Weekly Tax News – 15 June 2020

The European Parliament TAX subcommittee is (almost) there

On 11 June, the Conference of Presidents (CoP) of the European Parliament has approved the creation of a permanent subcommittee on taxation. The draft decision states that the subcommittee of ECON will be responsible for “tax related matters and notably the fight against tax fraud, tax evasion and tax avoidance as well as financial transparency for taxation purposes”. The subcommittee should be composed by 30 members (8 EPP, 6 S&D, 4 Renew Europe, 3 ID, 3 Greens/EFA, 3 ECR, 2 GUE/NGL, 1 non-attached member). Paul Tang (S&D, the Netherlands) should chair the subcommittee. The formal establishment of the subcommittee needs to be approved by a Plenary vote which is scheduled on Thursday 18 June and its composition is expected to be confirmed in July. The tax subcommittee should start its work in September.

Commissioner Gentiloni ready to propose a new EU digital tax in 2021

On 8 June, speaking at an online event, the European Commissioner for Taxation, Paolo Gentiloni acknowledged that it will be very difficult to find an agreement at OECD level on the reform of international taxation by the end of 2020. Mr Gentiloni mentioned the difficulties caused by the United States proposal for a safe harbor on pillar 1 of the OECD reform. He confirmed that the European Commission will be ready to launch its own proposals in this regard in 2021, if the negotiations at OECD level will fail. The Commissioner has also mentioned that the European Commission is assessing the possibility to use article 116 TFEU to move to qualified majority voting in the Council. He explained that article 116 allows to vote by qualified majority if the Commission finds a distortion to competition in the Single Market. On the same day, during a hearing to the French Senate, the Finance Minister Bruno Le Maire has remarked that the U.S. represent the last obstacle to an OECD agreement and that he is in close contact with U.S. Secretary of the Treasury Steven Mnuchin to convince him that the pillar 1 of the international tax reform needs to be agreed by the end of this year.

European Parliament pushes for a three-month postponement of VAT e-commerce package

On 9 June, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) held a discussion about the Commission’s proposal to postpone the entry into application of the legislative package on modernising VAT for cross-border e-commerce. The rapporteurs Ondřej Kovařík (Renew Europe) and Luděk Niedermayer (EPP) stated that a three-month postponement was sufficient (compared to the 6 months proposed by the Commission). Mr Kovařík clarified that a six-month postponement would be detrimental to the public finances of the Member States and that a three-month postponement would be in line with the lockdown period in place in most countries.

EU Court ruled against Commission’s decision over certain Hungarian taxes

On 4 June, the Court of Justice of the European Union ruled in favour of Hungary in its appeal against a European Commission order to suspend the collection of certain taxes. In 2014, Hungary introduced two new taxes, the first was a “health tax” aimed at introducing a progressive levy rate on the annual turnover of undertakings deriving at least 50% of their turnover from the production or trading of tobacco products. The second measure introduced the progressivity of the food chain inspection fee levied on the turnover of shops selling everyday consumer goods. In 2015, the European Commission informed the Hungarian authorities that, in its view, the two measures were establishing State aid incompatible with the internal market. In September 2016, Hungary brought actions against the Commission’s decisions that required the Hungarian government to suspend implementation of the tax measures at issue. The General Court dismissed those actions. The Court of Justice of the EU now welcomed the Hungarian argument that the General Court made a manifest error of assessment of the requirements for the statement of reasons for a suspension injunction.

ETAF Tax Conference on 30 June