EU Finance Ministers to discuss decluttering on 21 January
EU Finance Ministers will hold a policy debate on ensuring a globally competitive business environment in Europe through simplification, decluttering and regulatory burden reduction when they meet in Brussels on 21 January. The Ministers will reportedly be asked how they envisage the process of identifying avenues for simplification, decluttering, and the reduction of administrative burdens. They will also be invited to formulate concrete suggestions regarding economic and financial affairs. In particular, Ministers will be invited to provide input to the Commission on its planned proposal for an ‘Omnibus Regulation’ that aims at streamlining and reducing regulatory burden on businesses. Germany and the Netherlands already detailed their views on what tax decluttering should look like in a joint informal position, unveiled in the press. The two countries would be of the opinion that the Pillar Two Directive will secure a broad level of protection against harmful tax competition and aggressive tax planning and that consequently some EU anti-abuse rules should be simplified or abolished, mainly provisions of the anti-tax-avoidance directive (ATAD). Permanent simplification beyond the transition phase is also needed for Pillar Two, the two countries argue.
MEPs and tax experts discuss how to tackle gender inequality in tax systems
On Monday 13 January, the FISC Subcommittee held a public hearing on the impact of taxation on gender equality in the European Union, in the context of the European Parliament’s Gender Equality Week 2024. The hearing looked at how tax measures in EU Member States affect gender equality, either in a positive or a negative way and what tax policies can currently be seen as obstacles to promoting gender equality and look at how these obstacles can be addressed. The hearing also examined tax measures that can serve as a best practice or which could be considered to advance gender equality and whether EU-level tax policies can contribute to achieving this aim. Tax Professor Åsa Gunnarsson from Umeå University (Sweden) noted that redistributive tax policies often prioritize economic growth over progressivity, indirectly reinforcing gender inequality. Ms Manal Corwin, Director of the Centre for Tax Policy and Administration of the OECD, emphasized that while many explicit tax provisions harming gender equality have been removed, systemic issues like higher average tax rates for secondary earners — most often women — discourage their labour force participation. Ms Laura Linda Sabbadini, former Director of the Italian National Statistics Institute and former Chair of Women 20, stressed the importance of public service investments, such as care services and paternity leave, over tax reforms alone to address gender disparities. She pointed out that family-based tax systems often hinder women’s full-time employment. Reacting to the debate, Ana Xavier from the European Commission’s DG TAXUD underscored the disproportionate impact of tax burdens on second earners, 78% of whom are women. She advocated reducing these burdens and ensuring complementary benefits like childcare. The Commission collaborates with the OECD to refine tax policies and has recommended reforms to several Member States, she said.
ECON Committee agrees to fast-track second ViDA opinion and DAC9 opinion
The European Parliament Economic and Monetary Affairs (ECON) Committee decided on Thursday 16 January to use the simplified procedure without amendments for adopting its second opinion on the VAT in the digital age (ViDA) package. The rapporteur on this file, Ľudovít Ódor(Renew Europe, Slovakia)explained that the Council had decided to reconsult the European Parliament because significant changes have been made compared to the initial proposal of the European Commission. The use of the simplified procedure will therefore speed up the adoption of this important package. The ECON Committee made the same decision to use the simplified procedure for the proposal for a ninth amendment of the Directive on administrative cooperation in the field of taxation (DAC9), aiming to simplify compliance obligations for multinational enterprise groups (MNEs) under the Pillar Two Directive. The rapporteur Aurore Lalucq (S&D, France) explained that the file needs to be adopted quickly as the first reporting period would be 30 June 2026. Both files will be tabled for adoption at the February Plenary Session of the European Parliament.
OECD issues an update statement on Pillar One negotiations
On Monday 13 January, the Co-Chairs of the Inclusive Framework on BEPS issued a statement providing an update on the state of play of Pillar One negotiations – the first one since the statement issued after the 30 June deadline to finalise the negotiations has been missed. The statement says that concerns persist for some jurisdictions on Amount B, a simplified and streamlined approach to the application of the arm's length principle to baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries. Some progress have been made on how to appropriately reflect the interdependence between the MLC on Amount A and Amount B, the detailed terms of an agreed filter designed to screen out jurisdictions that account for a low number of disputes and the terms of an Optional Qualitative Test that certain jurisdictions have argued is needed. Concerning the question of how to address the concerns of certain jurisdictions that consider that the pricing matrix delivers inappropriate outcomes for taxpayers performing baseline marketing and distribution activities in their respective jurisdictions, various solutions have been put forward to bridge the different positions of IF members, including a solution that would allow the concerned IF members to limit the application of Amount B to distributors generating revenues below a threshold, with an alternative fast-track early certainty mechanism made available for distributors generating revenues above it, the Co-Chairs explain. “Despite constructive discussions on these solutions, we have yet to find a path forward that has the support of all members, and our focus remains on how outstanding concerns can be addressed as a part of a solution that is able to achieve consensus”, the statement reads. The Co-Chairs say they remain committed to do their utmost to help bridge the last few remaining issues relating to the Amount B Framework in order to secure agreement on the Pillar One package.
