Commission refers Belgium EU Court for failing to transpose ATAD correctly
European Commission (EC) has referred Belgium to the EU Court of Justice (CJEU) for failing to properly transpose the anti-tax avoidance Directive (ATAD), according to the April infringements package published on 19 April.
European Commission proposes to allow Hungary to apply a derogation to VAT Directive
EC proposed to allow Hungary to apply a derogation to the VAT directive on 20 April. Currently, companies with an annual turnover not exceeding the forint equivalent of €48,000 are exempt from VAT until 31 December 2024. Hungary requested to raise the threshold to €71 500 in a letter dated December 2022. The new threshold would simplify compliance with a Hungarian income tax for small companies. This valuation would also be justified by inflation and increased tax revenues created by economic growth. This measure could affect around 35,000 companies.
European Parliament adopts final agreement on CBAM
With 487 votes to 81 and 75 abstentions, EP adopted the interinstitutional agreement with the Council on the new EU Carbon Border Adjustment Mechanism (CBAM) on 18 April. It aims to incentivise non-EU countries to increase their climate ambition and to ensure that EU and global climate efforts are not undermined by production relocated from the EU to countries with less ambitious policies.
The goods covered by CBAM are iron, steel, cement, aluminium, fertilisers, electricity, hydrogen, and indirect emissions under certain conditions. Importers of these goods would have to pay any difference between the carbon price paid in the country of production and carbon allowances in the EU Emissions Trading Scheme (ETS).
Following EP’s vote and Council’s adoption (see below), CBAM can become EU law. The system will be phased in from 2026 until 2034 at the same speed as the free allowances in the EU ETS are being phased out.
BUDG adopts draft report on new EU own resources
EP’s budgetary affairs (BUDG) Committee adopted its draft opinion on new EU own resources on 17 April. MEPs José Manuel Fernandes (EPP/Portugal) and Valérie Hayer (RE/France) prepared the opinion. The non-binding report aims to influence EC’s thinking ahead of its package of proposals in September regarding the new EU’s own resources.
The draft report proposes new taxes for the EU’s new own resources. These include a BEFIT-based resource, a Financial Transaction Tax (FTT), a cryptocurrency tax, and an EU “fair border mechanism”.
A final vote in Plenary is currently scheduled for 9 May.
FISC hearing on the work of national tax administrations
EP’s FISC Subcommittee hosted a public hearing on “The Work of National Tax Authorities: Resources, Strategies, Cooperation” on 25 April. The purpose of the hearing was to discuss with experts how to support tax authorities to enhance the functioning of the internal market and foster its competitiveness. The hearing also focused on protecting the financial and economic interests of the EU and its Member States, including protecting national and EU budgets from tax fraud, tax evasion and tax avoidance, and how to improve tax collection.
MEPs who took the floor wanted to know how tax administrations have adapted their recruitment profiles to consider digitalisation, what legislation legislators should focus on other than DAC, and whether a stronger role for the Commission and the EU in tax administration cooperation would be helpful. MEPs had questions on specific areas of tax policy, notably VAT and withholding tax.
Some EU Member States sceptical about certain elements of VAT in the digital age
Businesses and the tax attaché from the Swedish Permanent Representation, Johan Lundqvist, shared concerns about the consequences of the ‘VAT in the Digital Age’ (‘ViDA’) initiative at an event organised by Business Europe on 18 April.
Discussions in the Council mainly revolve around technical details, including digital reporting requirements. There is a consensus e-invoicing is the way forward, although it is challenging for Member States. They have their national reporting systems, and harmonisation could change these systems, which they want to keep the same. “They spent money and time to create them,” Mr. Lundqvist justified.
For SMEs, some Member States reportedly argue VAT is an everyday tax that should be easy to apply. “Real-time or near-real-time reporting puts extreme pressure on this,” Mr. Lundqvist explained.
For him, ensuring that SMEs are guided and the system encourages voluntary compliance is vital. This involves transparent local legislation, harmonisation of the treatment of dates and places of taxation, and guidance when doubts arise in a declaration.
Member States adopt CBAM
The Council adopted the interinstitutional agreement on Carbon Border Adjustment Mechanism (CBAM) on 25 April, a week after EP approved it (see above). Poland opposed, whilst Belgium and Bulgaria abstained, but the agreement passed nonetheless with a qualified majority. EC will add CBAM to the EU Official Journal as a next step, thus enshrining it into EU law.
UK and EU boost cooperation over new carbon border tax
Britain and the EU are boosting the coordination of efforts to tackle climate change and respond to a massive US green subsidy programme. This is a sign of warming relations between the two sides. UK prime minister Rishi Sunak said that Britain and the EU could co-ordinate moves on a new carbon border tax that would place a levy on imported carbon-intensive goods arriving in Europe.