Weekly Tax News – 27 September 2021

Ireland’s willingness to participate to the OECD tax deal still unclear

Talks to try to convince Ireland to join the OECD tax deal are continuing but it is still unclear what the country will do. EU Commissioner for Taxation Paolo Gentiloni was in Dublin on Monday 20 September to meet with Irish Finance Minister Paschal Donohoe. “I am very clear that it is not appropriate for Ireland to be in the agreement now. That may continue to be the case”, Pascal Donohoe said at a press conference. According to the press, Ireland wants the proposed 15 percent minimum tax rate on corporate profits to be a ceiling, not a floor and it doesn’t want to accept any deal until it is clear what the U.S. Congress will authorise. But on Tuesday 21 September, Deputy Prime Minister Leo Varadkar showed more openness. Ireland doesn’t want to be seen as a tax haven and would prefer to be part of a global agreement on corporate tax reform, he said. He recalled that the OECD tax deal would apply only to multinationals that report turnover exceeding 750 million € annually and that only few companies registered in Ireland would meet that threshold.

Developing countries want more income allocation in OECD tax deal

Developing countries want more income to be reallocated in the OECD tax deal that is due to be finalised next month, the G-24 group of developing countries said in a statement submitted on Sunday 19 September to the OECD Inclusive Framework Secretariat. The G-24 estimate that the solution found on Pillar I in July does not reflect the concerns they expressed in the past. The paper said that the reallocation percentage should not be less than 30% of multinationals’ non-routine profits otherwise it will not ensure any meaningful revenue for developing countries, particularly small and emerging economies.

European Commission clarifies the implementation of the OECD tax deal

The Director-General for Taxation at the European Commission Gerassimos Thomas clarified how the Commission intends to implement the OECD tax deal, when delivering a speech on Wednesday 22 September at the Annual Tax Conference of Finland Chamber of Commerce. He said that following the agreement on a global solution, the Commission will immediately propose a Directive for the implementation of Pillar 2 in the EU. “This is a necessary step, to ensure that Pillar 2 is transposed in the EU in a uniform fashion and with the legal certainty that the new rules are compatible with the acquis”, he said. If Pillar 2 were implemented via unilateral measures at national level, a Member State could enact rules that limit the minimum effective tax rate requirements to cross-border situations, he explained, arguing that there would be a clear risk that this practice be found discriminatory under the EU Treaties. On Pillar 1, he said that it is key to see the level of detail in which the OECD final agreement will be spelled out to assess whether a Directive would provide added value or not.

Stakeholders discuss public trust in tax

Global and EU experts discussed public trust in tax on Wednesday 22 September during an online event organised by the Association of Chartered Certified Accountants (ACCA), the International Federation of Accountants (IFAC), the Chartered Accountants Australia & New Zealand (CA ANZ), in collaboration with the OECD. They discuss a new survey showing that people continue to have the highest level of trust in professional tax accountants and tax lawyers in relation to the tax system. All speakers agreed that professional accountants contribute to improving tax systems by making them more efficient, more effective and fairer. MEP Paul Tang, Chair of EP FISC Subcommittee, outlined that in EU countries where tax adviser is a regulated profession there is less tax avoidance than in the countries where it is not, like in the Netherlands. He pleaded in favour of a regulation of the tax profession, arguing that the role of tax adviser cannot be only to focus on profits and to minimise the bill of their clients.

Public CBCR’s legal basis still criticised

Eight Member States have issued statements on Wednesday 22 September criticizing the legal basis of the Directive to increase public country-by-country reporting (CBCR), which was agreed by EU co-legislators earlier this year and is in the process to be formally adopted. Croatia outlined that this case should not become a precedent for qualified majority voting in the EU Council on tax matters. Cyprus, Czech Republic, Hungary, Ireland, Luxembourg, Malta and Sweden said they keep rejecting the appropriateness of the legal basis and that this text should have been agreed in ECOFIN Council. During the ACCA- IFAC-CAANZ-OECD conference on Wednesday, Reinhard Biebel from DG TAXUD admitted that the legal basis of the Directive could now be challenged in front of the European Court of Justice but said that he is confident the European Commission’s arguments would hold before the court.

Several infringements procedures launched in tax matters

The European Commission launched on Thursday 23 September several infringements procedures against Member States who are violating EU law on tax matters. It decided to send letters of formal notice to Cyprus and to the Czech Republic for incorrect or incomplete transposition of EU anti-tax avoidance rules as well as to Greece for failure to comply with EU rules on car taxation. The Commission also decided to go one step further by sending a reasoned opinion to Italy urging the country to transpose EU rules to improve the functioning of the current VAT system (the so-called VAT ‘Quick Fixes’ Directive).

MEPs scrutinise the impact of national tax reforms on EU economy

The ECON committee of the European Parliament is working on the impact of national tax reforms on the EU economy. MEP Markus Ferber (EPP, Germany) recently published its draft report which outlines that if Member States are free to decide on their own tax policies, a certain degree of policy coordination is nevertheless desirable in order to prevent problems such as legal uncertainty, red-tape or risk of double taxation. The report notably supports the future Commission’s proposal for a debt equity bias reduction allowance (DEBRA) arguing that a European approach would be more sensible in order to avoid distortions across the Single Market. It also invites the Commission to look into whether some Member States are distorting competition by artificially lowering their effective margin tax rate and stresses the need for a joint understanding of Member States on how to handle tax incentives for research and development.

Five countries push for a 5 000 € EU cash payments limit

With the backing of Belgium, France, Italy and Spain, the Netherlands called the European Commission to set a 5 000 € cash payments limit within the EU to prevent money laundering and other criminal activities, the Dutch press reported on Monday 20 September. The five countries also reportedly pushed for a ban of the 500 € note. As part of its anti-money laundering package presented recently, the European Commission proposed to set an EU-wide limit of 10 000 € to large cash payments. Limits already exist in about two-thirds of Member States, but amounts vary.

European Commission launches TAXEDU

The European Commission launched this week its new website TAXEDU to educate young European citizens about tax and how it affects their lives. Information is conveyed through games, e-Learning material and microlearning clips so that European youngsters can learn about tax in a fun and engaging way, the Commission explained.