Weekly Tax News – 25 June 2018

TAX3 hearing with Nike and McDonald’s

On 21 June, the TAX3 committee held a public hearing about the “Lessons learnt from the Paradise Papers”. The chair of TAX3, Petr Ježek (ALDE) referred the refusals of Apple and Kering Group to attend and described as unacceptable the non-participation of Appleby and Baker McKenzie for uncleared reasons. During the first panel Mr Achim Pross (OECD), Ms Juliette Garside (The Guardian) and Ms Lucía Rossel Flores (COFFERS) discussed with MEPs about the efforts of the EU and the OECD to develop regulation to combat and prevent fiscal frauds and on the possible enforcement of a new EU regulation to protect whistle-blowers. The second panel involved Ms Irene Yates (McDonald’s) and Ms Patricia Johnson (Nike) explaining the international tax structures of the two multinationals. MEPs Kofod and Niedermayer questioned Ms Yates about the decision of McDonald’s to change its holding structure in Europe and to move the headquarter from Luxembourg to the UK in 2016. Ms Yates explained that the reasons for reorganising the group’s structure were merely business-driven.

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Luxembourg to recover €120 million from Engie group due to illegal tax rulings

On 20 June 2018, the European Commissioner Margrethe Vestager stated that "Luxembourg gave illegal tax benefits to Engie” via tax rulings that have allowed two complex financing structures that treat the same transaction as debt and as equity. As a result, according to the Commission, Engie paid an effective tax rate of 0.3% on certain profits in Luxembourg for about a decade.

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The Council agreed on a permanent minimum VAT rate and on measures to boost administrative anti-fraud cooperation

On 22 June 2018, the Council decided on the following VAT measures:

• A directive was adopted without discussions, to set up a permanent standard rate at 15%. This minimum rate prevents excessive divergence in VAT rates in the member states, reducing the risk of distortions of competition. Read on
• An agreement was reached on a proposed regulation to strengthen the administrative cooperation to prevent VAT fraud. The measures include the improvement of the exchange and analysis of information shared by the member states’ tax administrations and strengthen a network of national tax officials for the exchange of information on VAT fraud (Eurofisc). It also introduces the possibility to carry out joint administrative enquiries. The regulation will be adopted without further discussion once the European Parliament has delivered its opinion. Read on
• An agreement with Norway has been approved without discussion with the aim of boosting the cooperation in preventing VAT fraud and assisting each other in the recovery of VAT claims, Norway is the first country with which the EU has an agreement in this field which is also facilitated by the similar VAT system. Read on