Weekly Tax News – 30 April 2018

Commissioner Moscovici responds to criticisms over digital tax proposals

In an interview released on 21 April after the IMF Financial Committee, Commissioner Moscovici stressed that there was no connection between the current proposals to tax the digital economy and the measures to be taken by the US on aluminium and steel. He highlighted that the digital tax was not anti-American and is mainly the result of the willingness of the Commission to avoid any fragmentation of the EU single market. Moscovici also agreed with the US Secretary for the Treasury Steven Mnuchin that they would continue to work on the taxation of the digital activities also in the framework of the G20.

Referring to the reservations of some Member States towards the proposals (e.g. Ireland and Luxembourg), the Commissioner stated that the tax would not lead to delocalisation because businesses in the digital sector could not move away from an important market such as the European market. Furthermore, the Commission proposal is always a basis for a compromise and the so-called reluctant Member States have become much less so. Enhanced cooperation is an option that the Commission is taking into account, though the Community method is greatly preferable at this stage.

Spanish regional taxes on large retail establishments are compatible with EU law

On 26 April 2018, the Court of Justice of the European Union (CJEU) ruled that regional taxes on large retail establishments with the aim of contributing to protect the environment and town and country planning are not contrary to the principle of the freedom of establishment and to the EU state aid law. This was the answer of the CJEU to the Spanish association of large distribution companies (ANGED) that has challenged the legality of taxes levied by three Spanish communities on large retail establishments to offset the environmental impact of their activities.

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The European Banking Federation pushes for a change in VAT directive

On Wednesday 18 April, the European Banking Federation wrote a letter to Stephen Quest, Director General for Taxation and Customs Union at the European Commission, asking for a change in the VAT directive as a consequence of a number of cases upon which the CJEU has decided recently. The issue relates to the notion of “general interest” introduced by the Court in September 2017, that excludes groups whose members operate in an economic activity in the banking, insurance or finance sectors from the VAT exemption permitted under Directive 2006/112/EC.

Commission to protect whistle-blowers

The Commission made a new legislative proposal to ensure EU-wide protection for whistle-blowers who unveil breaches in EU legislation. The fields that are affected by these new rules are, amongst others, the abuse of corporate tax rules and damage to the EU’s financial interests, financial services, money laundering and terrorist financing. The EU seeks to protect investigative journalists and thus to ensure the freedom of expression and free speech in Europe. According to this new proposal all companies with more than 50 employees or with an annual turnover of over €10 million will be required to develop internal procedures to handle reports by whistleblowers.

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Irish sugar-sweetened drinks tax approved by the Commission

The Irish government is planning to introduce a tax on sugary drinks with the health objectives of addressing obesity and other sugar-related diseases. This tax will apply to non-alcoholic water-based beverages with more than 5 gr added sugar. The Commission approved this measure to be non-discriminatory and in line with EU health objectives not distorting competition.

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Germany demands exemptions to notification procedure for services

The German government proposed to exempt land-use planning and spatial and urban land-use plans from the directive on the notification procedure for services. It is argued that the fields of land use or building standards were not touched by the services directive (2006/123/EC) and therefore should not be included within the scope of the notification procedure. Germany fears an “immense administrative burden” with excessive costs. The proposal caused division between the Member States and led the Commission to consult its services for a compromise.