Danish Presidency of the Council of the EU unveils its programme and priorities
The Danish Presidency of the Council of the European Union launched its website, programme and priorities on Thursday 19 June. On 1 July, Denmark will, for the eighth time, take over the Presidency of the Council of the European Union under the motto “A Strong Europe in a Changing World”. The Danish Presidency has two overarching priorities: a secure Europe and a competitive and green Europe. On taxation, the Danish Presidency will prioritise initiatives to counter tax evasion and tax avoidance to promote and ensure fair taxation at an international level. This includes updating the EU list of noncooperative tax jurisdictions and further developing the tools used by the Code of Conduct Group to identify harmful tax competition. The Presidency will also support a continued strengthening of administrative cooperation, including revising or expanding the Directive on Administrative Cooperation (DAC). “A revision will improve rules and procedures for information exchange between tax authorities and encourage good governance within and beyond the EU”, it says. To strengthen European competitiveness, the Presidency will back the EU’s tax simplification agenda to reduce burdens on businesses and authorities. It also aims to advance, and possibly conclude, negotiations on revising the Energy Taxation Directive (ETD). Furthermore, the Presidency will prioritise a strengthening of the Carbon Border Adjustment Mechanism (CBAM) and is ready to support a revision of the Tobacco Taxation Directive if a proposal is tabled. Finally, the Danish Presidency will continue negotiations on the Customs Reform package to reach a final agreement with the European Parliament and continue talks on a possible revision of the Council Decision on own resources.
Outcomes of ECOFIN meeting
EU Finance Ministers met on Friday 20 June in Luxembourg for the last time under the Polish Presidency of the Council of the EU. The Polish Presidency notably presented ministers with an overview of the progress achieved on the Customs reform package. The presentation was followed by an exchange of views on the topic. During the discussion, ministers expressed broad support for a timely agreement on the Council’s position on the new framework. The Polish Presidency will therefore aim at reaching an agreement at the next COREPER meeting on 27 June. The ECOFIN Council also approved the traditional report to the European Council on tax issues, which provides an overview of the progress achieved in the Council under the Polish Presidency. The report highlights the major tax achievements in the last six months, including the formal adoption of the VAT in the digital age package, of the proposals on the electronic VAT exemption certificate, of the Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC9), as well as a general approach on the Directive on VAT rules for distance sales of imported goods and on import VAT as regards the incentivisation of the IOSS. It also recalls the adoption of Council conclusions on a tax decluttering and some discussions on how to enhance administrative cooperation in the area of gambling. Furthermore, the report makes a state of play on other tax files, including on the UNSHELL Directive to fight the misuse of shell entities. It notably states that, at the last technical meeting, many delegations were of the view that the aims of the UNSHELL proposal could be achieved with clarifications or amendments of hallmarks in DAC6. Consequently, Member States agreed not to continue analysing the UNSHELL proposal until the Commission has finalised its own analysis and submitted a possible new legislative proposal on DAC. Finally, the ECOFIN Council approved conclusions on the progress achieved by the Code of Conduct Group for Business Taxation and took note of a progress report on the revision of the Energy Taxation Directive and a progress report on the adjusted package for the next generation of own resources.
European Commission June tax infringements
On Wednesday 18 June, the European Commission adopted a series of tax infringements decisions. It notably decided to refer Portugal to the Court of Justice of the European Union for failing to fully transpose into national law Council Directive (EU) 2020/262 of 19 December 2019 laying down the general arrangements for excise duty (recast) and Council Directive (EU) 2020/1151 of 29 July 2020 amending Directive 92/83/EEC on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages. The remaining transposition gap in Portugal affects for instance the validity of the guarantees submitted by excise operators, the European Commission said. The European Commission also decided to send a reasoned opinion to Hungaryfor failing to bring its retail tax regime in line with the freedom of establishment guaranteed by the Treaty on the Functioning of the European Union and to Portugal for failing to comply with EU excise duty rules on wine. Finally, the Commission opened several new infringement procedures by sending letters of formal notice to Portugal and Belgium for failing to deploy certain customs electronic systems. In another decision, Belgium was also asked to meet its obligations on customs data transmission under the Union Customs Code (UCC). Finally, Spain was formally asked to end its discriminatory taxation of non-resident individuals' dwellings used as habitual residence.
Council and European Parliament strike a deal on CBAM simplification
On Wednesday 18 June, the Polish Presidency and European Parliament’s negotiators reached a provisional agreement on one of the proposals of the so-called “Omnibus I” legislative package: a regulation, which simplifies and strengthens the EU’s carbon border adjustment mechanism (CBAM). The proposal seeks to provide simplification and cost-efficient compliance improvements to the CBAM regulation, without compromising its climate goals. The co-legislators retained the key components of the Commission proposal to simplify CBAM rules: a broader de minimis exemption from CBAM obligations applicable to importers, which do not exceed a single mass-based threshold set at a level of 50 tonnes of imported goods per importer per year. This new threshold will replace the current and much narrower provisions of the CBAM regulation exempting goods of negligible value. Furthermore, the provisional agreement contains several other simplification measures for all importers of CBAM goods above the threshold. This concerns particularly the authorisation procedure, the data collection processes, the calculation of embedded emissions, the emission verification rules, the calculation of the CBAM declarants’ financial liability during the year of imports, and the claim by CBAM declarants for carbon prices paid in third countries where goods are produced. An agreement was also reached between the co-legislators on penalties and on the rules regarding indirect customs representatives. The provisional agreement must now be endorsed by the Council and the European Parliament before formal adoption, expected by September 2025.
