Weekly Tax News - Monday 15 January 2024

January 15, 2024

On Tuesday 9 January 2023, the OECD published a new working paper assessing the impact of the global minimum tax on the taxation of multinational enterprises (MNEs) profits. The new analysis is based on improved data and takes into account the final design of the GLOBE rules. OECD researchers estimated that revenue gains from the global minimum tax would be between $155 billion and $192 billion annually, which would represent between 6.5 and 8.1% of global corporate income tax revenues. Two-thirds of those gains are estimated to be directly attributable to the global minimum tax, while decreased profit shifting would account for the remaining one-third, according to the paper. The new rules are also expected to decrease the amount of global low-taxed profits by around 80%; from 36% of all profit globally to about 7%.  The analysis highlights that the implementation of Qualified Domestic Minimum Top-up Taxes (QDMTT) can be an important tool for jurisdictions to collect additional taxes on low-taxed profits originating in their own jurisdiction.

UN experts warn about potential adverse human rights implications of the OECD tax reform

A group of independent human rights experts mandated by the United Nations Human Rights Council sent in December a letter to the OECD’s Secretary General, Mathias Cormann, to raise concerns about potential adverse human rights implications of the OECD tax reform. “We are concerned that the Outcome Statement (…) adopted on 11 July 2023, may further reduce the tax payable to Global South countries and erode their taxing rights”, they write. The Two-Pillar Solution could have a discriminatory impact on the grounds of gender, ethnicity and race and could prejudice the predominantly non-white nations of the Global South, they further say. While affirming their support to a UN Framework Convention on International Tax Cooperation, they also encourage all OECD states to constructively engage in good faith in international cooperation and assistance in this comprehensive legal instrument.

Belgian Presidency determined to reach an agreement on the rest of the AML package on 17 January

The Belgian Presidency of the Council of the EU aims to reach a political agreement with the European Parliament on the sixth AML Directive and the AML Regulation at the negotiation meetings on Tuesday 16 and Wednesday 17 January. In a document dated 6 January leaked in the press, the Presidency explains that reaching an agreement on 17  is the best way to allow for the adoption of the legislative texts in this legislature without recourse to the corrigendum procedure. It has therefore developed a series of proposals to find an agreement on the remaining contentious points. Regarding the AML Regulation, it notably suggests setting the standard threshold for identifying beneficial owners through ownership at 25% of shares or voting rights in order to avoid an excessive administrative burden. It also proposes to follow the methodology advocated by Parliament of calculating the threshold using an every-step-in-the-chain-method. On the sixth AML Directive, the powers of beneficial ownership registers are one of the sticking points in the negotiations. The Presidency is proposing to show flexibility, by granting registries the power to carry out inspections on the premises of legal entities, although these inspections would be reserved for extreme cases. It also suggests a more flexible requirement than that sought by Parliament, i.e. that Member States provide registries with sufficient means to ensure that the information they hold is adequate, accurate and up-to-date, and to notify the European Commission of these means.

EU Finance Ministers meet in Brussels on 16 January

EU Finance Ministers are due to meet in Brussels on Tuesday 16 January 2024. On this occasion, the Belgian Presidency will present its work programme for the first semester of the year in the field of economic and financial affairs. The Ecofin Council will also seek to approve conclusions on the alert mechanism report 2024 and the annual sustainable growth survey 2024, as well as the 2024 recommendation on the economic policy of the euro area. The Council will then take note of the state of play of the economic and financial impact of Russia’s aggression against Ukraine. Ministers will also provide guidance for further work in view of the G20 meeting of Finance ministers and central bank governors on 26-29 February 2024 in São Paulo, Brazil. No tax files are expected to be discussed at this Ecofin meeting.

Upcoming FISC hearing on the taxation of capital gains in the EU

The sub-committee on tax matters (FISC) of the European Parliament will organise a public hearing on the capital gains taxation in the EU on Tuesday 23 January from 15:00 to 16:30, with the aim of examining potential measures that could be taken at EU level. Sean Bray, Director of European Policy at the Tax Foundation, Chiara Putaturo, Deputy Head of Oxfam's EU Office and EU Inequality and Tax Policy Advisor and Sarah Perret, Head of the Personal and Property Taxes Unit, Tax Policy and Statistics Division of the OECD’s Centre for tax Policy and Administration will present their view on this topic. The hearing will particularly explore the possibility of assessing whether some capital tax regimes are deemed harmful within the scope of the Code of Conduct Group on Business Taxation. It will also address the idea of expanding the scope of the automatic exchange of information to encompass capital gains associated with immovable property and financial assets.

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