Weekly Tax News – 7 February 2022

OECD sticking to the Global Tax deal timeline

OECD Secretary-General Mathias Cormann reportedly said that the timeline set for the implementation of Pillar I and Pillar II of the global tax deal is fixed and that he expects all the jurisdictions to fulfil their commitments, during a conference hosted by the Washington International Trade Association on Monday 31 January. Difficulties in the legislative process in the United States have indeed arisen while some concerns have also emerged among EU Finance ministers about the timeline. “We are working to support those who have agreed in implementing that deal, that is in the U.S. and all around the world,” Mr Cormann assured. He also praised progress made in the implementation of Pillar II in the European Union, United Kingdom, Switzerland and other jurisdictions.

OECD launches public consultation on a first building block under Pillar One

The OECD/G20 Inclusive Framework on BEPS launched on Friday 4 February a public consultation on the draft rules for Nexus and Revenue Sourcing under Pillar One of the OECD Tax Deal. For Amount A of Pillar One, the public consultation will occur in stages, with the release of Secretariat working documents on each building block to obtain feedback quickly and before the work is finalised, the Inclusive Framework explains in a press release. “This approach, rather than waiting for a comprehensive document to be ready, will allow work to continue in parallel, in order to remain within the political timetable agreed in October 2021”, it says. For Amount B of Pillar One, a public consultation document will be issued in mid-2022. Interested parties are invited to send their written comments no later than 18 February 2022.

EU is preparing the next update of its Blacklist of tax havens

The EU is preparing the February update of its black and grey lists of tax havens. Benjamin Angel, the Director for direct taxation at the European Commission, said on Tuesday 1 February during a hearing in the subcommittee of the European Parliament on tax matters (FISC) that “many countries” will enter the grey list of jurisdictions with tax risks but which have committed themselves to take corrective measures, due to new criteria such as the implementation of the country-by-country reporting minimum standard. According to a draft text, Russia could reportedly enter for the first time the grey list. Although Turkey has still not met all the requirements set by the Ecofin Council in February 2021, the country is likely to escape once again the blacklist of non-cooperative jurisdictions in tax matters. Since the Ecofin Council only meets informally in February, the revision of the list is expected to be adopted by the Competitiveness Council on 24 February.

MEPs make recommendations for fairer and simpler taxation

MEPs from the Economic and monetary Affairs (ECON) committee of the European Parliament adopted on Wednesday 2 February an own initiative report, drafted by the Czech MEP Luděk Niedermayer (EPP), urging the Commission to come forward with proposals to better fight tax evasion and avoidance as well as to facilitate tax compliance requirements, especially for SMEs. The report calls on the Commission to propose ways to address the remaining gaps in the existing directive on tax dispute resolution, including also to address changes in the post-Covid economy such as a move to remote and mobile working which has increased the risk of double taxation. According to MEPs, the Commission should issue guidelines on tax incentives that are not distortive for the single market. The report also says that strong anti-avoidance clauses should be introduced into the future Debt Equity Bias Reduction Allowance (DEBRA) proposal and makes specific recommendations to this effect.

European Court of Auditors looks at tax exemptions for fossil fuels

The European Court of Auditors (ECA) found that more polluting energy sources may get a tax advantage compared with other sources with better carbon efficiency, in a report published on Monday 31 January. Although some Member States have committed to phasing them out, annual fossil fuel subsidies have remained relatively stable over the past decade at around €56 billion, according to the report. Two thirds of these subsidies took the form of tax exemptions or reductions. Fifteen states have subsidised fossil fuels more than renewables: Finland, Ireland, Cyprus, Belgium, France, Greece, Romania, Lithuania, Bulgaria, Sweden, Hungary, Poland, Slovakia, Slovenia and Latvia. This situation could change with the 2021 proposal to revise the Energy Taxation Directive, where the Commission proposed to abolish national exemptions for polluting fuels and to end tax breaks for fossil fuels in energy-intensive industries.

Belgium to cut VAT on electricity in response to energy crisis

Belgium has followed other EU member states in cutting VAT on electricity and providing subsidies to households to combat rising energy prices in the EU, the Belgian Prime Minister Alexander De Croo announced on Tuesday 1 February. The Belgian government decided to temporarily reduce VAT on electricity from 21% to 6% from 1 March until 1 July, to give all households a one-time electricity bill discount of €100 and to get an extension of a social tariff from 31 March until then end of June for low-income families. These new measures are expected to cost €1.1 billion.