Weekly Tax News – 17 January 2022

European Parliament President David Sassoli has died

The President of the European Parliament, David Sassoli, died at the age of 65 on Monday 10 January in hospital in Italy. The Parliament will hold a special ceremony on Monday 17 January in Strasbourg. David Sassoli was first elected as an MEP in 2009. In July 2019, MEPs elected him President of the Parliament for two and a half years in an informal political agreement on the distribution of top European posts. As first vice-president of the Parliament, the EPP group’s candidate, the Maltese MEP Roberta Metsola – which is the favourite - will act as interim President to ensure that Parliament is able to continue functioning until the new election scheduled for Tuesday 18 January. So far, three other MEPs have announced their candidacy: Alice Kuhnke (Greens/EFA, Sweden), Kosma Zlotowski (ECR, Poland) and Sira Rego (The Left, Spain). The European Parliament is also set to elect its 14 Vice-Presidents and its five Quaestors on Tuesday 18 January and Wednesday 19 January.

EU Finance Ministers to discuss Pillar II

EU Finance ministers will hold on Tuesday 18 January a first policy debate on the EU proposal for a directive on ensuring a global minimum of taxation for multinational groups in the EU (so called Pillar II), presented on 22 December. According to a press release, Ministers will be invited to provide “political guidance” on whether the file is a priority and the need to urgently transpose the agreed rules of international corporate taxation as soon as possible. The adoption of the directive will come at a later stage, after the examination of the proposal in the Council has been completed, it adds.

The European Commission wants an agreement on Pillar II in Spring

The European Commission wants an agreement as soon as possible and preferably in Spring, on its Directive to implement Pillar II within the EU, the Director for direct taxation at the European Commission, Benjamin Angel said on Friday 14 January during a webinar organized by the Center for European Studies (CefES). The new rules will start to apply in 2023 and since it is a Directive, the EU needs some time for Member States to transpose it, he recalled. He also strongly encouraged businesses to start preparing for the new rules now and not to wait for the adoption of the EU Directive. Giorgia Maffini, Special Advisor on Tax Policy and Transfer Pricing at PwC United Kingdom, outlined that companies are still trying to understand the rules. She explained that the OECD model rules were a “big surprise” and that she wasn’t expecting so many novelties. Joachim Englisch, Professor of Tax Law at the University of Münster, regretted that the Directive contains no provision to allow to adapt it in the future, as the agreement on Pillar II will constantly evolve.

MEPs quiz experts on harmful tax practices

On Monday 10 January, MEPs of the subcommittee of the European Parliament on tax matters (FISC) discussed a study on the "development of potentially harmful tax practices and harmful competition in the area of personal income tax and wealth tax", presented by Dr Florian Neumeier, Director of the Research Group on Taxation and Tax Policy at the Ifo Institute in Munich. Mr Neumeier explained that the establishment of ground rules would make it possible to avoid aggressive measures and preferential tax regimes. There is evidence that the “unilateral and uncoordinated introduction of preferential tax arrangements can indeed be considered harmful”, as they have a negative impact on the revenue and tax base of other countries, he said. He also encouraged taxation based on immobile criteria, such as housing or goods, which cannot avoid taxation. MEPs also discussed a study on the "evaluation of the anti-tax avoidance and evasion measures introduced in the recent years”.

FATCA: the European Commission rules out once again any action

The European Commission is not entitled to discuss or negotiate bilateral agreements between EU Member States and the United States on the implementation of the US Foreign Account Tax Compliance Act (FATCA), EU Commissioner for Taxation, Paolo Gentiloni said in a written answer published on Tuesday 11 January to a question from the Luxembourgish MEP Christophe Hansen (EPP). FATCA provides for the automatic exchange of information between national tax authorities and the US tax authority. It often entails burdensome tax obligations for US citizens living abroad, especially for so called “accidental Americans”. Commissioner Gentiloni added that any possible negotiation between the EU and US on replacing existing bilateral FATCA arrangements would require both a unanimous decision from the Council of the EU and a willingness from the US to use the international Common Reporting Standard (CRS) rules, rather than FATCA.