OECD releases new Pillar Two administrative guidance package
On Wednesday 15 January, the OECD released a new set of administrative guidance for the implementation of Pillar Two rules. The package contains a central record of legislation with transitional qualified status, setting out those jurisdictions whose minimum tax legislation has completed the agreed process and secured transitional qualified status. In connection with the release of the central record, the OECD has released further administrative guidance on Article 9.1 of the GloBE model rules which excludes certain deferred tax assets for purposes of computing an MNE Group’s effective tax rate when they arose prior to the application of the global minimum tax as a result of certain governmental arrangements or following the introduction of a new corporate income tax. Moreover, the package contains an update to the standardised GloBE Information Return (GIR), with a new annex sets out a notification template that jurisdictions could use when they require a notification from MNE Groups that they will receive the GIR through exchange of information. In addition, the Inclusive Framework on BEPS has agreed further guidance on how to complete certain sections of the GIR. This is accompanied by a GIR Multilateral Competent Authority Agreement (MCAA) and related Commentary as well as a GIR XML schema and user guide. Further work will be undertaken on a common approach towards data consistency and quality in the form of validation rules to be applied to the GIR information prior to filing and exchange, the OECD said.
OECD Working Paper on MNE business functions and corporate taxation
The OECD published on Monday 13 January a new working paper examining how large multinational enterprises (MNEs) allocate business functions in response to corporate taxation. Drawing on new data from aggregated CbCR statistics, the study found that higher average effective tax rates are associated with a lower prevalence of functions related to holding or the provision of internal group finance. In contrast, more routine functions, such as sales or manufacturing appear less sensitive to average effective tax rates. Finally, business functions also respond to a variety of other features of CIT systems, such as tax incentives, loss carryover provisions, or anti-avoidance rules. According to the authors, the findings may offer insights on the potential effects of the Global Minimum Tax (GMT). Based on data for a pre-GMT sample period, the results presented in this paper suggest that some business functions may be responsive to the effective taxation in affiliate jurisdictions. The GMT will reduce differences in average tax rates between jurisdictions. At given tax sensitivities, the reduced tax rate differentials under the GMT would reduce the incentive to allocate functions in certain jurisdictions for tax-related motives. The allocation of other functions such as Manufacturing, Sales or Services might be less impacted by the introduction of the GMT as their allocation seems to be less driven by tax-related considerations, they found.
47 governments submit a maritime carbon tax proposal to the UN
On Thursday 9 January, 47 governments jointly submitted to the UN International Maritime Organization (IMO) a proposal for an annual carbon tax on ships traveling internationally. The joint proposal sets out convergent regulatory text for amendments to the IMO MARPOL Convention, which will require shipping companies operating ships on international voyages to make GHG contributions per tonne of CO2e emitted to a new “IMO GHG Strategy Implementation Fund”. The key purpose of this mandatory GHG charge will be to reduce the cost gap between zero/near-zero GHG emission (ZNZ) fuels (such as green methanol, ammonia and hydrogen) and conventional marine fuels, to incentivise the accelerated uptake of green energy sources. Revenue generated will be used to reward the production and uptake of ZNZ fuels, whilst also providing billions of US dollars annually to support the maritime GHG reduction efforts of developing countries, according to a press release. The joint text is supported by all EU Member States and the European Commission as well as the Bahamas, Fiji, Georgia, Jamaica, Japan, Kenya, Liberia, Marshall Islands, Montenegro, Nigeria, Palau, Panama, Republic of Korea, Solomon Islands, Seychelles, Tonga, Tuvalu, Ukraine, United Kingdom, Vanuatu and International Chamber of Shipping (ICS). The proposal will now be considered at an IMO meeting mid-February. If the amendments are approved, they should enter into force globally in early 2027, with the collection of annual GHG contributions from ships commencing in 2028.
