Weekly Tax News – 2 March 2020

Digital services tax: Spain to take unilateral actions

On 18 February, the Spanish government has approved a bill for a digital services tax to be discussed soon by the Spanish Parliament. The proposal is based on the one drafted by the European Commission in 2018, with a tax rate of 3% on gross revenues from three types of services: selling online advertising space, digital intermediary activities and the sale of users’ data. The proposed tax applies to companies with more than 750 million euros of total annual revenue worldwide and 3 million euros of annual revenue from digital services in Spain. The main difference compared to the EU proposal is that the Spanish one includes intercompany, cross border and domestic transactions in the scope of the tax. It is worth noting that the tax will be collected at the end of the year only if no agreement is reached at OECD level by the end of 2020.

G20 Finance Ministers approve OECD work on international tax reform

On 23 February, the G20 Finance Ministers held a meeting in Riyadh where they have approved the work of the OECD on the international tax reform. The communication issued after the meeting remarks that the Ministers “endorse the Outline of the Architecture of a Unified Approach on Pillar One as the basis for negotiations and welcome the Progress Note on Pillar Two”. Furthermore, the Minsters have confirmed the need to define “the key policy features of a global and consensus-based solution by July 2020, which would form the basis of a political agreement”.

Discussion on the plastic tax continues at Council level

The system of own resources of the European Union could include a new revenue connected with a plastic tax in its 2020-2027 Multiannual Financial Framework (MFF). The proposal on the table regards a national contribution calculated on the weight of non-recycled plastic packaging waste with a rate of €0,80 per kilogram, that would generate €6,6 billion a year for the EU budget. However, the Council is discussing the possibility to include a correction mechanism that would imply a rebate based on population size for countries with a per capita gross national income below the EU average, which would result in a reduction of revenues of about €700 million per year.

The impact of shifting away from labour taxes in some EU countries

On 26 February, the European Commission has released the Winter Package of the European Semester which analyses the key socio-economic issues of each Member State. In the area of taxation, the Communication of the European Commission, points out that several Member States have reduced labour taxes. In particular, France, Italy, Netherlands, Greece and Slovenia are lowering the tax burden on labour by reducing personal income taxes or social security contributions. On the other hand, the package highlights that certain features of some Member States’ tax systems (i.e. Ireland, Cyprus, Luxembourg, Hungary, Malta and the Netherlands), may be used by companies that engage in aggressive tax planning. It also remarks that aggressive tax planning practices in one Member State, have spillover effects both on other companies and on other Member States, including tax revenue losses and distortions of the playing field among companies.

Breton reassured that “one in, out” principle will not lead to deregulation

On 10 February, the European Commissioner for Internal Market Thierry Breton has reassured some concerned MEPs that the “one in, one out” principle will not be used to deregulate the internal market. The Commissioner, during a debate in the European Parliament, explained that the aim of the instrument is to modernize the European regulatory framework and not to lower the regulation of environmental and social standards. It is worth noting that the “one in, one out” principle was originally tabled by Manfred Weber (EPP, Germany) during the 2019 European election campaign. It was subsequently taken up by the President of the European Commission, Ursula von der Leyen, and has since been defended by Maroš Šefčovič, the Vice-President for Interinstitutional Relations