Weekly Tax News – 20 December 2021

European Commission considering an EU-wide regulation of tax advisers

The European Commission is reportedly considering to introduce a regulation of professional tax advisers in the EU, in response to the Pandora Papers. Its Directorate-General for Taxation (DG TAXUD) would be investigating the possibility of creating an EU-wide framework and enforcement mechanism if a professional tax adviser has breached professional ethics, because the transparency measures taken as responses to previous tax leaks have another target and don’t focus on the profession itself.

The OECD model rules on Pillar II to be released on Monday 20 December

The OECD mode rules, designed to help participating countries to implement the OECD tax deal on Pillar II, will be released on Monday 20 December at 11:00 a.m. First drafts leaked in the press last week show the details around how companies will have to calculate the newly agreed global minimum tax. The model rules also give details on key open questions, including defining what kind of payroll and tangible asset costs are eligible for a carve-out from the rule, and how the rules will deal with timing differences between when profits are recorded and when taxes are paid. A draft of the OECD model rules dated November 20 is available here.

European Commission to propose three new EU own resources

The European Commission will reportedly propose on 22 December a basket of three new EU own resources, to help pay back the €750 billion ‘Next Generation EU' economic recovery plan. According to a draft communication, the Commission should propose a resource based on the EU Emissions Trading System (ETS), a Carbon Border Adjustment Mechanism (CBAM) and “an own resource equivalent to [X]% of a share of the residual profits of the largest and most profitable multinational enterprises that are reallocated to EU Member States under the agreement on a reform of the international tax framework”. Concretely, Member States would have to provide a national contribution to the EU budget based on the share of the taxable profits of multinational enterprises re-allocated to each Member State under Pillar One. This own resource would be introduced once the Multilateral Convention negotiated by the OECD and the related EU Directive, would both be in force and effectively apply. The draft communication also recalls that the Commission will propose additional new own resources, which could include a Financial Transaction Tax and an own resource linked to the corporate sector. This second package would build on the upcoming ’Business in Europe: Framework for Income Taxation’ (BEFIT) proposal.

Fiat state aid case: advocate General Priit Pikamäe submits his opinion

On Thursday 16 December, Advocate General Priit Pikamäe proposed, in a non-binding opinion, that the European Court of Justice (ECJ) set aside the EU General Court’s judgment from 2019 in the cases Luxembourg and Fiat Chrysler Finance Europe v Commission (T-755/15 and T-759/15), allow the appeal brought by Ireland and annul Commission Decision (EU) 2016/2326 declaring aid which Luxembourg granted to Fiat as being incompatible with the internal market. Ireland intervened in the court procedure because the country was ordered by the European Commission, in a similar case, to recover €13 billion plus interest from Apple and won its appeal against this decision. Ireland argued that instead of relying on Luxembourg law, the Commission came up with its own version of the “arm’s length principle”. Mr Pikamäe suggests that the ECJ gives final judgment in the matter and hold that the General Court “infringed the provisions governing the division of competences between the European Union and its Member States”. He proposes, however, that the appeal brought separately by Fiat Chrysler Finance Europe against the same judgment should be dismissed.

European Commission registers European Citizens’ Initiative for ‘Green VAT’

The European Commission announced on Wednesday 15 December that it had registered a European Citizens’ Initiative which aims to introduce a ‘green VAT’ to stimulate sustainable products and services. Concretely, the organisers of the initiative call for a reduction of the VAT rate for green products and incentives for businesses to produce in a resource and environmentally-friendly way. They now have six months to collect signatures (1 million statements of support from seven Member States) in order to force the Commission to act.

Claes Bengtsson appointed Principal Adviser at DG TAXUD

The European Commission appointed on Tuesday 14 December Claes Bengtsson as Principal Adviser for Strategy and Economic Analysis Coordination in its Directorate-General for Taxation and Customs Union (DG TAXUD). Claes Bengtsson, a Danish official, is currently Head of Unit in the Chief Economist Team of the Directorate-General for Competition (DG COMP). Previously, he was also Deputy Head of Unit and Deputy Chief Economist in DG COMP and served as Head of Section at the Danish Ministry of Finance. In his new position, Mr Bengtsson will provide leadership and guidance on cross cutting economic analysis issues linked to DG TAXUD policies.