110 countries adopt the terms of reference for a UN Tax Framework Convention
The second substantive session of the Ad Hoc Committee to draft terms of reference for a UN Framework Convention on international tax cooperation took place from 29 July to 16 August 2024. On Friday 16 August, 110 countries adopted the terms of reference while 44 countries – including all EU countries - abstained from the vote and eight countries (Australia, Canada, Israel, Japan, New Zealand, Republic of Korea, United Kingdom and the United States) voted against. The terms of reference include commitments to the fair allocation of taxing rights on multinational enterprises, the prevention of tax evasion and avoidance, sustainable development, tax transparency and information exchange, and the prevention and resolution of tax disputes. They also allow for two separate early protocols to the convention to be negotiated simultaneously; one on the taxation of income derived from cross-border services in a digitalized economy and the second one to be chosen from a list of priority areas for countries. During the negotiations, contention reportedly emerged around the timeline and negotiation of early protocols, the inclusion of a commitment to human rights, whether to include a decision-making structure and on how to incorporate international tax work done in other fora such as the OECD. In a statement published after the vote, the EU explained its abstention by saying that it regrets that the final draft terms of reference text does not adequately reflect its key points of concerns, including on the safeguards for taxpayers and on protocols. The terms of reference will be sent to the UN General Assembly, which will hold a vote during its 79th session that begins in September. If adopted, the Assembly would have the convention and two protocols drafted by a Member State-led negotiating committee, which would meet annually for the next three years. The negotiating committee would then submit a final text to the General Assembly for its consideration in the first quarter of the 82nd session and all 193 UN Member States could vote on a finalised UN global tax treaty in 2027. The UN treaty would need to be adopted by the General Assembly, after which it would be opened for signature and ratification to all Member States.
European Commission evaluates the ATAD
The European Commission launched on Wednesday 31 July its evaluation of the Anti-Tax Avoidance Directive (ATAD), laying down rules against tax avoidance practices that directly affect the functioning of the internal market, by publishing its call for evidence. The evaluation will cover ATAD1 and ATAD2 for the period from 1 January 2020, which is the first date on which the measures were implemented, until the date of completion of the evaluation. The European Commission wants to know to what extent the Directive’s objectives have been achieved and whether the provisions need to be amended in the future, in particular when considering the introduction of Pillar Two rules. Interested stakeholders have until 11 September 2024 to send their feedback to the European Commission. A targeted consultation and a set of interviews with Member State tax authorities, companies and tax advisers will be undertaken by an external contractor at a later stage. The evaluation is expected to be published in Q3 2025.
European Commission proposes common template and electronic reporting formats for the CbC reports
The European Commission released on Thursday 1 August a draft implementing regulation introducing a common template and electronic reporting formats for the application of Directive 2013/34/EU as regards the information to be presented in reports on income tax information (so-called CbCR Directive). The Directive requires undertakings to draw up, publish and make accessible a report on income tax information as regards the latter of the two consecutive financial years in each of which the consolidated revenue on their balance sheet date exceeded a total of 750 000 000 €. The proposed implementing regulation aims at ensuring the CbCR reports are comparable and machine-readable. In particular, it requests obliged entities to ensure that the visual presentation and content of the report on income tax information comply with the specifications provided for in Annex I. The implement regulation would apply to reports on income tax information for the financial years starting on, or after 1 January 2025. The draft was submitted to public consultation until 29 August 2024.
VAT preliminary ruling officially conferred to the EU General Court
A significant amendment to the Statute of the Court of Justice of the European Union entered into force on Sunday 1 September. The amendment provides for a transfer, applicable from 1 October 2024, from the Court of Justice to the General Court of part of the jurisdiction to give preliminary rulings. The transfer concerns six specific areas: the common system of VAT; excise duties; the Customs Code; the tariff classification of goods; compensation and assistance to passengers in the event of denied boarding or of delay or cancellation of transport services; and the system for greenhouse gas emission allowance trading. The amendment to the Statute also provides for an extension, from 1 September 2024, of the mechanism for the determination of whether an appeal is allowed to proceed. The aim of this reform is to reduce the workload of the Court of Justice in the sphere of preliminary rulings and to allow it to continue to fulfil, within a reasonable period, its mission of ensuring that in the application and interpretation of the Treaties the law is observed.
