Weekly Tax News - 4 July 2022

July 4, 2022

The Czech Republic takes over the Presidency of the Council of the EU

On Friday 1 July, the Czech Republic took over the rotating Presidency of the Council of the EU, succeeding France, for the next six months. The country chose as motto its former president Václav Havel’s slogan “Europe as a Task” and will focus on five priority areas: - managing the refugee crisis and Ukraine’s post-war recovery; - energy security; - strengthening Europe’s defence capabilities and cyberspace security; - the strategic resilience of the European economy; and – the resilience of democratic institutions. Compared to the French Presidency, which set ambitious priorities and managed to strike a series of last-minute deals on several important files, the Czech Presidency is expected to be a more modest and pragmatic presidency due to the complex coalition in the Czech government but also to the lack of staff. The full priorities of the Czech Presidency can be consulted here.

Enhanced cooperation seriously considered to implement Pillar II without Hungary

The EU is reportedly working on alternative ways to implement the minimum 15% effective tax rate for large multinational enterprises in the European Union, despite the opposition of Hungary, the French Finance Minister, Bruno Le Maire, said on Thursday 30 June. Bruno Le Maire’s comments echo a similar statement made by Martin Kreienbaum, director general of international taxation at Germany’s finance ministry, earlier this week. Member States would be considering the so-called “enhanced cooperation” mechanism, which would allow a minimum of 9 EU Member States or more to progress and implement this legislation without having to reach the unanimity normally required on tax matters. On Monday 27 June, in front of the FISC subcommittee of the European Parliament, the EU Commissioner for taxation, Paolo Gentiloni, criticized Hungary for going against its own position taken at OECD level and against the interest of EU citizens. He said that although he is supportive of the enhanced cooperation mechanism, he won’t give up for now the efforts to try to bring all EU Member States on board.

First findings of the EP study on the regulation of intermediaries unveiled

On Monday 27 June, Professor Emer Mulligan from the National University of Ireland presented to the MEPs of the FISC subcommittee of the European Parliament the first results of her upcoming study on the “Regulation of Intermediaries, including tax advisers, in the EU/Member States and best practices from inside and outside the EU”. The overall aim of the study is to provide an overview of the regulatory framework for tax intermediaries within the EU based on four EU countries (Ireland, the Netherlands, Germany and Italy) and one non-EU country (the United Kingdom). All in all, the study recognizes and outlines the positive role of tax advisers for the economy and the society. It also recognizes that regulation needs to be targeted to be able to identify the small pool of “bad apples” among the tax advisers along with imposing relevant sanctions. The authors also suggest establishing an EU-Wide Code of conduct, a mandatory professional indemnity insurance or measures targeting tax avoidance enablers. However, before pursuing any course of action, they strongly advise the EU and national governments to carry out an impact evaluation of the current measures that are already in place. The final study, which has been ordered by the FISC subcommittee, should be published in the course of July.

Partial agreement reached in EU Council on AMLA

A partial agreement has been reached on Wednesday 29 June in the EU Council on the new EU anti-money laundering (AML) authority (AMLA). The agreement covers the whole proposal, except the location of the seat of the Authority which will be decided later and is expected to be a difficult issue as several Member States have already expressed their wish to host the AMLA. The main changes introduced by Member States concern the conditions that must be met for entities from the financial sector (including crypto asset service providers) to be supervised by the AMLA. Concerning the non-financial sector, the Council’s text weakens the powers of the AMLA regarding national supervisory authorities, including self-regulatory bodies. The final compromise proposal only allows the EU authority to present a recommendation if a national supervisory authority does not comply with EU law, without the possibility for the Commission to adopt a binding formal opinion or for the AMLA to make sure the national authority complies with this formal opinion, as initially foreseen in the Commission’s proposal. ETAF welcomes this development very much as it is more in line with the coordination and advisory function initially foreseen for AMLA on the non-financial sector. The European Parliament still has to adopt its position on this file after the summer break before the interinstitutional negotiations can start.

