Weekly Tax News – 8 June 2020

EU Member States agrees on postponement of DAC 6 deadlines

On 3 June, the Coreper (Ambassadors of the EU Member States) have found a political agreement in principle for a Council Proposal amending the Directive on Administrative Cooperation in the field of taxation (DAC 6) in order to postpone deadlines for submitting and exchanging tax information. The agreement proposes a deferral of six months compared to the original directive with an option to extend the proposed period by another three months, considering that these processes have been made more difficult by the COVID-19 pandemic. The European Parliament is responsible to deliver an opinion before 30 June before the Council of the EU unanimously approves an implementing decision.

US trade sanction pushes negotiations on digital tax at OECD level

On 2 June, the Office of the United States Trade Representative (USTR) has initiated an investigation with respect to the Digital Services Taxes (DSTs) adopted or under consideration by 9 countries (Austria, Brazil, the Czech Republic, India, Indonesia, Italy, Spain, Turkey and the United Kingdom) and the European Union. The USTR aims at assessing whether the DSTs are unreasonable or discriminatory or restrict United States commerce according to section 301 of the Trade Act. The subject of digital taxes was discussed during G7 Finance Ministers’ conference call on 3 June, where the Italian Finance Minister Roberto Gualtieri reiterated the need to reach an international agreement quickly. His French counterpart, Bruno Le Maire assured that France (that was the first country under US investigation for its DST in 2019) will not give up on digital taxation and called for a quick solution at OECD level. During an online workshop organised by the OECD Centre in Berlin, OECD officials have confirmed that an agreement on the international tax reform is still possible in 2020.

EU Council sets out priorities on DAC 7 and excise duty on tobacco

On 2 June, the Council of the EU has adopted a conclusion on the future evolution of administrative cooperation in the field of taxation in the EU. The Council invited the European Commission to submit a legislative proposal to establish a common standard at EU level for the reporting and exchange of tax information regarding the income (revenue) generated through digital platforms. The Council has also requested the Commission to analyse whether it would be feasible to further align the scope of the DAC with specific provisions of the Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax. In the course of the same meeting, the Council stated that the excise duties on manufactured tobacco have become less effective. The Council conclusions highlight that they are either no longer sufficient or too narrow to address current and future challenges related to certain products, such as liquids for e-cigarettes, heated tobacco products and other types of next-generation products which are entering the market.

Germany to reduce VAT to 16% from 1 July

On 3 June, German chancellor Angela Merkel has announced the introduction of a temporary VAT reduction in Germany. The regular VAT rate will be reduced from 19% to 16% whilst the reduced rate will decrease to 5% (from the actual 7%). The reduction will come into effect on 1 July 2020 and will remain into force until 31 December 2020. The overall cost of the measure amount to €20 billion and it is part of a stimulus package which aims to boost consumption.