CJEU validates several DAC6 provisions
In a judgment released on 29 July 2024, the Court of Justice of the European Union (CJEU) held that the fact that Directive 2011/16, as amended by Directive 2018/822 (DAC6), does not limit the reporting obligation solely to the area of corporate taxes does not affect the validity of that directive in the light of the principles of equal treatment and non-discrimination, and of Articles 20 and 21 of the Charter of Fundamental Rights. Furthermore, it held that the degree of precision and clarity of the terminology used in the provisions of the directive submitted for its consideration does not call into question the validity of that directive in the light of the principles of legal certainty and legality in criminal matters, and it similarly held that the interference with the private life of the intermediary and the relevant taxpayer entailed by the reporting obligation is defined in a sufficiently precise manner in view of the information which that reporting must contain. The Court also explained that the judgment of 8 December 2022 (Orde van Vlaamse Balies and Others) - in which it held that the obligation imposed on a lawyer, who is exempt from the reporting obligation as a result of legal professional privilege, to notify other intermediaries involved in the tax arrangement of their own reporting breached that legal professional privilege - applies only in respect of lawyers within the meaning of the directive to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained and not in respect of other professionals who may be authorised to ensure legal representation. Finally, the Court held that the reporting obligation imposed on intermediaries who are not entitled to a waiver from that obligation as a result of the legal professional privilege by which they are bound and, in default, on the relevant taxpayer constitutes a proportionate and justified interference in the right to respect for private life, understood as the right of everyone to organise his or her private life. The judgement is unfavourable for many tax professionals in the ETAF Member States as the CJEU refused the possibility to substitute the obligation to notify by the obligation to report for tax professionals who are not authorised to represent their clients before courts.
ETAF participates in the DAC evaluation
On Monday 29 July, ETAF submitted its answer to the European Commission’s public consultation to evaluate the effectiveness, efficiency and continued relevance of the Directive on administrative cooperation in tax matters (DAC) and its successive amendments (from DAC2 to DAC6). In principle, ETAF views the DAC as an effective tool for enhancing cooperation among tax authorities in the European Union and combating tax evasion and money laundering. While we acknowledge that DAC Directives have significantly increased information exchange, we must also recognize that they have resulted in a substantial volume of data that tax administrations must now manage. It is questionable whether all the information requested by the successive DACs are really in use and of use for the tax authorities. As an immediate simplification tool, ETAF members would welcome a consolidation of the initial DAC and its subsequent amendments into a single text. In view of the disproportionate costs/benefits combined with the legal uncertainties and the overlaps with more recent EU legislations, ETAF advises the European Commission to submit a proposal that would completely remove the reporting obligation of DAC6 from the legal text. In order to relieve companies of the reporting obligations of the Minimum Taxation Directive in the long term, the current temporary CbCR Safe Harbour, should be established as a permanent measure and the Public CbCR requirements should be adapted and standardized accordingly. We call on the European Commission to draw all the lessons from this evaluation and not to shy away from taking radical decisions, in order to achieve the announced goal of reducing EU reporting obligations. We are looking forward to the final results of the evaluation, expected to be published in Q3 2024, and remain available to constructively engage with the European Commission on this matter.
OECD announces new tax staff appointments
In a LinkedIn post published on Friday 5 August, Manal Corwin, the Director of the OECD’s Centre for Tax Policy and Administration (CTPA) announced that Ben Dickinson has been appointed acting deputy director of the CTPA, replacing David Bradbury, who left his post at the end of June. Mr Dickinson served as head of the CTPA’s global relations and development division since 2015 and prior to that, served as Tax and Development Manager responsible for the establishment of the OECD’s fiscal programme for developing countries (2010-2015) and was Head of the work on Governance, Conflict and Fragile States (2005-2010). John Peterson was appointed head of the cross-border and international tax division, while Kurt Van Dender was appointed head of the tax policy and statistics division. Both had previously served as acting heads of their respective CTPA divisions. Claudia Vargas will begin her new role as head of the CTPA’s tax administration and VAT division (TAV) in September, leaving her position as the head of the Colombian National Tax and Customs’ International Office. Sandra Knaepen has been appointed Deputy Division Head of TAV as of September, and will continue to co-lead the Tax Certainty Unit alongside her new role.
