Weekly Tax News – 16 September 2019

European Commission assessment report on the Energy Taxation Directive

On 12 September, the European Commission has published a report evaluating the Energy Taxation Directive (ETD). In a nutshell, the expected harmonization of energy taxation through the ETD was meant to avoid energy tax competition stemming from the relocation of consumers of energy (i.e.  businesses) to Member States with more beneficial tax regimes. This harmonization ultimately aims at strengthening the internal market. The ETD sets minimum levels of taxation, while allowing Member States to apply national rate above these minimum rates and to introduce additional taxes. The ETD also allows Member States to grant exemptions and reductions. However, the report highlights that:

  • The ETD lacks effectiveness. The minimum tax level contributed on a limited scale to the smooth functioning of the single markets since the rates on electricity and natural gas account for an insignificant share of the final prices and the optional tax exemptions further fragmented the internal market;
  • The ETD lacks relevance. It is no longer in line with the current use of energy products;
  • The ETF lacks coherence with other EU objectives. Sectoral exemptions and reductions granted by Member States contradict other EU policies.

During the informal ECOFIN of 13-14 September in Helsinki, the EU Finance Ministers agreed that energy taxation can be a tool for achieving EU climate and energy objectives, though they did not take any decision on the revision of the ETD.

Constant growth of the VAT collected through the MOSS

On 12 September, the European Commission has released the 2018 statistical analysis regarding the EU VAT Mini One Stop Shop (MOSS). The MOSS is a system set up in 2015 to collect and transmit VAT for telecommunications, broadcasting and electronic services across the 28 Member States of the EU. The analysis of the European Commission shows that the VAT collected via the MOSS has constantly increased between 2015 (€3 billion) and 2018 (€4,6 billion).

OECD Report on digital tax expected in October

On 11 September, Pascal Saint-Amans (OECD Director of the Centre for Tax Policy and Administration) confirmed that in October the OECD will publish a report with an update on the work carried out so far on the taxation of the digital economy. He stressed the need to find a global solution to avoid the proliferation of unilateral measures similar to the ones recently enforced by France. The next step is to reach a political agreement at G20 level on a unified “pillar one” proposal that can become basis for negotiations. The pillar one should provide a new set of rules on how to allocate multinational groups profit between countries by considering the place of residence of the customers or digital businesses’ users. According to Mr Saint-Amans, the OECD is seeking a solution “where you don’t have big losers or big winners”. This news arrives in the same week of the €1 billion settlement between Google and the French tax authority to end a 4-year tax dispute.

FTT to be discussed by the EU Coucil’s Tax Working Party

The Financial Transaction Tax comes back on the agenda of the Working Party on Taxation of the EU Council to be held on 20 September. Although it is still early for a meeting between the Finance Ministers on this topic, it is worth noting that the discussion will happen only few months after the statement of the German Finance Minister Olaf Scholz (dated 14 June) on the possible agreement between the 10 countries participating in the enhanced cooperation to introduce the FTT (France, Germany, Belgium, Portugal, Austria, Slovenia, Greece, Spain, Italy and Slovakia).