Outcomes of ECOFIN Council meeting
On Friday 21 June, EU Finance Ministers convened in Luxembourg. They reviewed and concluded discussions on the progress of the Recovery and Resilience Facility (RRF). The economic and financial repercussions of Russia’s aggression against Ukraine were also on the agenda. In addition, the Ecofin Council deliberated on the European Semester Package, which serves as the annual coordination of economic, budgetary, employment, and social policies within the European Union. An agreement on VAT in the digital age could not be reached due to a veto by Estonia.
Estonia rejects Belgium's final EU VAT proposal
At the ECOFIN meeting on Firday 21 June, the ViDA (VAT in the Digital Age) package was a major discussion point. Despite extensive negotiations, no final agreement was reached. The ViDA package aims to simplify VAT processes through several key reforms, such as implementing a unified e-invoicing system, digital reporting obligations, updated VAT regulations for passenger transport and short-term accommodations, and a single VAT registration across the EU. A significant obstacle to consensus was Estonia's firm opposition to the proposed deemed supplier regime for digital platforms. Estonia continues to resist the proposed VAT liabilities for digital platforms in the ride-sharing and short-term accommodation sectors such as Airbnb or Bolt. Estonia argued that taxing service providers solely for offering their services on digital platforms would disproportionately burden SMEs and increase competitive distortions. They also pointed out the difficulty in justifying rules that heighten administrative burdens. Estonia proposed an opt-in clause for the deemed supplier regime, allowing each country to adopt measures best suited to their needs. Vincent Van Peteghem, Belgian Deputy Prime Minister and Minister of Finance, highlighted that the text was changed to limit the administrative burden. At technical level, this solution was supported by 26 Member States. However, Estonia still did not accept the compromise. Further negotiations are scheduled for the next ECOFIN meeting on 14 July, where Estonia is expected to continue seeking clarifications on VAT obligations for digital platforms in the sectors of passenger transport and short-term accommodations.
Upcoming Hungarian Presidency publishes its priorities and programme
On 18 June, the upcoming Hungarian Presidency of the Council of the EU published its priorities and programme under the controversial motto “Make Europe Great Again”. Hungary will hold the Presidency for the second time between 1 July 2024 and 31 December 2024 and has set out seven key priorities for its term: - New European Competitiveness Deal; - The reinforcement of European defence policy; - A consistent and merit-based enlargement policy; - Stemming illegal migration; - Shaping the future of cohesion policy; - An economy-centred EU agricultural policy; - Addressing demographic challenges. As regards taxation, Hungary’s main objective is to effectively advance the discussions on the taxation files and international issues currently on the agenda, achieving progress which responds to the needs posed by new business models, international cooperation and fiscal revenues. Its main focus lies on fighting tax evasion, ensuring legal certainty for taxpayers and supporting the international engagement of the European Union. The Hungarian Presidency sees an opportunity to enhance the competitiveness of European businesses through digitalisation, the efficient use of information and simplification in the area of taxation.
EU leaders lay groundwork for EU top jobs
Following the European elections, EU leaders met for an informal dinner on Monday 17 June, to discuss the next institutional term. The European Council is essential for designating the so-called EU top jobs, namely nominating the President of the European Commission, electing the President of the European Council and appointing the High Representative of the Union for Foreign Affairs and Security Policy. The proposal on the table involved re-nominating incumbent European Commission President Ursula von der Leyen for a second term, appointing António Costa as European Council President, and naming Estonia’s Prime Minister Kaja Kallas as High Representative of the Union for Foreign Affairs and Security Policy. In his remarks following the informal leaders’ meeting, Charles Michel, President of the European Council, acknowledged that although an agreement was not reached at this stage, it was “a good conversation” which is moving in “the right direction”. Charles Michel further stated that the political parties are playing a role and have made several proposals. EU leaders would work further and prepare the decision they “need to make”. The next European Summit will take place on 27 and 28 June 2024.
OECD issues administrative guidance on GloBE rules
On Monday 17 June, the OECD published further administrative guidance on the global anti-base-erosion (GloBE) rules. The GloBE rules are an essential component of Pillar 2 of the so-called Two-Pillar solution, a global tax reform initiative, on which the majority of jurisdictions in the 147-member Inclusive Framework on Base Erosion and Profit Shifting (BEPS) reached a political agreement in October 2021. These rules seek to ensure that large multinational enterprises are subject to an effective tax rate of 15 % regardless of where their constituent entities are located. The latest document aims to further clarify and simplify aspects of the GloBE rules. It clarifies the criteria for determining the scope of a deferred tax liability category and introduces a simplification measure which extends the application of the unclaimed accrual election rule. Further issues which have been addressed in the guidance include the cross-border allocation of current and deferred taxes, how to allocate profit and taxes for flow-through entities and the treatment of securitization vehicles.
