The European Commission unveiled on Wednesday 11 May its proposal for a debt-equity bias reduction allowance (DEBRA), combining an allowance for new equity and a limitation to the deductibility of debt costs. With this proposal of Directive, its objective is to ensure that equity receives similar tax treatment as debt, so that companies can consider both options on an equal footing and choose the source of financing that is best for their business-model. The allowance would apply to all taxpayers that are subject to corporate tax in one or more Member State, with the exception of financial undertakings. Concretely, increases in a taxpayer's equity from one tax year to the next will be deductible from its taxable base, similarly to what happens to debt. The Commission also proposes anti-abuse provisions against schemes that might be put in place to circumvent the conditions on which an equity increase qualifies for an allowance under this Directive. Once adopted, the Directive should come into effect as of 1 January 2024. A transition period is foreseen for the six Member States (Belgium, Cyprus, Italy, Malta, Poland and Portugal) which already have rules in place.
The European Commission will phase out the State Aid COVID Temporary Framework adopted on 19 March 2020 and last amended on 18 November 2021, which allows Member States to remedy a serious disturbance in the economy in the context of the coronavirus pandemic, it announced on Thursday 12 May. The European Commission indicates that the temporary framework will not be extended beyond its scheduled expiry date of 30 June 2022 for most of the tools provided. The existing phase-out and transition plan will not be changed, including the possibility for Member States to provide specific investment and solvency support measures until 31 December 2022 and 31 December 2023 respectively. Through this framework, the Commission adopted more than 1300 decisions, approving nearly 950 national measures for an estimate total State aid amount approved of nearly €3.2 trillion.
On Tuesday 10 May, MEPs from the subcommittee on tax matters (FISC) of the European Parliament discussed how the use of special tax regimes in the EU has attracted high net worth individuals, especially Russian oligarchs with a hidden wealth abroad estimated to account for around half of Russia’s household wealth. Professor Susana Peralta from the Nova University presented the specific case of Portugal, showing how the country had very opaque systems in place, especially regarding its golden visa scheme, citizenship granted to Sephardic Jews and the non-taxation of crypto assets. Theresa Neef from the EU Tax Observatory outlined a proposal for a European Asset Registry which would detail what assets are owned where across all the EU. Professor Richard Murphy from the Sheffield University Management School underlined the need to make financial intermediaries more accountable and responsible and to keep in mind that it is the network of secrecy jurisdictions that allow wealth to go under the radar, not a single jurisdiction on its own. MEPs focussed their questions on how to make already existing legislation work better and what new tools would be needed at EU level to address the problems.
At the initiative of the Green/EFA group in the European Parliament, several MEPs involved in anti-money laundering files sent a letter, on Wednesday 11 May, to the European Commission to urge it to add as soon as possible the United Arab Emirates on the EU list of high-risk third country regarding money laundering after the “Dubai Uncovered” revelations. The Financial Action Task Force has included the United Arab Emirates on its ‘grey’ list already in March 2022, they recall. In their letter, MEPs also encourage the Commission to share more information on the work conducted by the ‘Freeze and Seize’ taskforce, set up to ensure EU-level coordination to implement sanctions against listed Russian oligarchs, and suggest publishing an overview of assets frozen per Member States.
The citizens’ representatives who took part in the Conference on the Future of Europe presented, on Monday 9 May in Strasbourg, the proposals they had drawn up during one year, which cover a wide range of issues such as European democracy, migration, the fight against climate change and an economy that serves the people. “Citizens want to move away taxation from people and SMEs and target tax evaders, big polluters and by taxing the digital giants”, they wrote in their final report. They particularly ask for the introduction of a common corporate tax base or a minimum effective rate and to ensure that companies pay taxes where profits are made. They also say that decisions on certain tax matters should be taken by qualified majority in the Council of the EU. The European Commission should specify during the State of the Union speech mid-September what it intends to do to implement the Conference’s proposals.
As the regulation of tax advice in the EU is coming back into the spotlight with the recent announcement of the European Commission, ETAF is delighted to invite you on 14 June from 14h30 to 17h00 in the Stanhope hotel in Brussels to discuss how a regulated tax consultancy sector can make a difference, with tax advisers helping the businesses to pay their fair share of taxes, playing an important role in ensuring tax compliance and hence contributing to the tax revenues of the States. Benjamin Angel, Director for direct taxation, tax coordination, economic analysis and evaluation at the European Commission, MEP Markus Ferber, Vice-President of the FISC subcommittee in the European Parliament, Sarah Godar, Researcher at the EU Tax Observatory, Philippe Vanclooster, former partner at PwC and Board member of ITAA, and Philippe Arraou, President of ETAF will participate to a lively discussion moderated by Todd Buell, Tax journalist at Law360. The conference will be livestreamed on ETAF social media, with simultaneous translation into French and German. You can register here and consult the programme here.