EU leaders meet in Brussels amid Ukraine and Middle East issues
EU leaders met in Brussels on Thursday 17 October to discuss Ukraine, the Middle East, competitiveness, migration, foreign affairs and adopted conclusions on these topics. The European Council held an exchange of views with the President of Ukraine Volodymyr Zelenskyy. EU leaders addressed Russia’s war of aggression against Ukraine in all its dimensions and reaffirmed the EU’s continued support for Ukraine and its people. In this context, the leaders reiterated their support for a comprehensive, just and lasting peace, based on the UN Charter and in line with Ukraine’s peace formula. EU leaders also reviewed progress on military support for Ukraine and called for the rapid stepping up and acceleration of the delivery of air defence systems, ammunition and missiles. Concerning the military escalation in the Middle East, EU leaders called on all parties to exercise the utmost restraint, put an end to hostilities and fully abide by international law, including international humanitarian law. Finally, they also addressed EU competitiveness issues and called on all EU institutions, Member states and stakeholders to advance work in response to the challenges identified in the recent reports of Enrico Letta and Mario Draghi on the future of the Single Market and the EU’s competitiveness. This issue will be further addressed at the informal European Council meeting in Budapest on 8 November 2024.
Talks continue on a non-binding Joint Transfer Pricing Forum
The proposal for an EU Directive to transpose the OECD Transfer Pricing Guidelines into EU law, presented in September 2023, is facing reluctance from Member States, and it now seems likely that the directive will be replaced by a non-binding Joint Transfer Pricing Forum (JTPF), similar to the one that existed until 2019. Concerns over creating a transfer pricing double standard and losing flexibility in negotiating and applying OECD guidelines have led Member States to reject the current proposal. There is, however, strong support for the idea of re-establishing the JTPF while avoiding repeating the errors of the past and making sure that any consensus within the future forum would be followed up with implementation. After the examination of several options, the Hungarian Presidency reportedly decided to pursue the option of a two-level structure: one involving stakeholders (without voting rights) and one involving Member States. In this option, the political commitment would not be legally binding and peer review would be decided on a case-by-case basis by Member States. The presidency also reportedly suggested including the rule of supremacy of the OECD Guidelines over the deliverables of the Platform. Talks continue, with no final consensus yet on the structure, the exact mandate, political commitment and peer review mechanisms of the JTPF. Legal complications have also arisen. The EU Council’s legal service has reportedly warned Member States that the ongoing draft Transfer Pricing Directive is hindering progress on the JTPF, as EU law prohibits adopting such a forum while a directive is under consideration. It has therefore recommended that the European Commission withdraw the directive to allow discussions on the JTPF to move forward, though the Commission has not yet indicated its decision on this matter.
Hungary proposes 10-year opt-out to unlock agreement on the ViDA package
The Hungarian Presidency of the Council of the EU is working to resolve Estonia's opposition to the final part of the VAT in the Digital Age (ViDA) package. Estonia has twice vetoed the deemed supplier rule, which would make these platforms responsible for VAT collection on behalf of their users. Estonia worries this rule could harm small traders who fall below the VAT registration threshold. To address the dispute, Hungary reportedly proposed two options at a meeting on 15 October with Member States' fiscal attachés. The first is a 10-year general opt-out from the deemed supplier VAT obligations for all platforms. The second, which is widely preferred by Member States, is a simplified version of a May 2024 Belgian proposal that allows an opt-out only for SMEs with reduced administrative burdens. Estonia had previously pushed for a voluntary opt-in system, with no time limit, but may now accept a compromise. If agreement is reached at a meeting of the Working Party on Tax Questions on 24 October, the entire ViDA package could be finalised at the Ecofin meeting on 5 November.
MEPs and tax experts discuss simplification of the tax system
On Thursday 17 October, the FISC subcommittee of the European Parliament held a public hearing on “Simplification and transparency: Role of simplified tax policy to encourage growth, job creation, competitiveness and cross-border business within the EU”. Prof. Dr. Eva Eberhartinger, Full Professor and Chair in Business Taxation at the Department of Finance, Accounting and Statistics of the Vienna University of Economics and Business, highlighted that tax complexity hampers entrepreneurship, increases compliance costs, and creates uncertainty, affecting investment. She called for the continued simplification of tax law and noted that FASTER and BEFIT would both be steps forward. Prof. Dr. Christiana Hji Panayi, Professor in Tax Law at Queen Mary University of London, supported simplification, especially regarding the sixth Directive on Administrative Cooperation (DAC6), criticising its inconsistent implementation across Member States and excessive administrative costs. She also criticised fragmented anti-tax avoidance measures and suggested shelving the UNSHELL proposal. Finally, Dr. Panayiotis Nicolaides underscored the role of tax policy in EU competitiveness and cautioned that the steps taken already should not be undermined. He also pointed out that anti-tax avoidance rules have not been shown to have a complicating effect. The presentations of the speakers can be found here.
MEPs agree to fast-track their opinions on FASTER and electronic VAT exemption
On Monday 14 October, MEPs from the ECON committee decided to expedite legislative work on two tax proposals: the Faster and Safer Relief of Excess Withholding Taxes (FASTER) proposal and a proposal for an electronic VAT exemption certificate. The European Parliament already issued an opinion on the FASTER proposal. However, the EU Council's legal service recommended reconsulting the EP because the final agreement reached by Member States in May 2024 differed from the European Commission’s original plan, allowing small stock markets with effective relief systems to opt out. MEP Herbert Dorfmann (EPP/Italy) published a new draft report on the file, in which he proposed to support the proposal without amendments and to adopt the opinion through a so-called fast-track procedure, allowing for a more rapid final adoption of the Directive. MEPs also agreed on using the same expedited procedure for the electronic VAT exemption certificate proposal, as it is a highly technical and non-controversial proposal. Both files will be submitted to the plenary sessions in November.
New EP briefing on behavioural taxation in the EU
The European Parliamentary Research Service (EPRS) published on Thursday 17 October a new briefing on behavioural taxation in the EU, discussing the role of taxes such as those on tobacco, alcohol, fossil fuels and sugary products, in influencing consumer behaviour and addressing societal issues like health costs and climate change. The briefing also examines economic consequences like price elasticity, noting that while tobacco and alcohol taxes are relatively inelastic, such taxes can still raise revenues while reducing consumption. New tax avenues, such as those targeting flights, sugar, and possibly meat, are being considered as Member States face budget pressures and seek to meet environmental and public health targets. Finally, the briefing highlights how behavioural taxes interact with the EU budget, mentioning new revenue streams like the plastics levy and possible future environmental taxes. Overall, the role of behavioural taxes is expected to grow in response to Europe’s evolving environmental and health goals, the author found.
