Weekly Tax News – 2 November 2020

Commission agrees to postpone international tax reform to mid-2021

On 28 October, the FISC subcommittee of the European Parliament held a hearing with Benjamin Angel (Director for Direct Taxation at DG TAXUD) and Pascal Saint-Amans (Director of the OECD's Centre for Tax Policy and Administration). During the discussion with MEPs, Mr. Angel clarified that the Commission accepted the postponement of the international tax reform deadline to mid-2021 but he also made clear that the Commission will not accept that it “become a moving target”. Mr Angel explained that mid-2021 shall be an ultimate deadline rather then another moment of discussion at OECD level. He confirmed that an agreement at OECD level remains the target for the EU, though he highlighted that the Commission will be ready to present a European solution on both pillars of the reform. Pascal Saint-Amans showed a certain optimism about the outcome of the negotiations, since without an agreement the risk of international tensions would not benefit any of the negotiating countries. The Chair of FISC, Paul Tang (S&D, the Netherlands) announced that the exchange of views will feed into the preparation of an own-initiative report by the subcommittee in the coming months.

European Commission’s tax measures to support access to medical equipment

On 28 October, the European Commission has presented a package of tax and customs measures to support access to more affordable equipment, vaccines and testing kits. A Commission Decision prolongs the current temporary relief from customs duties and Value Added Tax (VAT) on the import of protective and medical equipment from non-EU countries until the end of April 2021. The prolongation was made after consultation with Member States and as a response to the increased number of coronavirus cases reported in the entire EU. Member States still need to import those goods from third countries. The Commission has also proposed that hospitals and medical practitioners should not have to pay VAT on vaccines and testing kits used in the fight against coronavirus. These measures are designed to give Member States better and cheaper access to the tools they need to prevent, detect and treat coronavirus. Currently, Member States can apply reduced VAT rates on sales of vaccines but cannot apply zero rates. Testing kits cannot benefit from reduced rates at the moment. The new rules would allow a temporary VAT exemption to be given to vaccines and testing kits being sold to hospitals and medical practitioners, as well as closely related goods and services. Member States would also be able to apply reduced rates to testing kits if they so choose.

VAT regime for financial and insurance services: Commission launches a Roadmap

On 22 October, the European Commission has launched a roadmap on the review of the VAT rules for financial and insurance services. As set out in the tax package of July, in the Commission’s view the rules regarding the VAT treatment of financial and insurance services are obsolete, since they date back to 1977. The Commission also considers the current rules to be complex and difficult to apply, given that they have not kept pace with the developments of new services in the financial industry (fintech services including services linked to cryptocurrencies and e-money). The Commission had already proposed a revision of these rules in 2007, but the discussions in the Council ended up in a standstill and the proposals were withdrawn in 2016.

MEP Larrouturou on hunger strike for FTT

On 28 October, Pierre Larrouturou (S&D, France) announced that he was starting a hunger strike to push for an ambitious financial transaction tax (FTT) at the European Parliament in Brussels. He highlighted that the next EU budget may lack resources for climate, health and employment and, according to him “if we don’t tax speculation, the European Green Deal is dead”. He hopes that the ECOFIN will reach an agreement on a financial transaction tax to reimburse the Next Generation EU recovery plan on 1 December.