Weekly Tax News – 13 July 2020

Charles Michel proposes new EU taxes to finance the EU budget

On 10 July, the European Council President Charles Michel has put forward its proposal for the EU's long-term budget and the recovery plan. On the revenue side, the proposal contains a roadmap that describes a four-phase approach for the introduction of new own resources to finance the EU budget. The first step would introduce a plastic tax already from 1 January 2021. The second phase consists in two Commission’s proposals by the first semester of 2021 on a digital tax and on a carbon border adjustment mechanism that should be applicable from 1 January 2023. The third phase would see a revision of the Emission Trading system (no timeline is provided). The fourth and last phase would consist in the possible introduction of new own resources between 2021 and 2027, including a Financial Transaction Tax.

European Commission publishes its 2020 Tax Trends report

On 7 July, the European Commission has published the 2020 report “Taxation Trends in the European Union”. The report contains a breakdown of tax levels in the EU and includes data on the different tax structures and rates of Member States. The report presents mostly data from 2018 and some from 2019, thus it will be an important reference as to how EU economies were performing prior to the ongoing COVID-19 crisis. In 2018, tax revenues, measured as percentage of GDP, increased slightly in the European Union up to 40,2% (from 39% in 2017). The distribution of revenues by tax base remained stable compared with previous years (around 52% from labour, 28% from consumption and 20% from capital).

U.S. – France relations heat up again over digital tax

On 9 July, Robert Lightizer (U.S. Trade Representative) announced that the United States are preparing sanctions on France in dispute over the country’s digital services tax. He remarked that the sanctions are going to be suspended as the collection of the tax has been suspended by France until the end of 2020. In the meantime, on 3 July, the German Finance Minister Olaf Scholz said that the OECD negotiations on international tax reform are difficult but necessary and that they must continue. Earlier last week, Paschal Donohoe, Irish Finance Minister and new Eurogroup President (succeeding Mario Centeno), warned that the EU should not go alone with the taxation of digital giants but rather work towards an international agreement.

Paschal Dohonoe elected President of the Eurogroup

On 9 July, the 19 Finance Ministers of the euro area have elected the Irish Finance Minister Paschal Donohoe as President of the euro-area Finance Ministers. He was elected by a simple majority of votes in two rounds of voting, winning over his Spanish counterpart, Nadia Calviño. The 2,5-year term of Mr Donohoe begins on Monday 13 July.

European Commission extends State aid Temporary Framework

On 29 June, the European Commission has decided for a third extension of the Temporary Framework on State aid to support the economy in the context of the coronavirus outbreak. The third amendment extends the scope of the Temporary Framework to micro and small companies that were already in a difficult situation before 31 December 2019. This will apply unless such companies are in insolvency proceedings, have received rescue aid that has not been repaid, or are subject to a restructuring plan under State aid rules.

European Parliament decides the members of the TAX subcommittee

On 10 July, the names of the 30 members of the standing tax subcommittee of the European Parliament have been announced during the plenary session. The MEPs selected by the EPP group are: Herbert Dorfmann (Italy), Markus Ferber (Germany), José Manuel García-Margallo y Marfil (Spain), Enikő Győri (Hungary), Christophe Hansen (Luxembourg), Othmar Karas (Austria), Luděk Niedermayer (Czech Republic), Lídia Pereira (Portugal). For S&D: Marek Belka (Poland), Jonás Fernández (Spain), Aurore Lalucq (France) Pedro Marques (Portugal) Paul Tang (the Netherlands) Irene Tinagli (Italy). Renew Europe: Gilles Boyer (France), Hlaváček Martin (Czech Republic), Billy Kelleher (Ireland), Drago Pîslaru (Romania). Identity and Democracy: Francesca Donato (Italy), Hélène Laporte (France), Antonio Maria Rinaldi (Italy). The Greens/EFA: Sven Giegold (Germany), Kira Marie Peter-Hansen (Denmark), Ernest Urtasun (Spain). ECR: Patryk Jaki (Poland), Eugen Jurzyca (Slovakia), Roberts Zīle (Latvia). GUE/NGL: Manon Aubry (France), Marti Schirdewan (Germany). Non-attached member: Clara Ponsatí Obiols (Spain). The chair and vice-chairs committee will be decided at their inaugural meetings in September.

European Parliament opinion’s on postponement of VAT e-commerce package

On 8 and 9 of July, in the course of the plenary session, MEPs have adopted the opinions on the postponement of the application of the VAT e-commerce package due to the COVID-19 outbreak. The Parliament’s opinion drafted by Ondřej Kovařík (Renew Europe) on the “Amending Regulation (EU) 2017/2454 as regards the dates of application due to the outbreak of the COVID-19 crisis passed with 485 votes in favour, 162 against and 43 abstentions. The opinion of the rapporteur Luděk Niedermayer (EPP) on the “Amending Directives (EU) 2017/2455 and (EU) 2019/1995 as regards the dates of transposition and application due to the outbreak of the COVID-19 crisis” passed with 494 votes in favour, 165 against and 35 abstentions. The Council of the EU has already approved the Commission's proposal for a six-month postponement of the package. The new rules will apply from 1 July 2021 instead of 1 January 2021.