European Commission Conference on mega-trends in taxation

The European Commission organized on Tuesday 28 June a conference on mega-trends and their impact on taxation. On this occasion, EU Commissioner for taxation, Paolo Gentiloni, explained that the recent challenges with the COVID-19 pandemic and Russia’s war are forcing us to reconsider which taxes we want to have revenues from. As our population is ageing, it raises questions on our current tax mix which relies a lot on labour taxation, he added. This subject was discussed in-depth during a panel discussion, which tackled questions such as how to tax pensions and could inheritance taxes help. This event was the first of a series of events the Commission will organize until its high-level Tax Symposium on “the EU tax mix on the road to 2050” on 28 November 2022, which will fuel its policies priorities for the future. The conference can be rewatched online here.

MEPs ask for a coordinated approach on the taxation of crypto assets

MEPs of the ECON committee of the European Parliament adopted on Thursday 30 June a non-binding resolution calling for a better use of blockchain to fight tax evasion and for Member States to coordinate more on the taxation of crypto assets. The resolution, drafted by Lídia Pereira (EPP, Portugal), says that crypto assets must be subject to fair, transparent and effective taxation. It calls on the Commission to assess the ways in which the different Member States tax crypto assets and identify the different national policies regarding the fight against tax evasion in the field of crypto assets. The resolution then also calls for a clear and broadly accepted definition of crypto assets and for a coherent definition of what would constitute a taxable event. Moreover, the resolution encourages national administrations to use all available instruments to facilitate efficient tax collection and it identifies blockchain as one of these instruments. According to MEPs, the potential of blockchain is clear: it could offer a new way to automate tax collection, limit corruption and better identify ownership of tangible and intangible assets allowing for better taxing mobile taxpayers.

European Commission waives VAT on the import of life-saving goods for Ukrainians

The European Commission adopted on Friday 1 July a decision enabling Member States to temporarily waive customs duties and VAT on the importation from third countries of food, blankets, tents, electric generators and other life-saving equipment destined for Ukrainians affected by the war. This measure, which was requested by Member States, will apply retroactively from 24 February 2022 and will be in place until 31 December 2022. The duty and VAT waiver applies to goods imported by state organisations (public bodies and bodies governed by public law including hospitals, governmental organisations, regional governments, communes/towns, etc) and charitable or philanthropic organisations approved by the competent authorities of the Member States.

European Commission to evaluate the VAT administrative cooperation framework

The Commission is preparing for the fourth quarter 2022 an evaluation of the application of the Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of value added tax (VAT) between 2014 and 2022. In a roadmap published on Monday 27 June, the Commission explained that it will in particular assess its: - performance in terms of effectively achieving its objectives; - efficiency in terms of cost and benefits; - relevance to the current needs; - coherence within the Regulation and with other EU initiatives; and - EU added value. The evaluation will cover all cooperation tools and will focus predominantly on the provisions introduced by the 2018 amendment of the Regulation, it added. The evaluation will also look at how the rules set out in the VAT e-commerce package have been applied since they entered into force on 1 July 2021.

European Commission annual report on taxation 2022

The European Commission published on Tuesday 28 June its annual report on taxation 2022, which highlights that EU Member States’ tax revenue has decreased for the first time since the 2009 financial crisis, while public expenditure jumped from 46.5% in 2019 to 53% in 2020 due to the COVID-19 crisis. The annual report has been published together with an accompanying report on the most striking taxation trends in Member States over the last years. The latter shows that labour taxes were more resilient than other tax bases in 2020. Labour on taxes were 21.5% in 2020, the highest point in the time series and 0.8 pp more than in 2019. Consumption taxes were at 10.8% of GDP in 2020 and revenue from taxes on capital were at 7.9% of GDP, according to the report. Revenue from environmental taxes represented 2.2 % of GDP in 2020, down from 2.4 % in 2019. The various restrictions to mobility imposed in 2020 due to the pandemic could have been behind this change as energy consumption decreased in the EU in 2020, according to the Commission.

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