Weekly Tax News - 12 September 2022

September 12, 2022

EU Commission announces new measures to cope with the energy crisis

On Wednesday 7 September, the President of the European Commission, Ursula Von der Leyen, announced in a statement five immediate measures that the EU will take to tackle the energy crisis. The Commission will propose a cap on the revenues of companies that are producing electricity with low costs as well as a “temporary crisis solidarity contribution” from fossil fuel companies. Although the concrete design of this last option is not yet known, it could act as a windfall tax on excess profits and would reportedly use the pre-tax profits of all companies in the oil, gas and coal sectors as a basis, taking care to avoid double taxation. The Commission will also propose a binding target for reducing electricity demand, a cap on the price of Russian gas and a redistribution of super-profits to help households. The Commission should formally bring forward the proposals on Tuesday 13 September. EU energy ministers discussed the options at an emergency Energy Council on Friday 9 September.

EU Finance ministers discuss harmonisation in direct taxation

On Saturday 10 September, EU Finance ministers discussed harmonisation in the area of direct taxation during an informal Ecofin meeting in Prague. In a preparatory document, the Czech Presidency of the Council of the EU invited ministers to exchange views on possible developments in the area of direct taxation within the EU, and especially on whether they see harmonisation as the only way forward or whether complementary legislative work through soft-law activities might be an interesting avenue too. "As the presiding country, we opened a debate on whether, for some of the EU-wide measures taken in the field of direct taxation, a more effective way would be, for example, to recommend or share best practice instead of introducing blanket directives. They are generally able to be less responsive to the specificities of individual Member States. In such situations, there is a risk that the directive will only bring small benefits, which will be outweighed by administrative costs for entrepreneurs and the state," explained the Czech Finance Minister Zbyněk Stanjura in a press release.

Big push for enhanced cooperation on Pillar II

The European Commission is reportedly consulting Member States on whether they would support to implement Pillar II (minimum taxation) through enhanced cooperation in order to circumvent Hungary’s veto. On Friday 9 September, during an informal meeting of EU Finances ministers in Prague, France, Germany, Italy, the Netherlands and Spain presented a joint statement supporting this mechanism and more generally a quick implementation of Pillar II in the EU. “Should unanimity not be reached in the next weeks, our governments are fully determined to follow through on our commitment. We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means”, they wrote. Another option could be a coordinated transposition into national legislation. Germany recently committed to unilaterally implement the global minimum tax, rather than waiting for EU27 agreement. But on the same day, the Czech Finance Minister, Zbyněk Stanjura, cooled down this push and reportedly said that there was still time to find a solution that would allow for a unanimous agreement.

New cooperation agreement between the EU and Ukraine on taxation

On Monday 5 September, the European Commission signed an agreement between the EU and Ukraine which paves the way for Ukraine’s participation in the EU’s Fiscalis programme. Fiscalis is the EU’s programme for cooperation in the field of taxation. Amongst other things, it allows tax administrations to work together in fighting tax fraud, evasion and aggressive tax planning. The programme also facilitates information exchange and administrative cooperation between authorities and helps to reduce administrative burdens and compliance costs for taxpayers. The signature of this agreement means that Ukraine will be able to take part in the activities of the programme with EU Member States and other participating countries.

Pascal Saint-Amans leaves OECD

After 15 years at the OECD, Pascal Saint-Amans, the Director of the Centre for Tax Policy and Administration of the OECD announced on Monday 5 September that he will retire from the organisation at the end of October 2022. In a statement published on the same day, the OECD Secretary General, Mathias Cormann, thanked him for the “enormous, historically significant contribution he has made to international tax policy reform and administration through his work at the OECD”. Among other things, Pascal Saint-Amans launched the Base Erosion and Profit Shifting (BEPS) Project in 2012 and brokered last year’s landmark agreement among 137 countries and jurisdictions on the two-pillar solution to the tax challenges arising from the digitalisation and the globalisation of the economy. In an interview, he said he is convinced that the tax deal will survive because it already has a critical mass behind it. The deputy Director of the Centre for Tax Policy and Administration, Grace Perez-Navarro, will take over the job from 1 November 2022 until 31 March 2023. She will be supported by David Bradbury and Achim Pross, as acting deputy directors.

New OECD report on tax morale

Effective taxation of large businesses would benefit from increased efforts to build trust and improve communication between tax administrations and Multinational Enterprises (MNEs), according to a new report from the OECD published on Monday 5 September. The report shows that while MNEs are generally seen to demonstrate a formal commitment to co operation with tax administrations, notably through on-time payment, perceptions of MNE transparency and trust in the information provided by them are less positive. It also reflects tax administrations’ perceptions of the behaviour of the Big Four professional services networks (Deloitte, EY, KPMG, PricewaterhouseCoopers) on tax matters. It shows “similar patterns of positive perceptions of their willingness to follow the letter of the law and formal compliance, but less positive perceptions of following the spirit of tax laws”, the report concluded.

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