Weekly Tax News – 9 December 2019

US and France still debating the OECD proposal under Pillar 1

During the last few days, the United States and France revealed some deep disagreements on the OECD Pillar 1 proposal to reform the international tax framework. On 3 December, Steven Mnuchin (US Treasury Secretary) sent a letter to the OECD Secretary-General Jose Angel Gurria expressing concerns “regarding potential mandatory departures from arm’s length transfer pricing and taxable nexus standards”. Thus, it seems that the US are not ready to support the OECD unified approach under Pillar 1. The answer of Mr. Gurria specifically pointed out to the Mnuchin’s “interventions at G20 meeting that moved the discussions to a broader scope using a more formulaic approach and a new nexus concept”. Finally, on 6 December, Bruno Le Maire (French Minister of Finance) stated that the proposal of the US based on the safe harbor regime was unacceptable for France and for other OECD partners. The letter of Mr. Gurria includes an invitation to a meeting in Paris with Le Maire in order to find the best way forward.

ECOFIN on CbCr and Energy Taxation Directive

On 5 December, the Economic and Financial Affairs Council (ECOFIN) took note of the deadlock on public country-by-country reporting at the Competitiveness Council the week before. In spite of the attempt of 10 countries (led by Luxembourg) to change the legal basis of the proposal, the Executive Vice-President Valdis Dombrovskis indicated that the Commission has no intention of withdrawing the legislative proposal or to change its legal basis.

During the same meeting, the European Finance Ministers have adopted a conclusion that seeks to review the Energy Taxation Directive. The text invites the European Commission to pay special attention to the scope of the Directive, minimum rates and specific tax reductions and exemptions. Commissioner Paolo Gentiloni assured that the Commission would launch an assessment that considers the impact of a possible revision on competitiveness, connectivity and social aspects.

European Parliament approves a resolution on International Tax Reform

On 3 December, the MEPs of the ECON Committee adopted a draft resolution proposed by the Chair of the Committee, Irene Tinagli (S&D, Italy), calling for an ambitious international tax reform within the OECD. The text regrets the lack of a common approach and calls on the Commission and the Member States to agree on an ambitious position, so that the EU can speak with one voice in these negotiations. Furthermore, the resolution recalls that the two pillars of the reform are complementary and of equal importance and should therefore be negotiated as an indivisible whole. Finally, MEPs call on the Commission to prepare the necessary legislative ground for implementing the results of an international agreement into EU law. In this regard, they ask to avoid a legal basis that would require unanimity in the EU Council, by referring to the Commission's roadmap for a transition to qualified majority voting in tax matters.

ETAF Tax Conference on “Future dynamics of EU tax policy”

On 5 December, over 80 participants from the EU institutions, different stakeholders and many tax advisers joined the Conference on "Future Dynamics of EU tax policy" hosted by ETAF in Brussels. In her keynote speech, Maria Teresa Fabregas Fernandez (Director Indirect Taxation and Tax Administration at DG TAXUD, European Commission) described the possible tax priorities of the European Commission in the next 5 years. She confirmed that digital taxation and the European Green Deal and a Carbon Border Tax would be high on the tax agenda of the EU. Other than that, the Commission would continue working on the simplification of the tax system, keep fighting tax fraud and harmful tax regimes and eventually work towards using the passerelle clauses to move towards qualified majority voting.

In the first panel Ms. Fabregas Fernandez, Martin Martinez-Navarro (Référendaire at the European Court of Justice in the Cabinet of the Irish Judge Collins) and Marcus Scheuren (Senior adviser at ECON Secretariat, European Parliament), discussed these tax priorities and the relationships between the different EU institutions in setting up tax policies.

The second panel focused on how the EU and the OECD influence each other when it comes to designing and implementing tax policies. Bernardus Zuijdendorp (Head of Unit Company Taxation Initiatives at DG TAXUD, European Commission), Piergiorgio Valente (President of the Confédération Fiscale Européenne) and Marek Belka (Member of the European Parliament, S&D, Poland) debated about the last developments of the OECD proposal to reform the international tax system and the role of the European Union in promoting this topic at global level.