The OECD published on Monday 11 July a progress report on Amount A of Pillar I, presenting a comprehensive draft of the technical model rules to implement the new taxing right. The Inclusive Framework has now officially agreed on a new timeline to deliver the Multilateral Convention for the implementation of Amount A. It fixes mid-2023 as the ultimate deadline for signing the Multilateral Convention and 2024 for its entry into force. According to the OECD, this more realistic timeline will optimise the chance for the Multilateral Convention to be ratified by a sufficient critical mass of countries, including the largest economies where most in-scope companies are headquartered. Interested parties have until 19 August to send their comments to the OECD.
The ECON committee of the European Parliament held on Wednesday 13 July an exchange of views with Zbyněk Stanjura, Minister for Finance of the Czech Republic, in his capacity of President of the ECOFIN Council during the Czech Presidency of the Council of the EU. On this occasion, Mr Stanjura said that he will focus on the implementation of Pillar II and will “personally strive to find a solution with Hungarian partners during the summer” so that an agreement can be reached at the next formal Ecofin meeting in October. He added that without an agreement on Pillar II, there will be no agreement on Pillar I at OECD. Asked by some MEPs about the use of the “enhanced cooperation” mechanism or the move from unanimity to qualified majority moving on tax matters, the minister dismissed these strategies. “I am rather a believer in diligent negotiations rather than in open public pressure”, he concluded.
The United States will reportedly end its 1979 tax treaty with Hungary, the Treasury Department said on Friday 8 July. The timing of the termination suggests that the US Treasury is using it to try to pressure Hungarian Prime Minister Viktor Orbán to agree to implement the 15% global minimum tax (Pillar II). "Hungary made the U.S. government’s longstanding concerns with the 1979 tax treaty worse by blocking the EU Directive to implement a global minimum tax", a Treasury spokesperson reportedly said. "If Hungary implemented a global minimum tax, this treaty would be less one-sided. Refusing to do so could exacerbate Hungary’s status as a treaty-shopping jurisdiction, further disadvantaging the United States”, he added. Termination of the treaty is expected to be completed in six months after the U.S. Treasury sends formal notification to Hungarian authorities.
On Monday 11 July, the FISC subcommittee of the European Parliament held a public hearing on "the role of tax incentives and exemptions in the framework of the reform of corporate taxation and in the promotion of European economies' competitiveness". The purpose of the hearing was to gather insights and opinions from experts on the effectiveness and economic relevance of tax incentives for investment, in particular tax free zones, in the EU, as well as its further influence on the competitiveness of Member States and the Single Market as a whole. During the hearing, Benjamin Angel, Director Direct Taxation, Tax Coordination, Economic Analysis and Evaluation, DG TAXUD, European Commission said that tax incentives are good tools but tools to use with care. He explained that theoretically, tax incentives can help supporting public policies by nerving the right behaviour. However, he outlined that many of them are costly, inefficient, and sometimes socially regressive. He also warned against the complexity created by an accumulation of tax incentives.
On Friday 15 July, the European Commission decided to take several steps against Member States who do not comply with EU tax law. It sent a reasoned opinion to Greece for not properly applying the VAT rules on postal services and to Cyprus for failing to notify the measures for the transposition into national law of the Council Directive laying down the temporary VAT exemptions on imports and on certain supplies in response to the COVID-19 pandemic. Greece, Latvia and Portugal were also asked to transpose as soon as possible the new rules on excise duties, that will start applying beginning of 2023. Finally, the Commission urged Greece and Spain to communicate the required national measures implementing Article 9a of the Anti-Tax Avoidance Directive, as regards reverse hybrid mismatches. These rules prevent taxpayers from exploiting the differences between tax systems to pay less or no tax and prevent tax base erosion for Member States. All these countries now have two months to provide a satisfactory answer or the Commission may decide to refer the case to the Court of Justice of the European Union.
