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Weekly Tax News – 28 May 2018

ETAF Conference on how to tax the digital economy: searching for common solutions

On 23 May 2018, over 100 participants from the EU institutions and multiple Member States joined the Conference on “fair taxation in a digitalized world” hosted by the European Tax Adviser Federation (ETAF) in Brussels. Main subject of the Conference were the Commission’s proposals on taxing the digital economy of 21 March 2018. The ETAF Conference offered an ideal setting for Director General at DG TAXUD, Stephen Quest, to explain the background and the purpose of the Commission proposals.

In his welcoming address, ETAF President Philippe Arraou highlighted that the taxation of the digital economy is one of the core topics of ETAF since its very first day, “when we submitted Commissioner Moscovici a position paper on the taxation of the digital economy at our launching conference”, he said. Furthermore, President Arraou welcomed the Commission proposals as a basis for discussion and further developments.

Mr Quest referred to the digitalisation of the economy as a fundamental aspect of the growth of the EU. However, he insisted on the fact that one of the pillars of the work of the European institutions was to ensure fairness within the EU. “These positive developments of the digital economy have exposed the outdated nature of the international tax framework”, Quest stated.

During the first panel, stakeholders and European decision-makers further discussed the proposals of the Commission, offering their different angles.

The second panel was focused on the TAX3 committee; here MEPs from the major political groups discussed with the professionals not only about the taxation of the digital economy, but also on the role of tax advisers in tackling the complexity in international taxation.

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The US are planning 25% tax on car imports

The US president Donald Trump is considering to introduce a 25% tariff on imports of automobiles under the same authority that allowed him to raise duties on steel and aluminium, which is US national security. The Commerce Secretary Wilbur Ross stated that an investigation launched by the Commerce department showed that there are evidence suggesting that imports from abroad have eroded the domestic auto industry in the US. The main US trade partners in the automotive sector are Canada, Japan, Mexico, Germany and South Korea. The European Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen commented that “if the US would unilaterally raise car tariffs, it would be against the WTO rules”.

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European Commission urged Hungary to ends its discriminatory taxation on spirits

On 7 May, the European Commission decided to send Hungary a reasoned opinion asking to stop the exemption granted to fruit distillates (palinka, the national drink) as well as to herbal liqueur which are mostly domestically produced. The Commission considers this practice contrary to article 110 of the Treaty on the Functioning of the European Union which prohibits Member States from imposing, “directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.” Hungary has two months to take action on the matter before the European Commission decides to refer the case to the Court of Justice of the European Union (CJEU).

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ECOFIN decisions on tax blacklist and disclosure rules for tax intermediaries

On 25 May 2018, the Economic and Financial Affairs Council has removed the Bahamas and Saint Kitts and Nevis from the EU's list of non-cooperative tax jurisdictions. These two countries have made commitments at a high political level to remedy EU concerns and EU experts have assessed those commitments. As a consequence, they have been moved to the so-called greylist, which cites jurisdictions that have undertaken sufficient commitments to reform their tax policies and whose implementation commitments will be carefully monitored.

During the same meeting, the Council also adopted the directive on disclosure rules for tax intermediaries. Member States will have until 31 December 2018 to transpose it into national laws and regulations.

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New provisional agreement between Parliament and Council tackle illicit cash flows in and out of the EU

The European Parliament and the Council reached a provisional agreement to fight the financing of terrorism. By putting tighter controls on cash flows above €10,000 or more and commodities such as gold and prepaid cards it will be more difficult for terrorists to finance their criminal activities like money laundering. The new rules will also improve the exchange of information between Customs and Financial Intelligence Units and Member States. The provisional agreement is expected to be formally approved by both the European Parliament and the Council in the following weeks.

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