Weekly Tax News – 2 June 2020

European Commission proposes new taxes to finance the EU budget

On 27 May, the European Commission has unveiled its EU recovery plan which includes a reinforced EU Multiannual Financial Framework (MFF) 2021-2027 and new recovery instrument called “Next Generation EU”. The new recovery instrument proposed by the Commission should account for €750 billion raised on the financial markets. Along with the recovery plan, the Commission has put forward a plan on the EU budget to help finance the repayment of and the interest on the market finance raised under Next Generation EU. The plan targets a deep reform of the EU own resources system by using various tools. The European Commission called for a simplification of the own resource based on VAT (which is currently subject to convoluted calculations and rebates for some EU Member States) and for a levy on non-recycled plastics. Furthermore, the Commission’s Communication on “The EU budget powering the recovery plan for Europe” mentions the possibility to introduce a digital tax based on the work of the OECD (to generate up to €1.3 billion per year) and a carbon border adjustment mechanism to prevent carbon leakage (to raise between €5 and €14 billion per year). The Communication also launched the idea of a new corporate tax “based on operations of enterprises” that draw huge benefits from the EU single market. The European Commission did not release any further information regarding the mechanism of this possible new form of taxation, though it is possible that the Berlaymont is trying to revive its proposal on a common consolidated corporate tax base (CCCTB) which lies at Council level since 2016.

The Netherlands announce a new withholding tax

On 29 May, Hans Vijlbrief (Dutch State Secretary for Finance) said in a statement that the Netherlands will act against tax avoidance by introducing a new withholding tax on dividends flows to low tax jurisdictions starting from 2024. The measure will apply to financial flows to countries with a corporate tax return of under 9% and to countries included in the EU list of non-cooperative jurisdictions. This announcement follows the call of last week by the European Commission for the Netherlands (and 5 other EU Member States) to take further steps to address aggressive tax planning practices on its territory.

OECD launches COVID-19 guidance to tax administrations

On 26 May, the OECD has published two additional reports to the series dedicated to the impact of the COVID-19 crisis. The report on “Tax Administration Responses to COVID-19: Recovery Period Planning” outlines how tax administrations can prepare for the potentially prolonged, uncertain and complex recovery period from the COVID-19 crisis. A second report, named “Tax Administration: Privacy, Disclosure and Fraud Risks Related to COVID-19” highlights the risks of lapses or deviations from disclosure and privacy requirements as well as the risks of fraud linked to the extraordinary measures taken by tax administrations to support taxpayers. The document has been produced by the OECD Forum on Tax Administration (FTA) Secretariat and it captures some of those high-level risks as well as possible mitigation strategies with a particular focus on remote working issues.