European Parliament approves von der Leyen II Commission
Following a debate with the President of the European Commission Ursula von der Leyen on her new team and programme, MEPs elected the College of Commissioners by a narrow majority of 370 votes for, 282 against and 36 abstentions. The debate with MEPs revealed a divided Parliament. The EPP was strongly supportive of the Commission, as were most S&D speakers, along with MEPs from Renew Europe, parts of the ECR, and some members of the Greens/EFA. Conversely, the PfE and the Left signaled their intention to vote against the Commission. During the discussion, significant concerns were voiced by the S&D, Renew Europe, and the Greens about the EPP potentially distancing itself from what they described as a “pro-European majority”. Many members cautioned the EPP, warning that collaborating with parties further to their right could have serious negative implications for the European project. In her introductory speech, Ms von der Leyen announced that the first major initiative of the new Commission will be a Competitiveness Compass, based on three Pillars: - closing the innovation gap; - decarbonisation; - economic security. She also pledged to make things easier for companies and said that one of the first steps in the new mandate will be a new omnibus legislation looking at different sectors of the Single Market. Following the European Parliament’s approval, the European Council appointed the new European Commission, which is now expected to take up its duties on 1 December 2024.
UN Committee approves framework for tax negotiations
The UN Economic and Social Committee adopted on Wednesday 27 November a resolution approving the terms of reference of a UN Tax Convention, already agreed in August by the Ad hoc committee specifically formed for their negotiation. The resolution was reportedly voted by 125 jurisdictions and rejected by 9 (including Argentina, Australia, Canada, the United Kingdom, the United States) with 46 jurisdictions abstaining (including all EU countries). The text establishes an intergovernmental negotiating committee for the purpose of drafting the UN Framework Convention on International Tax Cooperation and two early protocols simultaneously. This intergovernmental negotiating committee should meet in 2025, 2026 and 2027 for at least three substantive sessions per year, in New York or other United Nations locations, with the view of completing the work and submit a final text at the 82nd session of the UN General Assembly. The first organizational session will take place in New York from 3 to 6 February 2025 to address and conclude organizational matters, including decision-making rules of the committee. The EU abstained in the vote as a “gesture” of its “continued constructive posture and our strong belief in the utility of international cooperation on tax and related instruments” but has serious outstanding reservations, it justified in its explanation of vote. “If the upcoming process in the negotiating committee’s organisational session is not conducted in a fairer, transparent and more inclusive way, and if this process does not safeguard a broad consensus-based decision-making process, ensuring that we work towards a convention that is effective (i.e. implemented by the most parties), EU Member States may have to choose to disengage from these negotiations. In particular, the imposition of simple majority decision-making for the committee would be unacceptable and may leave EU Member States unable to participate in the future convention”, the statement reads.
UNSHELL talks resume under new approach
The talks on the 2021 UNSHELL Directive laying down rules to combat the misuse of shell entities for tax purposes have resumed under the Hungarian Presidency of the Council of the EU. Some drafting suggestions covering the main elements of the proposal, based on the new approach the European Commission proposed in June to unlock the negotiations, have reportedly been discussed on Tuesday 26 November at the Working Party on Tax Questions. The proposal would now establish high-risk hallmarks under which entities should self-assess, like in DAC6. It no longer sets out an economic substance test for determining whether an entity is a shell or not, but rather hallmarks that would trigger entities meeting them to report to their tax authority every year in their tax return which hallmarks they meet. The information would then be automatically exchanged by the Member State where the reporting entity is resident for tax purposes to the Member State concerned, so the one that may have incurred loss of tax, and this Member States would be required to use this information, in order to investigate structure involving high-risk entities. The new approach does not require anymore Member States to apply common tax consequences against shell entities or identified tax abusive schemes. The Hungarian Presidency is now working towards translating this new approach into a workable legal text, which will still have to be discussed and approved by all Member States.
Electronic VAT exemption certificate proposal to be agreed at December Ecofin
Negotiations are also progressing on the proposal for an electronic VAT exemption certificate for certain transactions treated as exports under the VAT Directive, replacing the current paper form to be signed by hand. Member States will be requested to use an electronic certificate to confirm that a transaction qualifies for an exemption under article 151 (1) (e.g. supply of goods or services under diplomatic and consular arrangements; supply of goods or services to recognised international bodies; supply of goods or services to another Member State intended for the armed forces, …). The eligible body or individual to whom the exempt supply of goods or services is made, will issue the certificate and, together with the host Member State, will sign it by electronic means. The proposal is reportedly expected to be discussed one last time on Wednesday 4 December by EU ambassadors and adopted without discussion at the next Ecofin meeting on 10 December. The main changes made by Member States compared with the initial proposal presented by the European Commission in July concern the deadlines. The new rules would now enter into force by 30 June 2031 (instead of 2026) and Member States would be allowed to continue to use the paper version of the exemption certificate for a transitional period until 30 June 2032 (instead of 2030). The draft text of the Council is available here.
