Commission publishes its Work Programme for 2021
According to the European Commission’s Work Programme for 2021 published on 19 October, the following items should be expected in relation to tax by June 2021 at latest:
- A “digital levy” and proposal for digital levy as an EU own resource
- Revision of the Energy Tax Directive (ETD)
- Carbon Border Adjustment Mechanism (CBAM) proposal for it as an EU own resource
Moreover, according to the Work Programme’s annexes, the familiar buzzwords public country by country reporting (CBCR), financial transaction tax (FTT) and the common consolidated corporate tax base (CCCTB) will continue to be the Commission’s priorities.
Commission publishes roadmap on VAT for financial services
The European Commission’s roadmap published on 22 October presents what is to be expected for the Commission’s upcoming legislative package concerning VAT for financial services. The Commission highlights that current VAT rules for financial and insurance services are criticised for being complex, difficult to apply and not having kept pace with the development of new services in the sector. This seems to have led to:
- lack of VAT neutrality (businesses being unable to reclaim VAT associated with financial and insurance services)
- legal uncertainty for businesses
- high administrative and regulatory costs
The initiative will aim to address these issues by modernising how VAT is applied in the sector. The Commission will launch a public consultation in the first quarter of 2021, followed by the legislative package in the fourth quarter of 2021.
European Commission publishes details of an upcoming initiative on tax administrative cooperation on crypto-assets and e-money
On 24 November, the European Commission published an Inception Impact Assessment on the upcoming revision of the Directive on Administrative Cooperation (DAC8). The revision aims to improve cooperation between national tax authorities, particularly in emerging areas such as crypto-assets. This initiative should provide tax administrations with information to identify taxpayers who are actively using new means of exchange, notably crypto-assets and e-money, in order to curb tax fraud and evasion.
Stakeholders have until 21 December to provide feedback on the Inception Impact Assessment. A more comprehensive public consultation is scheduled for first quarter of 2021, followed by the proposal in the third quarter of 2021.
FISC Committee discusses role of tax policies in COVID recovery
On 16 November, European Parliament’s FISC Committee held a hearing on the role of tax policies in post-COVID economic recovery. The hearing hosted as external speakers Grace Perez Navarro from the OECD, Joaquim Miranda Sarmento, Professor at the University of Lisbon and Liina Carr, ETUC Confederal Secretary.
At the hearing, Ms. Navarro emphasised that governments will have to look at different angles of tax policy to support post-COVID recovery, ranging from fighting tax avoidance to environmental and labour taxation. Professor Sarmento called for tax support measures for SMEs, and to create minimum and maximum corporate tax rates (25%-50%). Ms. Carr among other measures underlined the importance of public country by country reporting (CBCR).
In their reactions, FISC MEPs stressed the need to reduce the tax burden on SMEs, shifting it instead to those who can and should pay more taxes. The discussion thus focused on ways to develop the financial transactions tax (FTT), recalibrate corporate taxation and develop green taxes.
Draft report on DAC7 published
The European Parliament’s draft opinion, prepared by MEP Sven Giegold (Greens-EFA/Germany), relates to the Commission’s proposed revision to the Directive on Administrative Cooperation (DAC7) to include in it digital platforms.
Mr. Giegold proposes a number of amendments to DAC7, including:
- Member States should be free to use DAC information for other purposes than tax
- Enlarge the scope to informal and domestic tax rulings
- Include a definition of excluded Relevant Activities and Reporting Platform Operators in order to reduce bureaucratic burden on small platforms
ECON Committee will vote on the draft report in early-2021, and it is only a non-binding opinion on the Commission proposal. EU member states already approved the proposal a few weeks before (see below).
MEP Questions & Answers
Commission clarifies what methodology it used to calculate EUR 10 billion revenue estimation for Single Market Tax
Commission estimates tax revenue losses in the EU due to tax avoidance and VAT gap
Commission is exploring how to make use of Article 116 to address competition distortions from differences in Member States’ legislations
Council publishes Conclusions on digital taxation, no firm commitment for stand-alone EU initiatives
The Council’s draft Conclusions, adopted on 27 November, focus on tax challenges from digitalisation, economic recovery and taxation, and tax good governance. They constitute EU member states’ positions on the various tax questions, and include the following:
- Commission should put forward proposals for a “digital levy”, carbon border adjustment mechanism (CBAM) and possibly a financial transaction tax (FTT)
- Underlines that indirect taxation can be used to support the green transition
- European Council will evaluate the situation with OECD international tax reform negotiations in March 2021, but refrains from committing to EU-only proposals
- On VAT, welcomes the Commission’s intention to modernise reporting obligations for cross-border transactions within the EU and to examine the need to further harmonise reporting obligations for domestic transactions. Also highlights the use of new technologies to improve efficiency of reporting
France reinstates digital tax, courting trade war
On 14 October, French finance minister Bruno Le Maire announced that France will begin collecting tax from big digital companies this year after international talks failed to agree on a global levy.
“With the US it has always been clear,” Bruno Le Maire said in a call with reporters after a virtual meeting of G20 finance officials.
“If there was no agreement at the OECD [Organization for Economic Cooperation and Development] in the autumn, we would levy our national tax,” he added. “There has never been any ambiguity on the subject.” On 25 November, France confirmed that it will levy a tax on digital giants before the Biden administration takes office.
European Commission – Commission publishes latest VAT Guidelines
European Parliament – European Parliament approves temporary VAT exemption for Covid-19 vaccines and test kits, still to be approved by Council
Council – Member states approve Commission’s proposal for temporary VAT exemptions for COVID vaccines and testing kits