Weekly Tax News – 11 January 2021

Washington suspends tariff action against France’s Digital Services Tax

On 7 January, the US Trade Representative’s office (USTR) has determined to suspend the tariff action in the Section 301 investigation of France’s Digital Services Tax (DST). The additional tariffs on certain products of France were announced in July 2020, and were scheduled to go into effect on January 6, 2021.  The USTR has decided to suspend the tariffs in light of the ongoing investigation of similar DSTs adopted or under consideration in other jurisdictions, such as Italy. According to the note of the USTR, those investigations have progressed, but have not yet reached a determination on possible trade actions.  A suspension of the tariff action in the France DST investigation will promote a coordinated US response in all of the ongoing DST investigations. On 6 January, the USTR has published its Report on Italy’s Digital Services Tax along with a notice highlighting that the USTR has determined that Italy’s DST is unreasonable or discriminatory and burdens or restricts U.S. commerce and thus is actionable under Section 301. However, no trade sanctions were determined at this stage.

European Parliament expects more from DAC 7

The European Parliament’s opinion on the Directive on administrative cooperation in the field of taxation is on its way to be delivered. The rapporteur Sven Giegold (Greens/EFA, Germany) has published the draft in December with additional contents compared to the text proposed by the European Commission, though it is to be noted that the European Parliament is only consulted on tax issues. MEP Giegold advocates for the inclusion of a definition of excluded Relevant Activities and Reporting Platform Operators in order to reduce bureaucratic burden on small platforms and allow non-monetary activities to be out of scope. The draft opinion pushes for inserting a review clause for the Commission to assess the implementation of the reporting obligation and consider the possibility of a European supervisor in charge of the Directive’s enforcement. The opinion highlights that the agreement reached in the last months of 2020 at Council level on the Commission’s proposal weakens the original text with regard to joint audits, while postponing the application of DAC 7 to 2023.

The tax priorities of the Portuguese Presidency

On 1 January 2021, Portugal took over the Presidency of the EU Council. The official work programme of the Portuguese Presidency confirms the commitment of Lisbon to reach an agreement on the proposal for a public “Country-by-Country Reporting” (CbCR) agreeing to the request of a part of the European Parliament. The Portuguese Presidency is also ready to step up the fight against tax fraud, evasion and avoidance through non-cooperative jurisdictions and to implement the EU action plan on preventing money laundering and terrorist financing. With regard to green taxation, the programme highlights that tax policy should be aligned with the objective of decarbonisation facilitating the transition to a competitive and carbon-neutral economy and boosting sustainable growth.

Greens MEPs worried about the UK tax policy following the Brexit draft agreement

On 4 January, MEPs Sven Giegold (Greens/EFA, Germany) and Philippe Lamberts (Greens/EFA, Belgium) have sent a letter to the President of the European Commission Ursula von der Leyen and to the Brexit Chief Negotiator Michel Barnier to express their concern over the risk of the United Kingdom becoming a “Singapore on Thames” in terms of tax policy and anti-money laundering policies. The MEPs are worried that the provisions included in the draft trade and cooperation agreement between the EU and the UK could not effectively address any aggressive tax policy plans to be undertaken by London.