ECA special report on combatting harmful tax regimes and corporate tax avoidance
The European Court of Auditors (ECA) published on Thursday 28 November a special report assessing the EU framework in place and making recommendations to better combat harmful tax regimes and corporate tax avoidance in the EU. The audit focused on the design and the implementation of three EU Directives between 2019 and 2023, namely the Anti-Tax Avoidance Directive, the 6th amendment to the Directive on administrative cooperation in the field of taxation (DAC6) and the Directive on Tax Dispute Resolution Mechanisms, as well as the EU Code of Conduct on Business Taxation. The activity of the European Commission DG TAXUD and five Member States (Ireland, Cyprus, Luxembourg, Malta and the Netherlands) were particularly scrutinised. The main conclusion from auditors is that the established EU framework serves as a necessary first line of defence to support the fight against harmful tax regimes and corporate tax avoidance within the limited scope of the EU’s competences. However, there are shortcomings in the way EU measures were drawn up and implemented, and there is no appropriate monitoring system for assessing their effectiveness, they found. On DAC6, auditors found that the five Member States visited did exchange tax information on potentially harmful cross-border arrangements but carried out few data quality checks and make little use of the information received. They also observed different interpretations of the legislation between the five countries, especially with regard to the application of the main benefit test and the hallmarks on whose basis a cross-border arrangement is considered reportable, as well as some uncertainty with regard to the triggering date of the reporting and the disclosure of secret information, despite the recent EU Court judgment (Case C-623/22). Auditors therefore recommend the Commission to: - clarify the EU legislative framework; - improve the quality of DAC 6 reports; - ensure that the impact of penalties is adequate; - enhance its support to the Code of Conduct Group; - monitor the results and impact of the fight against harmful tax regimes and corporate tax avoidance.
2024 OECD Global Forum annual report highlights progress on CARF implementation
The 2024 annual report of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, published on Tuesday 26 November, highlighted progress on the implementation of the recently developed Crypto-Asset Reporting Framework (CARF). 61 jurisdictions have already committed to implement the CARF to start exchanges by 2027 or 2028 at the latest, while 48 jurisdictions are expected to already begin to implement their commitment by signing the CARF Multilateral Competent Authority Agreement imminently, the Global forum said in a release. In November 2024, the Plenary agreed to expand the Global Forum’s mandate to pursue the global implementation of the Crypto-Asset Reporting Framework (CARF) by relevant jurisdictions. Global Forum members have agreed to implement the amendments to the Common Reporting Standard (CRS) on AEOI in relation to financial accounts, in time to commence exchanges under the amended CRS by 2027, with appropriate transitional arrangements where needed. These amendments will widen the scope of the CRS exchanges and improve its effectiveness and usability.
Italy’s Bruna Szego selected as Chair of new AMLA
Ms Bruna Szego (Italy) was chosen as Chair of the European Union’s new Anti-Money Laundering Authority (AMLA). MEPs made this choice after a three-hour hearing on Monday 25 November before the LIBE and ECON committees of the European Parliament. Other candidates reportedly were Marcus Pleyer (Germany) and Jan Reinder De Carpentier (the Netherlands). Since 2022, Ms Szego has served as Head of Unit at the Banca d’Italia, where she directly oversaw initiatives related to anti-money laundering regulation, supervision, and countering terrorist financing. Her extensive experience also includes serving as an alternate member of the Single Resolution Board within the Single Resolution Mechanism and as a member of the Resolution Committee at the European Banking Authority (EBA). Her appointment still needs to be officially confirmed by the Council of the EU. The AMLA will be based in Frankfurt and begin its operations mid-2025.
FISC Subcommittee meets on 3 December
The next meeting of the FISC Subcommittee of the European Parliament will take place on Tuesday 3 December, with a busy agenda. From 14:30 to 15:30, FISC Members will exchange views with Ms Mariá José Garde, Chair of the Code of Conduct Group on Business Taxation. The discussion should focus on the implementation of the newly expanded scope of the Code of Conduct, which now goes beyond preferential tax measures to encompass broader tax features of general application. It will also evaluate the effectiveness of the Code of Conduct as a tool in combating tax evasion and avoidance, reflecting on whether the criteria used by the Code of Conduct Group should be made stricter to address evolving challenges in global tax governance. From 15:30 to 16:45, the Subcommittee will host a public hearing on 'National Tax Measures to Support People with Disabilities in the EU', organized in the context of the European Parliament’s Disability Rights Week 2024. Invited experts include Mr Javer Güemes Pedraza (Grupo Social ONCE), Christopher Prinz (OECD), and Daniela Bas (UN) (tbc). Together, they will discuss the diversity and effectiveness of national tax incentives designed to support individuals with disabilities across EU Member States. Additionally, the hearing will consider whether EU-level tax policies can contribute to better support for this group. Finally, from 16:45 to 18:00, MEPs will hear from Ms Ildikó Gáll-Pelcz, Member of the European Court of Auditors, a presentation about her special report 27/2024 on 'Combatting Harmful Tax Regimes and Corporate Tax Avoidance'.