Weekly Tax News - 19 April 2022

April 19, 2022

EU studying how to make Russia pay for the war bill

EU governments are reflecting on several options for the reconstruction of Ukraine after Russia’s invasion, with estimates ranging from €200 billion to closer to €1 trillion. EU officials are reportedly studying whether assets belonging to sanctioned oligarchs could be targeted and channelled to the reconstruction effort. Other options include forcing the Russians into a reparation deal as part of a peace settlement or make Russia pay by taxing its oil export revenues. For his part, the EU Commissioner for budget Johannes Hahn reportedly advocated for a Marshall plan for Ukraine.

Russian oligarchs escape EU sanctions with shell companies

Russian oligarchs and politicians are evading EU sanctions through shell companies, mostly based in the British Virgin Islands, according to a new international investigation called the "Pandora Papers Russia" revealed on Monday 11 April. The ICIJ consortium of investigative journalists has collected information from five previous data leaks on more than 11,000 letterbox companies and other shell companies linked to Russia. In the Pandora Papers, the ICIJ consortium uncovered 163 structures behind which Russian politicians are hiding. This makes it extremely difficult for European banks, companies and authorities to map the full wealth of the hundreds of Russians targeted by the sanctions, journalists explain. More than 45 Russian oligarchs appear in the Pandora Papers, of which at least 12 are targeted by the recent sanctions.

OECD consults on extractives carveout under Pillar I

The OECD opened on Thursday 14 April a public consultation on the draft rules for excluding extractive activities profits from the scope of the new taxing right under Pillar I of the OECD tax deal. The exclusion would apply where a group derives revenue from the exploitation of extractive products and the group has carried out the relevant exploration, development or extraction. “This approach reflects the policy goal of excluding the economic rents generated from location-specific extractive resources that should only be taxed in the source jurisdiction, while not undermining the comprehensive scope by limiting the exclusion in respect of profits generated from activities taking place beyond the source jurisdiction, or later in the production and manufacturing chain”, the OECD explains in a press release. Interested parties have until 29 April to send their written comments.

MEPs look at the impact of new technologies on taxation

The European Parliament is looking at the impact of new technologies on taxation. In a draft initiative report recently published, MEP Lídia Pereira (EPP, Portugal) recognizes that whereas new technological solutions, such as blockchain, can be used by tax administrations to better serve the needs of taxpayers, such technologies can also be abused and serve as a vehicle for illicit activities, with the criminal intent to avoid paying taxes. The draft report calls on the Commission to consider the dimension of crypto assets in its future Business in Europe: Framework for Income Taxation. It also calls the Ecofin Council and the Eurogroup to initiate a structured dialogue on a common approach on the taxation of crypto assets at the EU level, in close cooperation with the European Parliament. Finally, Ms Pereira is suggesting the creation of a new platform for training and best practice sharing between national tax authorities in the field of combat against tax fraud and evasion linked to the use of crypto assets.

European Commission evaluates the current excise duty rules on alcohol

The European Commission launched on Wednesday 12 April a public consultation on the EU regulatory framework for alcohol excise duty rates. The rules currently in force in all Member States set minimum rates for alcoholic products in order to avoid distortions of competition within the Single Market. They also support the fight against tax fraud and public health policy. However, these rules have not been updated since 1992 and have not taken into account inflation, market developments, consumption patterns or growing public health concerns, the European Commission explains. In 2006, the Commission made a legislative proposal to adjust the minima by introducing regular increases according to the inflation rate but it fell short of the necessary unanimity and was withdrawn by the Commission in 2015. The results of this public consultation will feed into a broader assessment of the current framework by the Commission, with a view to identifying issues to be addressed. Interested parties have until 4 July to send their comments.

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