SAFE proposal now expected in June 2023
The European Commission plans to unveil its proposal for a Directive to tackle the role of enablers that facilitate tax evasion and aggressive tax planning (Securing the Activity Framework for Enablers – SAFE) on 7 June 2023, according to a tentative agenda for forthcoming Commission meetings published on Tuesday 17 January. Earlier this month, reports in the press were mentioning as a possible publication date 5 April. The content of the future proposal still remains unclear. In its public consultation document, the Commission considered several options, including due diligence procedures to perform a self-assessment test to demonstrate that a tax scheme does not lead to tax evasion or aggressive tax planning, a code of conduct that would prohibit the enablers who design or assist in the creation of tax evasion and aggressive tax planning schemes and an EU register of enablers. On the same day, the Commission also plans to issue a proposal for a common system for the avoidance of double taxation and prevention of tax abuse in the area of withholding taxes.
Revenue impact of international tax reform better than expected, OECD says
Revenue gains from the implementation of the OECD Two-Pillars agreement will be higher than previously expected, according to a new OECD analysis released on Wednesday 18 January. The proposed global minimum tax (Pillar Two) is now expected to result in annual global revenue gains of around USD 220 billion, or 9% of global corporate income tax revenues. This is a significant increase over the OECD’s previous estimate of USD 150 billion in additional annual tax revenues. As for Pillar One, the OECD is now expected a reallocation of taxing rights on about USD 200 billion in profits to market jurisdictions annually. This is expected to lead to annual global tax revenue gains of between USD 13-36 billion, based on 2021 data. The new estimates reflect a significant increase compared to the USD 125 billion of profits in previous estimates. These new estimates are based on updated data and incorporate most of the recently agreed design features included in the Amount A Progress Report and the GloBE Model Rules, the OECD explains. A full economic impact analysis as well as a detailed methodology report will be released in the coming months.
EP adopts its final position on the UNSHELL Directive
On Tuesday 17 January, the European Parliament adopted its non-binding opinion on the Commission’s proposal for a directive setting out criteria for determining a shell company used for tax avoidance and tax evasion (UNSHELL). In their opinion, MEPs amend the Commission proposal, notably by slightly lowering the thresholds below which a company is exempt of the reporting requirements of the directive, and by providing for penalties to be levied also on companies with zero or low revenue. They also say that companies subject to the reporting requirements should be obliged to provide more detailed information. During the debate before the vote, numerous MEPs called on the Council to ensure that the text was adopted as soon as possible. Competition commissioner Margrethe Vestager reportedly assured MEPs that the tax consequences as laid down in the proposal for non-compliant entities will not interfere with the existing bilateral tax agreements between member states and third countries. During the negotiations between Member States, questions about whether an EU directive can override obligations that Member States have toward third countries in tax agreements or in tax treaties indeed arose.
ECB urges EU to address debt-equity tax bias
Speaking at the World Economic Forum in Davos on Thursday 19 January, the European Central Bank President Christine Lagarde reportedly said EU Member States should encourage the use of equity, including through tax measures, to finance the bloc's digital and green transitions. “Equity is the best way to channel money to those sectors that require innovation," she reportedly said. "If the tax rules are such that you actually encourage debt rather than equity, how do we think that we're going to mobilize equity?", she added. The European Commission presented a debt-equity bias reduction allowance (DEBRA) in May 2022 but Member States decided to put on hold the discussions on the proposal until more is known about the Commission’s plan for a new framework for income taxation (BEFIT).
This newsletter contains information about European tax policies and developments gathered from official documents, hearings, conferences and the press. It does not reflect the official position of ETAF nor should it be taken as a written statement on behalf of ETAF.