Weekly Tax News – 27 January 2020

France and US to further discuss the international tax reform

On 23 January in Davos, France and the United States have announced an agreement on the basis of work at the OECD on digital taxation. The French Finance Minister, Bruno Le Maire confirmed that the American proposal to give businesses the option to apply the new system set by the OECD was off the table. Furthermore, France and the US have agreed that they will work on minimum taxation if there is also an agreement on digital taxation, treating the two OECD pillars as one package. The day before, Paris had taken an important step towards Washington by proposing to postpone to December 2020 the payment of the instalments on the French digital tax (originally due in April). In return, Washington agreed not to impose trade sanctions against France during the same period.

MEPs call the US Congress for a fairer international tax system

On 22 January, 135 MEPs signed a letter addressed by MEP Paul Tang (S&D, the Netherlands) to the members of the US Congress asking them to push the US government to have a productive attitude towards the OECD negotiations to re-shape the international tax system. The letter highlights that between 1995 and 2017, US federal corporate tax revenue fell 30 percent and that the EU average nominal tax rate has decreased by 32 percent since 2000. The MEPs have remarked the need for the EU and the US to work together for modernizing the international tax system in the framework of the negotiations at OECD level. They pointed out to the urgency to consider concepts like minimum level of taxation, harmonisation of the tax base and cross-border consolidation of taxable profit. MEPs have also annexed to the letter the resolution approved by the European Parliament which calls for an ambitious reform of international taxation.

Croatia is committed to push discussions on CCCTB

On 22 January, the Croatian Finance Minister Zdravko Marić have had a 90 minutes dialogue and exchange of views with ECON Members of the European Parliament to highlight the priorities of the Croatian Presidency. Regarding taxation, Marić stated that Croatia intends to give new impetus to the technical discussions on the proposed harmonisation of the corporate tax base (CCCTB) and on the definitive VAT regime. Referring to the tax elements of the European Green Deal, he warned the MEPs that the progress will depend on how soon the European Commission will develop new proposals. In the course of the ECOFIN meeting of 21 January, the Croatian Presidency stated that it would organize technical discussions on digital taxation in the Council in order to prepare negotiations taking place at OECD level.

Austria rejects FTT proposal under enhanced cooperation

On 21 January, Austrian Finance Minister Gernot Blümel declared that Austria is not keen to support the Franco-German proposal of December 2019 for a Financial Transaction Tax. Mr Blümel warned his German counterpart that the proposal is too far from the ambitious plan initially proposed by the European Commission. Specifically, Austria is still available to discuss a new broader proposal which should not penalize small investors. It is worth noting that if all the other member states participating in the enhanced cooperation (France, Belgium, Portugal, Slovenia, Greece, Spain, Italy and Slovakia) validated the text, while remaining in the group, Austria would block discussions.

German rule on carry forward of losses by ailing companies does not constitute State aid

On 22 January, the European Commission has concluded that the German tax rule on company restructuring (the so-called "Sanierungsklausel") does not constitute state aid. The rule allows an ailing company to offset losses in a given year against profit in a future year, despite changes in its shareholder structure. The decision follows judgments by the European Court of Justice which in 2018 annulled a 2011 Commission State aid decision. The Commission has assessed the measure against a broader reference framework, including the rules under German law generally allowing companies to carry forward losses for fiscal purposes. It found that the “Sanierungsklausel” does not derogate from these general rules and therefore does not provide a selective advantage to ailing companies vis-à-vis other companies.