Weekly Tax News - Monday 04 March 2024

March 4, 2024

The Finance Ministers of the G20 countries discussed the issue of taxing the super-rich at a meeting in São Paulo on Thursday 29 February, at the request of the Brazilian G20 Presidency. “Despite recent progress, it is undeniable that the world’s billionaires continue to evade our tax systems through a variety of strategies”, deplored the Brazilian minister, Fernando Haddad, in his opening speech. He referred to the European Tax Observatory’s latest report on tax evasion, which shows that billionaires pay an effective tax rate equivalent to 0 to 0.5% of their wealth. The minister mentioned Brazil's experience on the topic, noting that the tax reform in the country was successful, and each nation can do much for itself domestically. "However, effective solutions for the super-rich to make their fair tax contribution depend on international cooperation", he pointed out. To push discussions forward, Mr Haddad announced that the Brazilian G20 Presidency has commissioned economist Gabriel Zucman, Director of the EU Tax Observatory, to study the feasibility of a minimum tax on the super-rich and present proposals to the group. Zucman had addressed delegates during the meeting, urging them to use tax policy to tackle global wealth inequality. In his tax report to G20 Finance Ministers, OECD Secretary-General Mathias Cormann pointed out the OECD work on the taxation of capital income and capital gains. “Work may also be needed to identify the specific challenges involved in taxing high-net worth individuals, particularly in a globalised economy”, the report says.

EP adopts its opinion on the FASTER proposal

On Wednesday 28 February, the European Parliament adopted its opinion on the proposal for a Directive on Faster and Safer Relief of Excess Withholding Taxes (FASTER) in plenary. The opinion, spearheaded by MEP Herbert Dorfmann (EPP, Italian), contains several changes to the original Commission’s proposal on the use of the electronic tax residence certificate (eTRC). Moreover, they added that Member States shall process a refund request within 25 calendar days unless the Member State has reasonable doubts on the legitimacy of the refund request and that a refund request may be rejected if any verification procedure or tax audit is initiated. MEPs also want to strengthen controls and the exchange of information. They suggest that the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) regularly monitor the risk of ‘cum-cum’ and ‘cum-ex’ tax optimisation practices in the EU. A summary of the proposed changes can be found here and the adopted is available here.

Update to the Commentary on Article 26 of OECD Model Convention

On Tuesday 27 February, the OECD announced that its Council approved on 19 February 2024 an update to the commentary on Article 26 (Exchange of information) of the OECD Model Convention on Income and Capital, which serves as basis for negotiation and application of bilateral tax treaties between countries. The update clarifies that information received through administrative assistance can be used for tax matters concerning persons other than those in respect of which the information was initially received, the OECD explained in a release. It also provides interpretative guidance on confidentiality, in particular regarding the access of taxpayers to information exchanged when such information has a bearing on their tax situation and regarding reflective non-taxpayer specific information, including statistical data, about or generated on the basis of exchanged information. The updated text is available here.

Experts discuss international perspectives on tackling corruption

On 26 February 2024, as part of the 25th Anniversary of the OECD Anti-Bribery Convention, IFAC (The International Federation of Accountants), ICAEW (the Institute of Chartered Accountants in England and Wales) and IBA (The International Bar Association), joined the OECD, for an online event on the need to foster cultures of integrity and active enforcement to tackle the risk of corruption. Laura Hough (ICAEW), MEP Ramona Strugariu (Renew Europe, Romania), Scott Hanson (IFAC) , France Chain (OECD), Jeroen Blomsma (European Commission), Scarlet Wannenwetsch (Basel Institute on Governance) and Sara Carnegie (IBA) discussed the various periods of economic turmoil recently experienced, which may create new opportunities for those seeking to corrupt public and private activities. It emerged from the discussion that a joint approach by all players, public and private, is needed to effectively prevent and combat the insidious nature of corruption and illicit financing. In this respect, renewed regulatory efforts to combat corruption are visible in various jurisdictions, including the EU, where the anti-corruption package currently under negotiation seeks to strengthen the existing legal framework, based on the United Nations Convention against Corruption. Finally, the speakers took the time to answer a number of questions, such as the future strategies to be put in place, the tools available, the subject of cross-border collaboration, the relationship between the private sector and international organisations.

More than 330 EPPO’s investigations into serious cross-border VAT fraud in 2023

The European Public Prosecutor’s Office (EPPO) published on Friday 1 March its 2023 annual report showing that at the end of 2023, it had a total of 1 927 active investigations, with an overall estimated damage to the EU budget of €19.2 billion – 59% of which (€11.5 billion, corresponding to 339 investigations) was linked to serious cross-border VAT fraud. According to the EPPO, new sources of EU funding are also being targeted by fraudsters, the EPPO found. By the end of 2023, the EPPO had 206 active investigations relating to the first NextGenerationEU funding projects, with an estimated damage of over €1.8 billion. This represents approximately 15% of all cases of expenditure fraud involving EU funds handled by the EPPO during the reporting period, but in terms of estimated damage, it corresponds to almost 25%, it said.  In 2023, the EPPO received and processed 4 187 crime reports, which is 26% more than in 2022. This increase has been driven mainly by reports from private parties (2 494 – 29% more than in 2022), as well as from national authorities (1 562 – 24% more than in 2022), it explained. According to the EPPO, this evolution proves that the level of detection of fraud affecting the financial interests of the EU in the participating Member States has further improved. In 2023, with 139 indictments filed (over 50% more than in 2022), the EPPO started to bring more perpetrators of EU fraud to judgment in front of national courts. 

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