Weekly Tax News – 14 October 2019

The OECD proposes a “Unified Approach” to tax the digital economy

On 9 October, the OECD has published its "Secretariat Proposal for a Unified Approach under Pillar One" to tax the digital giants. Under the proposed approach, a country where customers or users of a multinational company reside, would have the right to tax a portion of the residual profit if the multinational has significant sales or users there, even if there is no physical presence in that country. The taxing right (that the OECD calls Amount A) should be limited by the size of the multinational, only including the ones that have revenues of €750 million or more. The second element of the proposal (Amount B) is the adoption of a fixed percentage to remunerate certain baseline activities, such as marketing and distribution, taking place in market jurisdictions. Finally, Amount C would use existing transfer pricing principles to take into account cases where the tax jurisdictions argue that the activities carried out are more complex than the one included in Amount B and require an additional remuneration therefor. These new taxing rights would be subject to tax dispute prevention and resolution mechanisms. The Director of the OECD Centre for Tax Policy and Administration Pascal Saint-Amans has explained that the proposal seeks to advance negotiations on the international tax reform. The first step will be the submission of the proposal to the G20 Finance Ministers in Washington on 17-18 October, while a public consultation on the proposal will remain open until 12 November.

EU tax blacklist: two countries removed

On 10 October, the Council approved the exclusion of the Marshall Islands and the United Arab Emirates (UAE) from the list of non-cooperative jurisdictions for tax purposes after these two countries have implemented the necessary tax reforms to be compliant with the EU requirements. As a result, the list now includes the following 9 jurisdictions: American Samoa, Belize, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, the US Virgin Islands and Vanuatu. Furthermore, Albania, Costa Rica, Mauritius, Serbia and Switzerland have been removed from the so-called grey list (Annex 2 of the list) after the implementation of the reform to comply with EU tax good governance principles.

European Commission refers Hungary to the Court of Justice

On 10 October, the European Commission has decided to refer Hungary to the Court of Justice for failing to apply the minimum excise duty threshold on cigarettes implemented by the EU rules on manufactured tobacco. Council Directive 2011/64/EU sets a minimum excise duty of at least 60% of the applicable weighted average retail price of cigarettes (in any case not lower than €90 per 1.000 cigarettes). After sending to Hungary a letter of formal notice and a reasoned opinion earlier this year, the European Commission has now decided to bring the matter to the Court of Justice explaining that it is generating distortions of competition with other Member States and is at odds with EU health protection policy.

ETAF appointed to the 2019-2022 EU VAT Expert Group

On Wednesday 2 October, the Director-General for Taxation and Customs Union of the European Commission appointed Benoît Vanderstichelen and Stefanie Becker as members of the VAT Expert Group on behalf of the European Tax Adviser Federation (ETAF). The mandate of the VAT Expert groups run from 1 October 2019 until 30 September 2022. Benoît Vanderstichelen is a member of the Belgian Institut des Experts-Comptables et Conseils fiscaux (IEC-IAB) with thirty years of experience in national and international VAT consulting, having authored numerous books in the field of VAT. Dr. Stefanie Becker is a member of Bundessteuerberaterkammer (BStBK) with more than ten years of experience as a VAT specialist in national and international tax consulting and a former member of the EU VAT Expert Group (2016-2019). The VAT Expert Group is responsible to advise the European Commission on the preparation of legislative acts and other policy initiatives in the field of VAT and to provide insight concerning the practical implementation of legislative acts and other EU policy initiatives in the field of VAT.