Weekly Tax News – 25 May 2020

EU Ambassadors approve EU Council conclusion draft on DAC7

On 20 May, the Member States' Ambassadors to the EU (Coreper) endorsed the draft EU Council conclusions regarding "the future development of administrative cooperation in the field of taxation in the EU". The draft recognizes the need for a further revision of the Council Directive 2011/16/EU which targets the exchange of information on the income generated through digital platforms. Furthermore, the document asks the European Commission to ensure data protection, showing some concerns on potential data breach regarding the information exchanged between EU tax authorities. Finally, the draft suggests that the work of the DAC and of the Regulation on Administrative Cooperation in the field of VAT (904/2010) should be somehow coordinated.

European Commission calls 6 EU Member States to tackle aggressive tax planning

On 20 May, the European Commission has published its European Semester Spring Package focused on economic policy guidance to Member States in the context of the coronavirus pandemic and on relaunching sustainable growth. The country-specific recommendations included a clear request to 6 EU Member States (i.e. Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands) to act against the aggressive tax planning that is favoured by some of their internal tax regulations. According to the Commission, certain features of the tax systems of these countries “are used by companies that engage in aggressive tax planning”.

OECD pillar 1 agreement may be postponed to 2021

On 21 May, during a conference organised by the Tax Policy Center, Pascal Saint-Amans confirmed that the Inclusive Framework on BEPS is having certain difficulties  to find an agreement on the OECD proposal on pillar 1. The US bears some responsibility because of the contradictory messages they have sent on pillar 1, with particular reference to the US proposal of December 2019 to draft pillar 1 as a “safe harbor”. Saint-Amans warned that if US multinationals  keep on trying to delay a global agreement, many countries will act unilaterally by imposing their own digital taxes (e.g. Nigeria, India, Egypt, France, the UK, Austria, Spain, Italy and Turkey). The agreement is also being hampered by some countries that want pillar 1 only to apply to digital companies and that support their arguments by pointing at how the COVID-19 crisis has naturally ring-fenced digital activities, since they are the only ones that are thriving in these days compared to the main street shops which are closed almost everywhere. Commenting about the timeline for pillar 1, Saint-Amans stated that, since the  Inclusive Framework meeting in July has been cancelled, the OECD is working hard to deliver something concrete in October. However, he admitted that October might be too soon and that some additional time may be needed to reach an agreement regarding the main features of the proposal.

FIAT state-aid request ignited public opinion regarding tax justice

On 16 May, FCA-Chrysler (i.e. the Italian subsidiary of the FIAT Group) called for state support of €6,3 billion from Italian government in response to the COVID-19 economic crisis. The aid should be granted under the “liquidity decree” adopted by the Italian government in April. Many Italian politicians immediately complained that six years ago Fiat moved its headquarters from Turin to Amsterdam for tax reasons and that the state aid would end up supporting the whole group, including subsidiaries that pay their taxes in low-tax jurisdictions. Furthermore, the public guarantee would also allow the parent company to save cash and pay a €5,5 billion dividend due to the shareholders before the closing of the merge with the French Peugeot group. According to MEP Carlo Calenda (S&D, Italy), the merger is precisely why FCA is asking for the state-aid.