Weekly Tax News – 18 January 2021

European Commission launches impact assessment on Digital Levy

On 14 January, the European Commission has launched an inception impact assessment on a new EU Digital Levy. There are no specific details on the proposal, but the Commission is moving fast in order to be ready in case the OECD/G20 negotiation will fail in mid-June. In the course of the same day, the OECD was discussing with stakeholders the results of the public consultation on blueprints for the two pillars of international tax reform. Pascal Saint-Amans (Director of the OECD’s Centre for Tax Policy and Administration) remarked that the OECD has already begun to address some of the main issues highlighted by the commentators, namely the complexity of the measures identified and cost of compliance. Mr Saint-Amans has also stressed that negotiations will probably restart at the G20 meeting at the end of February, when the new U.S. Treasury Secretary should be in place. On 14 January, the U.S. Trade Representative issued findings on the investigation on the Digital Service Taxes (DSTs) adopted by Austria and Spain, concluding that each of the DSTs discriminates against U.S. companies, is inconsistent with prevailing principles of international taxation, and burden or restricts U.S. commerce. The U.S. Trade Representative Robert E. Lighthizer emphasized that “the best outcome would be for countries to come together to find a solution”.

Commission remarks that CBAM’s resources will be used to finance the EU budget

On 14 January, in the course of an event organized by the French association of private companies (AFEP - Association française des entreprises privées), Benjamin Angel (Director of Direct taxation at DG TAXUD) stated that the European Commission is not working on a proposal that uses the resources of the Carbon Border Adjustment Mechanism (CBAM) to provide financial support to “clean” companies. Mr. Angel highlighted that the Member States have made clear that the resource of the CBAM should be made available for the European budget and the Next Generation EU programme, which anyway contains several measures to support environmental-friendly companies. He confirmed the statement of MEP Bernd Lange (S&D, Germany), by highlighting that the measure will be WTO-compatible, not to create undue limitations at the EU border. The Commission is expected to publish its proposal in June 2021 to be applied from 2023. 

CJEU rules against the Commission on fuel prices applied in an Italian region

On 14 January, the Court of Justice of the European Union (CJEU) dismissed an action brought by the Commission against Italy for failing to apply the Energy Taxation Directive. The residents of the Regione autonoma Friuli Venezia Giulia (one of the Italian regions) have benefitted from a reduction in the “pump price” of fuel based on a Council Decision between 1996 and 2006 and later on based on a regional law. The Commission claims that the legislation infringes the Energy Taxation Directive which establishes minimum excise rates which Member States must apply. However, the CJEU has concluded that the Commission has not established that the introduction of the contribution system by Italy implies a reduction in excise duty in the form of a refund of the amount of the tax, thus the reduction of price does not, in itself, constitute an infringement of the Energy Taxation Directive.

MEPs warn Commission that Brexit deal is weak on tax dumping

On 11 January, European Parliament’s Committee on Economic and Monetary Affairs held an exchange of views with the European Commission's Task Force for Relations with the United Kingdom. During the meeting, several MEPs warned the Commission about the weaknesses of the Brexit agreement regarding money laundering and tax evasion. In particular, the MEPs remarked that the exclusion of taxation and the fight against money laundering from the rebalancing provisions represents a problematic point and they expressed the fear that the U.K. could start practicing tax dumping.

ECtHR ruled in favour of Hungarian tax authority on disclosure of tax defaulters’ data

On 12 January, the European Court of Human Rights (ECtHR) issued its judgment in the case “L.B. v. Hungary” (application no. 36345/16) confirming that the Hungarian tax authority did not breach article 8 of the European Convention on Human Rights (Right to respect for private and family life). The tax authority had published the personal data of the applicant, including home address, on tax authority website portal, for failing to fulfil his tax obligations. It named the applicant as a tax defaulter, and subsequently a major tax evader, and detailed his name, the amount of his tax arrears and debts, his tax identification and home address. The case was brought before the ECtHR by the applicant who complained that the publication of his data was not necessary and that it aimed at publicly shaming him. The judgment of the ECtHR rejected these claims concluding that the publication of the data “could not be considered a serious intrusion into the applicant’s personal sphere”. Furthermore, the judgment states that “it does not appear that making his personal data public placed a substantially greater burden on his private life than was necessary to further the State’s legitimate interest”.