Weekly Tax News – 10 February 2020

S&D MEP to chair the standing subcommittee on taxation

According to several sources, a standing subcommittee on tax issues shall soon be established by the European Parliament. The areas of competence are still to be defined, but there seems to be a political agreement that the subcommittee should be chaired by a MEP of the S&D group. It unclear if the tax subcommittee will also include money laundering in its mandate, due to the competence of the JURI Committee in this area. The subcommittee for taxation should have around 30 members selected among the members and substitutes of the ECON Committee. It is expected to start its mandate in April or May 2020.

The European Commission publishes its “Tax policies in the European Union” survey

On 31 January 2020, the European Commission published the 2020 edition of its annual survey Tax policies in the European Union. The survey examines how the various EU Member States perform in terms of fighting tax abuse, promoting sustainable investment, supporting job creation and employment and mitigating inequalities. Amongst others, the edition of this year includes discussions on tax competition and on the sustainability of tax systems in a changing world. It also includes an overview of recent tax reforms at both EU and Member State level. The report recommends Member States to strengthen their cross-border cooperation to fight against tax fraud and evasion, by using tools such as the automatic exchange of information, sharing of data analysis between countries and joint audits. On the other hand, the survey recognizes that Member States have taken or plan to take a series of measures to strengthen their legal frameworks and the enforcement of their tax laws and to modernize tax collection.

The OECD Pillar 1 proposal takes shape

On 29 and 30 January, the OECD's Inclusive Framework on BEPS agreed to continue negotiations on the basis of a unified approach to digital taxation (Pillar I) and reaffirmed its commitment to reach an agreement before the end of 2020. The 122 jurisdictions agreed on a Statement on the Approach to Address the Tax Challenges Arising from the Digitalization of the Economy which includes an updated work programme. The Inclusive Framework agreed on the solution proposed by the OECD in October 2019, though the document provides more details on the scope. It introduces the concept of automated and standardized digital services whilst it clarifies that both the extractive industries and most financial services should be out of scope. The statement also mentions that some key political points need to be further discussed, like the proposal for a safe harbor (coming from the United States), the binding nature of the dispute prevention and resolution mechanisms and the suggestions to take into account “digital differentiation” (to account for different degrees of digitalization between in-scope business activities) and “regional segmentation” (to account for regional factors in computing and allocating Amount A). Finally, some jurisdictions have expressed concerns about the continued application of Digital Service Taxes. On 1 and 2 July, the Inclusive Framework will meet in Berlin where policy makers hope to reach an agreement on the key policy features of the solution that would form the basis for a political agreement.