Weekly Tax News – 4 October 2021

Commission hosts 3 days conference on global tax avoidance and tax evasion

From Monday 27 September to Wednesday 29 September, the European Commission organized an online conference on the fiscal and distributional consequences of global tax avoidance and tax evasion. Many participants recognized that the scale of cross-border tax avoidance is sufficient to make it a first global priority and regretted the lack of available information on this phenomenon. They generally welcomed the recently agreed EU deal on public country-by-country reporting (CBCR) as a good step in the right direction while outlining that some improvements would be needed. Gabriel Zucman, Director of the EU Tax Observatory, recalled that about 35% of the profits shifted to the tax havens come from the EU and that US multinationals are responsible for about half of all the profits shifted to tax havens.

Decisive week to come for the global tax deal

Talks are intensifying in the run-up of the decisive October 8 meeting of the OECD/G20 Inclusive Framework on BEPS where countries are expected to solve the last issues on the global tax reform. On Wednesday 29 September, the subject was discussed during a G7 Finance ministers conference call. The UK, which is currently chairing the group, said there was “a common understanding” on some important issues and a commitment to implementation. On the same day, during the European Commission’s conference on tax avoidance, Benjamin Angel Director at DG TAXUD said countries were “really close” to an agreement and that the carveouts are at the very heart of the negotiations right now. He also said that he was “optimistic” that all EU countries will be on board. Ireland expects to receive a revised text by early next week and is likely to endorse the deal if there is “certainty and stability” that the proposed rate of Pillar II won´t climb above 15%. Ireland also reportedly wants that its domestic firms will still be free to qualify for its existing 12.5% tax rate and won’t face new tax charges on sales abroad. Another uncertainty hanging over the talks is whether the US could implement the deal on Pillar I, after some comments this week on the possibility that the US Congress could block the ratification of an implementing treaty. On Tuesday 28 September, US Treasury Janet Yellen however suggested that there may be a way to enact the deal on Pillar I without the Senate approving a treaty.

Anguilla, Dominica and Seychelles to leave the EU blacklist of tax havens

When it will meet on Tuesday 5 October in Luxembourg the Ecofin Council is expected to formally remove Anguilla, Dominica and the Seychelles from the EU’s blacklist of tax havens. The item was approved on Wednesday 29 September at the meeting of Member States’ ambassadors to the EU. These three countries will become part of the grey list of jurisdictions with tax risks but which have committed themselves to take corrective measures. American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the US Virgin Islands and Vanuatu will remain on the blacklist. Although Turkey has not met all the requirements set by the Ecofin Council last February, it will remain on the EU’s grey list.

EU Council held its final vote on public CBCR

The Council adopted on Tuesday 28 September its position at first reading on the directive on public country-by-country reporting (CBCR), paving the way for its final adoption. Cyprus and Sweden voted against the agreement and the Czech Republic, Ireland, Luxembourg and Malta abstained. These six Member States, plus Croatia and Hungary, have annexed to the legislative text a declaration in which they criticize the legal basis of the directive, arguing that the purpose and the content of the proposal are linked to tax provision. The next step before the directive can enter into force is the formal approval by the European Parliament.

EP is preparing recommendations for fair and simpler taxation

The ECON committee of the European Parliament is preparing recommendations to the European Commission on fair and simpler taxation supporting the recovery. MEP Luděk Niedermayer (EPP, Czech Republic) published his draft report on Tuesday 28 September, which generally welcomes the July Commission’s Action Plan on fair and simpler taxation but also proposes new ideas. It recommends for instance to the European Commission by 2022/2023 to move towards the adoption of a Single EU VAT registration procedure and the Single EU VAT number, to assess the option of introducing a unique pan-European Income tax regime for small enterprises, to ensure a more consistent determination of tax residency and to establish a Charter on taxpayer’s rights. The report also suggests to set-up a harmonised common standard for e-invoicing and to explore the possibility of a gradual introduction of obligatory e-invoicing across the EU.

Commission publishes a roadmap for a future EU withholding tax framework

The European Commission published on Tuesday 28 September its roadmap for a future directive on a new EU system for the avoidance of double taxation and prevention of tax abuse in the field of withholding taxes, planned for the fourth quarter 2022. The Commission is considering three options: to establish common EU standardised forms and procedures for withholding tax refund claims, to establish a fully-fledged common EU relief at source system or to require a reporting and subsequent mandatory exchange of beneficial owner-related information on an automated basis.

Maria Elena Scoppio appointed Director at DG TAXUD

The European Commission appointed on Wednesday 29 September Maria Elena Scoppio as Director for ‘Indirect Taxation and Tax Administration’ in the Directorate-General for Taxation and Customs Union (DG TAXUD). Maria Elena Scoppio is currently coordinating the legislative proposals in the field of direct and indirect taxation in the Cabinet of EU Commissioner for taxation Paolo Gentiloni. From 2004 until 2017, she served as a Member of Cabinet for the Commissioners Moscovici, Šemeta and Kovács. Previously, she was Head of Unit in DG TAXUD in charge of the elaboration and development of the EU policy in the field of VAT and of digital taxation.