Weekly Tax News – 18 February 2019

Member States divided on Commission’s proposal to shift away from unanimity principle in tax

On Tuesday 12 February, the Economic and Financial Affairs Council (ECOFIN) has discussed for the first time the communication of the European Commission of 15 January 2019 targeting to shift away from unanimity principle in tax matters. During the exchange of views, a considerable number of Ministers called for keeping the current voting rules in taxation. Others showed openness towards the possibility to change the decision-making process, with particular reference to the first of the four stages proposed by the European Commission (i.e. on administrative cooperation to fight tax fraud and evasion). Furthermore, the Ministers have stressed the high number of legislative proposals adopted in the course of this mandate in the field of taxation at EU level. More discussions are expected to come in the next months both at ECOFIN and at European Council level on this topic.

On Wednesday 13 February, Members of the European Parliament who participated to a debate on “fair taxation” showed divergent views on the proposal. Commissioner Moscovici opened the debate and acknowledged that he knows very well that the proposal would not be adopted during this mandate, but he had mainly wanted to open a debate on this topic. MEPs from S&D and the Greens/EFA showed a general support for the proposal. On the other hand, reservations were expressed by Gunnar Hökmark (EPP, Sweden) and Richard Sulík (ECR, Slovakia), who fear a general increase of taxes in Europe following such a measure. Finally, Matt Carthy (GUE/NGL, Ireland) and Nuno Melo (EPP, Portugal) strongly opposed the proposal by explaining that the ability to levy and collect taxes is one of the sovereign manifestations of countries.

Technical measures for definitive VAT system approved by the European Parliament

On Tuesday 12 February, during the Plenary session, MEPs approved the draft report on the proposal for a directive on the introduction of detailed technical measures for the functioning of the definitive VAT system for the taxation of trade between Member States of Fulvio Martusciello (EPP, Italy). The report supports the transition to the principle of taxation in the Member State of destination, in order to better fight VAT fraud (in particular carousel frauds). It also proposes strict criteria to determine which companies can benefit from the status of certified taxable person.

EU Court ruled against European Commission on Belgium excess profit tax

On Thursday 14 February, the Court of First Instance of the European Union decided against the decision of the European Commission that considered the Belgian tax linked to the surplus profit regime as an illegal state aid. The decision of the Commission is related to advance ruling granted by the Belgian tax authority to Belgian entities of multinationals when these entities claimed that a new situation existed that created surplus profit exceeding profits gained in normal circumstances by comparable entities. The Court of First Instance confirmed the competency of the Commission to examine the tax scheme but the judge explained that the Commission erroneously qualified the system of exemption from excess profits as an aid scheme.

European aviation tax proposed by the Netherlands

On Tuesday 12 February, in the ECOFIN meeting, the delegation of the Netherlands informed the Ministers on the possibility to propose an aviation tax at EU level. France, Sweden and Belgium, were rather open to it, while Spain remained cautious. It is worth noting that there is no legislative proposal on the table neither more concrete information on this proposal, but the issue will be probably discussed again in the next ECOFIN meetings.