Weekly Tax News - 13 June 2022

June 13, 2022

Tax authorities step up tax enforcement efforts in support of the ‘Freeze and Seize' Task Force

The European Commission and Member States’ tax authorities have set up a subgroup on tax enforcement in the already existing ‘Freeze and Seize’ Task Force to step up their efforts against sanctioned Russians and Belarusians individuals and companies, the Commission announced on Wednesday 8 June. This subgroup will help unearth possible tax crimes and recover unpaid taxes, while facilitating the implementation of EU sanctions. In particular, it will: - check for the presence of sanctions-listed persons and entities in tax files; - undertake new tax audits or investigations regarding such persons and entities; - share information on those persons and entities with each other and with third countries within the boundaries of existing tax law frameworks; - increase screening efforts on tax refunds and repayments to avoid any circumvention of the asset and fund freezes laid down in EU sanctions regulations; and - ensure a high level of vigilance regarding any intermediary acting for such persons and entities in view of the already existing prohibition to offer certain services to trusts and similar legal arrangements.

Overview of the progress made under the French Presidency on tax matters

The Council of the European Union published on Wednesday 8 June its traditional draft Ecofin report to the European Council on tax issues, which gives a good overview on the progress made under the French Presidency. The report recalled that the French Presidency managed to reach an agreement on VAT rates and approved Council conclusions on the implementation of the VAT e-commerce package. It also started the examination of the proposal for a Directive laying down rules to prevent the misuse of shell entities for tax purposes and hopes to reach an agreement on the Directive ensuring a global minimum level of taxation for multinational groups in the Union (Pillar II). The report should be adopted at the Ecofin meeting on 17 June, before being transmitted to the European Council on 23-24 June.

More work needed on the Energy Taxation Directive

The French Presidency of the Council of the European Union won’t be able to close the revision of the Energy Taxation Directive, tabled in July 2021, before the end of its mandate. In a progress report, which should be presented at the Ecofin meeting on 17 June, it said that, given the complexity of the proposal, further technical discussions will be required to obtain possible compromise solutions on a wide range of issues. In particular, Member States have to further discuss: - the delimitation of tax categories and minimum levels of taxation, including the possibility of applying a derogation regime to certain products such as gas; - the pace of implementation of the new rules and the abolition of exemptions for the aviation and maritime sectors; and - the interaction between the state aid rules and the future Directive. According to the French Presidency, Member States do not contest the objectives of the proposal but they attach a particular importance to preserving the competitiveness of the EU and to examining the effects of the future Directive on households, on certain sectors of activity and on the economy as a whole.

Final vote on CBAM postponed in the European Parliament

MEPs were due to vote on a series of proposals in the ‘Fit for 55’ climate change package on Wednesday 8 June but due to the rejection of the draft report on the review of the EU Emissions Trading System (ETS), the final vote on the other texts, including the Carbon Border Adjustment Mechanism (CBAM), were postponed. It was a vote on key amendments phasing out free emissions allowances that reportedly divided the European Parliament, leading the Greens/EFA and Social Democrats to oppose the ETS report at the last minute because the level of ambition was weakened. As the issue of free allowances, which led to the rejection of the ETS report, is at the heart of the CBAM report, the latter has been referred back to the ENVI committee of the European Parliament and is now on hold pending political agreement. The matter will be discussed this week among political groups’ coordinators in order to find a way forward on this file, the EP said in a press release.

State of play of the discussions on the AML package in the EU Council

During its Presidency of the Council of the European Union, France has focused its efforts on the regulation establishing the new EU AML authority (AMLA), it said in a progress report published on Monday 7 June and which should be presented at the Ecofin meeting on 17 June. While on AMLA, the Presidency hopes to obtain a negotiating mandate on “as much of this text as possible by the end of the semester”, for the Regulation and the Directive (AMLD6) it admits that complex discussions will have to be continued under the Czech Presidency, starting in July. Particular attention was paid to the fundamental elements of the Regulation, namely the harmonization of definitions and the precise definition of the scope of the entities subject to the regulation, France says in its report. On the AMLD6, the Presidency has focused on issues relating to cooperation and coordination between EU supervisory authorities, the sanctions and remedies they can apply, joint analysis and exchange of information between FIUs and with other authorities, and the powers of suspension of FIUs.

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