of the European Parliament has voted on a draft report on the VAT rates applicable to e-publications, prepared by the MEP Tom Vandenkendelaere (EPP/BEL). In the report, the MEPs agree with aligning the VAT treatment of both physical and e-publications. The report passed with 48 votes in favour, one against and two abstentions. The European Parliament may only provide its opinion on the dossier, which the Member States will not have to take into account.
PANA Committee hearing with Commissioner Moscovici, additional details on tax intermediaries proposal – 4 May 2017
Commissioner Moscovici has attended a hearing of the PANA Committee. During the hearing, he revealed additional details on the proposal on disclosure rules for tax intermediaries expected for June. The proposal appears to be a completely new Directive, as opposed to an amendment to an existing one, such as the Directive on Administrative Cooperation (DAC). Its objective will be to provide tax administrations with necessary information that they need for plugging unintended holes in national tax systems. The directive will cover all intermediaries that provide tax advisory services, regardless of their professional background. Moreover, it will also apply to intermediaries based outside of the EU – in such cases; the disclosure obligation would fall on the EU-based taxpayer, rather than the advisors. The proposal will include clear sanctions, but there will be no criminal sanctions. Finally, the Directive will include clear criteria for identifying those schemes that should be disclosed to national tax administrations, as well as a set of common key definitions.
Court of Justice of the EU – Rulings
Ruling on VAT Directive concerning independent groups of persons – 4 May 2017
The Fourth Chamber of the Court of Justice of the EU has issued a ruling on VAT rules and independent groups of persons (IGPs). The case code is C-274/15. In the ruling, the Court established that Luxembourg has transposed in too wide a manner the rules in the VAT Directive covering IGPs. The Court argues that according to the VAT Directive, only the services rendered by an IGP and directly necessary for the exercise of the exempt activities of its members may fall to be exempt from VAT. Under the Luxembourgish legislation, however, the services rendered by an IGP to its members are exempt from VAT not only where those services are directly necessary to the non-taxable activities of the members, but also where the share of the members’’ taxed activities does not exceed 30% of their total annual turnover excluding tax.
Ruling on the principal supply of education and VAT – 4 May 2017
The First Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the principle of supply of education and VAT. The case code is C-699/15. In the ruling, the Court established that activities carried out by students of a higher education establishment supplying, as part of their education, restaurant and entertainment services to third parties may be regarded as supplies “closely related” to the principal supply of education and accordingly be exempt from VAT.
Ruling on VAT for supply of services to high seas navigation – 4 May 2017
The Eighth Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on VAT for supply of services to high seas navigation. The case code is C-33/16. In the ruling, the Court establishes, first, that loading and unloading of cargo are services supplied for the direct needs of the cargo of vessels. Second, such services as well as services supplied in earlier stages (e.g. services supplied by a subcontractor to an economic operator which then re-invoices them to a freight forwarder or transporter, or services for loading and unloading of cargo supplied to the holders of that cargo, such as the exporter or importer may) also exempt from VAT.
Link to the published ruling: http://curia.europa.eu/juris/document/document.jsf?text=&docid=190324&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=131618
Ruling on the transfer of ownership of immovable property – 11 May 2017
The Second Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the transfer of ownership of immovable property. The case code is C-36/16. In the ruling, the Court established that the transfer of ownership of immovable property occurring in payment of tax arrears by a person subject to VAT does not constitute a supply of goods for consideration that is subject to VAT.
Link to the published ruling: http://curia.europa.eu/juris/document/document.jsf;jsessionid=9ea7d0f130d6242d53af8bdb449a8b0ec78eb060c598.e34KaxiLc3eQc40LaxqMbN4Pax4Pe0?text=&docid=190584&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=892259
EESC holds hearing on taxation of the digital economy – 5 May 2017
The European Economic and Social Committee (EESC) have held a public hearing on the challenges of taxing the digital economy. Professor Rita de la Feria from the University of Leeds highlighted the fundamental digital shift that economies and consumption patterns are going through. She emphasised the need for tax systems to adapt to the new reality of digitalised economies, as under current rules the system is prone to fraud. EESC is currently preparing an opinion on the taxation of the sharing economy, and the hearing will feed into its work.
- 08/06/2017, Reforming European VAT , Public Policy Exchange, Brussels
- Accountacy Europe Tax day – Brussels, Belgium. Link: https://www.accountancyeurope.eu/events/tax-day/