EESC opinion on the need for tax simplification
The European Economic and Social Committee (EESC) adopted on Wednesday 18 June in Plenary its own-initiative opinion “Assessing tax reporting obligations in the EU: costs, benefits and effective use of information by tax authorities”, where it recommends conducting competitiveness checks of new legislative initiatives in the field of taxation, including for SMEs, in order to evaluate – through an analytical and dedicated tool – whether the new rules actually support the stated objectives of economic growth, competitiveness and innovation, while minimising unnecessary burdens and compliance costs. The opinion calls for guidance from the European Commission when directives are presented. However, it will not be enough to create clarity on complex tax rules and concepts, it warns. The EESC therefore proposes that a system of advance rulings at EU level be introduced. A court should be established with the right/obligation to offer rulings on interpretation of a Directive, preferably within a reasonably short timeframe after having been asked to do so, say, within 3-6 months, it states. Only the rules of the Directive – and its transposition into national law – should be ruled on, not other national tax rules. The purpose is to provide clarity on the exact content of a Directive, avoiding different interpretations and implementations in Member States, due to different definitions of concepts or terminology used. The EESC also cautions that Pillar II may overlap with certain provisions in the Anti-Tax Avoidance Directives, particularly regarding Controlled Foreign Company (CFC) rules. Member States should review existing CFC rules and consider repealing or modifying those that have become unnecessary, it says. Finally, the opinion calls for an EU agreement addressing the tax complexity and tax uncertainty for cross-border workers, in particular teleworkers. It also calls for timely repayment of withholding taxes on an individual’s stock investments in another Member State.
FISC Subcommittee meeting on 25 June
On Wednesday 25 June, from 14:30 to 16:15, the FISC Subcommittee will host a joint public hearing with the SEDE Committee on "The European Defence Union: Tax Matters". The hearing will focus on the legislative framework governing VAT exemptions for defence-related activities carried out under the EU’s Common Security and Defence Policy (CSDP). From 16:15 to 16:45, the FISC Subcommittee will discuss the 243 amendments tabled to the own-initiative draft report entitled “The Role of Simple Tax Rules and Tax Fragmentation in European Competitiveness.” Since its initial presentation, the draft report has sparked substantial interest and engagement across political groups, highlighting broad support for its focus on simplifying tax rules and reducing fragmentation. The 10 proposed compromise amendments currently negotiated by political groups aim to strengthen key elements of the text, particularly those promoting digital innovation, the reduction of administrative burdens, and enhanced cooperation among tax authorities. Finally, from 16:45 to 18:00, the Policy Department for Economy and Growth will organise a workshop with FISC Members to present the study on "Tax barriers and cross-border workers: tackling the fragmentation of the EU tax framework". This study provides a mapping of the existing financial sector taxes applied in EU Member States and summarises the empirical evidence on the various effects associated with individual financial sector taxes.
Antigua and Barbuda signs the OECD multilateral BEPS Convention
On Wednesday 18 June, Antigua and Barbuda signed the Multilateral Convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (the BEPS Convention) at a signing ceremony held in Paris, becoming the 105th jurisdiction to join the landmark agreement to strengthen tax treaties, which now covers around 2000 bilateral tax treaties. 89 jurisdictions have either ratified, accepted, or approved the BEPS Convention, resulting in the modification of over 1600 treaties. Around 400 additional treaties will be modified once the BEPS Convention will have been ratified by all signatories. Measures included in the BEPS Convention address treaty abuse, strategies to avoid the creation of a “permanent establishment”, and hybrid mismatch arrangements. The BEPS Convention also enhances the dispute resolution mechanism, especially through the addition of an optional provision on mandatory binding arbitration, which has been taken up by 34 jurisdictions.
OECD report Tax Administration Digitalisation and Digital Transformation Initiatives
The OECD published on Tuesday 17 June its report Tax Administration Digitalisation and Digital Transformation Initiatives, which takes a closer look at the extent and progress that tax administrations have made in their digitalisation and digital transformation journeys in 54 members of the OECD Forum on Tax Administration (FTA). It shows that most taxpayers are already using a digital identity to access online services offered by the tax administration and that many taxpayers enjoy a seamless experience through full prefilling of tax returns. According to the report, nearly 80% of administrations have developed a digital transformation strategy and artificial intelligence (AI) is being used by more than 70% of tax administrations to enhance effectiveness and efficiency within the administration, for example on compliance management, and to improve taxpayer services. The most common use case is the involvement of AI in the detection of tax evasion and fraud, followed by the use of AI in risk assessment processes and as part of virtual assistants. The report is intended to be used by tax administration analysts and strategists in their considerations of possible domestic reforms as well as to help them identify where future collaboration might be of most value. It can also be a useful tool for senior tax administration managers or officials in ministries of finance to understand global trends and to aid them in their considerations of possible future changes in tax system administration, the OECD says.
