Weekly Tax News - Monday 1 July 2024

July 1, 2024

During their meeting in Brussels on Thursday 27 June, EU leaders confirmed the agreement found a few days before by negotiators from the Christian Democrat (EPP), Social Democrat (S&D) and centre-right (Renew Europe) political families on the three top European posts to be filled at the start of the 2024-2029 institutional cycle. EU leaders consequently nominated: - German Christian Democrat Ursula von der Leyen as President of the European Commission for a further five years; - Portuguese Socialist António Costa as President of the European Council for two and a half years; - Estonian Liberal Kaja Kallas as High Representative of the Union for Foreign Affairs and Security Policy for five years. However, the decision was not unanimous. The Italian Prime Minister, Giorgia Meloni, reportedly voted against the appointments of Mr Costa and Ms Kallas and abstained on that of Ms von der Leyen. Hungarian Prime Minister Viktor Orbán would also have opposed the nomination of Ms von der Leyen, abstained on that of Mrs Kallas and approved that of Mr Costa. Ms von der Leyen will have to be elected by an absolute majority of MEPs, i.e. 361 votes. According to the European Parliament’s latest projections, the EPP, S&D and Renew Europe groups have a total of almost 400 votes. Her election should take place on Thursday 18 July during the European Parliament’s constituent session, when MEPs are also expected to re-elect Maltese Christian Democrat Roberta Metsola as President of the European Parliament.

EU leaders also adopted, during their meeting on Thursday 27 June, the Strategic Agenda 2024-2029, which sets out the political priorities to be pursued that will enable the EU to meet the challenges it will face in the future. It is based on three pillars: - a free and democratic Europe; - a strong and secure Europe; and - a prosperous and competitive Europe. The text notably sets a direction to prepare for a bigger and stronger Union. The European Union will undertake the necessary internal reforms to ensure that EU policies are fit for the future and financed in a sustainable manner and that the EU institutions continue to function and act effectively, it says. Charles Michel, President of the European Council, led the process by working closely with leaders since the informal European Council meeting in Granada on 6 October 2023. In November 2023 and April 2024, Mr Michel organised further consultation rounds with the leaders which led to the current adopted text.

Political groups in the European Parliament get formed

Political groups in the future hemicycle continue being formed in view of the European Parliament’s constitutive session on 16 July. They reportedly have given themselves until Thursday 4 July to form, after which they will begin negotiations on the distribution of posts in the parliamentary committees according to their size. According to the European Parliament’s latest projections, the European Conservatives and Reformists (ECR) group has grown to 83 members, overtaking the liberal Renew Europe group (75 seats) to become the third largest force in the European Parliament. Renew Europe indicated it still expects to grow in the coming days. The EPP re-elected German MEP Manfred Weber as Chairman and S&D re-elected Spanish MEP Iratxe García Pérez as its President. Centre-right and liberal Renew Europe group reappointed French MEP Valérie Hayer and the Greens/European Free Alliance (EFA) group re-elected Dutch MEP Bas Eickhout and German MEP Terry Reintke as their Co-Presidents. The ECR reportedly postponed the election of its chairman until 3 July. A third far-right group, led by AfD MEPs and named The Sovereignists, would also reportedly try to form itself.

Hungarian Presidency of the Council of the EU kicks off

The Hungarian Presidency of the Council of the EU starts today for six months and a number of tax issues will be on the table, for discussion at least. First, Hungary will have the delicate task of convincing Estonia to lift its veto on the VAT in the digital age (ViDA) package. Hungary will also resume discussions on the UNSHELL Directive to fight the misuse of shell entities, based on the new approach presented beginning of June. According to a draft agenda of Ecofin Council meetings under its Presidency published on Monday 24 June, Hungary only plans to hold a state of play discussion to get guidance for further work on the Business in Europe: Framework for Income Taxation (BEFIT) proposal, the Head Office Tax system (HOT) proposal and the Transfer Pricing Directive proposal at the November Ecofin Council. The Hungarian Presidency also foresees to work on the Directive on exchange of information to ensure global minimum level of taxation for multinational groups (DAC 9), when the proposal will be issued. Finally, it should present a progress report on the revision of the Energy Taxation Directive at the Ecofin in December.

On Tuesday 25 June, the Director of the EU Tax Observatory, Economist Gabriel Zucman, published his blueprint for a coordinated minimum effective taxation standard for ultra-high-net-worth individuals, commissioned by the Brazilian Presidency of the G20.The report presents a proposal for an internationally coordinated standard ensuring an effective taxation of ultra-high-net-worth individuals. In the baseline proposal, individuals with more than $1 billion in wealth would be required to pay a minimum amount of tax annually, equal to 2% of their wealth. This standard could be flexibly implemented by participating countries through a variety of domestic instruments, including a presumptive income tax, an income tax on a broad notion of income, or a wealth tax, the report says. Mr Zucman estimates that a minimum tax on billionaires equal to 2% of their wealth would raise $200-$250 billion per year globally from about 3,000 taxpayers; extending the tax to centimillionaires would add $100-$140 billion. According to the author, such a standard could be enforced successfully even if all countries did not adopt it, by strengthening current exit taxes and implementing “tax collector of last resort” mechanisms as in the coordinated minimum tax on multinational companies.

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