Weekly Tax News - Monday 27 May 2024

May 27, 2024

On Thursday 23 May, the lead candidates for the European Commission presidency Ursula von der Leyen (Germany, European People’s Party), Nicolas Schmit (Luxembourg, Party of European Socialists), Terry Reintke (Germany, European Greens), Sandro Gozi (Italy, Renew Europe Now) and Walter Baier (Austria, European Left)held a final electoral debate before the EU elections. The debate, organised by the European Broadcasting Union (EBU), addressed traditional topics such as Economy and Jobs, Defence and Security, Climate and Environment, Democracy and Leadership, Migration and Borders and Innovation and Technology. The debate also focused on possible alliances between the EPP but also between Renew Europe Now and far-right groups. Questioned several times on this subject by the other candidates, Ursula von der Leyen reiterated her line, not ruling out working with ECR MEPs who are “pro-Europe, pro-Ukraine, against Putin and pro-Rule of law”. She however dismissed the possibility of a rapprochement with parties currently belonging to ID, such as the French Rassemblement National. Sandro Gozi was also challenged by the other candidates about the coalition in the Netherlands of the Liberal party VDD with the far-right one PVV. Mr Gozi condemned this alliance, while announcing that Renew Europe group would be discussing VVD’s position on 10 June. The debate can be watched again here.

G20 Symposium on fair international taxation

To encourage experts and representatives from G20 Member countries to engage with the Brazilian proposal on a Global Tax on Billionaires, the G20 Finance Track organised an international seminar in Brasilia from 21 May to 23 May. The event featured tax experts as keynote speakers, including representatives from international organizations, the European Union, the World Bank, the Inter-American Development Bank - IDB, and G20 Member countries. During the event, Brazil, the United Kingdom, Norway, France, India, Australia, and South Africa presented their progressive taxation models. The event closed with a presentation by French economist Gabriel Zucman on a proposal to discuss how global tax systems can make it easier for the super-rich to avoid paying taxes, as well as the implications for deepening inequalities.

European Commission issues a series of decisions on tax infringements

On Thursday 23 May, the European Commission issued its May Infringements Package, including a series of decisions on tax infringements. The Commission notably opened an infringement procedure by sending a letter of formal notice to Germany (INFR(2024)2043), Hungary (INFR(2024)2045), Poland (INFR(2024)2047) and Romania (INFR(2024)2048) for failing to exchange timely information on income earned by individuals and companies through the use of online platforms according to Directive (EU) 2021/514 of 22 March 2021  (DAC7), which entered into force on 1 January 2023. The Commission also decided to send reasoned opinions to Spain (INFR(2024)0049), Cyprus (INFR(2024)0020), Latvia (INFR(2024)0094), Lithuania (INFR(2024)0080), Poland (INFR(2024)0113), and Portugal (INFR(2024)0119) for failing to notify measures for the transposition into national law of the Pillar 2 Directive. Furthermore, the Commission sent reasoned opinions to: - Greece (INFR(2020)4001) for failing to amend its rules on car registration and taxation and put it in conformity with EU law; - to Spain (INFR(2021)4035) for failing to align its rules on the taxation of capital gains obtained in Spain by non-resident taxpayers with the free movement of capital; and – to Sweden (INFR(2023)4007) requesting it to bring its legislation on preliminary income taxation into line with EU law requirements. Finally, the European Commission decided to refer Spain (INFR(2018)4084) to the Court of Justice of the European Union for having introduced additional conditions in Spanish law restricting EU harmonised rules on divisions of companies (Council Directive 2009/133/EC).

European Commission urges six Member States to complete the transposition of the public CbCR Directive

On Thursday 23 May, the European Commission sent reasoned opinions to Belgium (INFR(2023)0109), Italy (INFR(2023)0150), Cyprus (INFR(2023)0118), Slovenia (INFR(2023)0175), Austria (INFR(2023)0106) and Finland (INFR(2023)0136) for failure to transpose completely the Public Country by Country Reporting Directive (Directive (EU) 2021/2101). The Directive provides for rules on the public disclosure of income tax information by certain multinational undertakings with a revenue of more than €750 million, including non-EU multinationals doing business in the EU. Delays in implementing this policy will impair the objective of enhancing corporate accountability on the income tax they pay in each Member State, thus jeopardising the objective of maintaining the trust of citizens in the fairness of national tax systems, the Commission said. Belgium, Italy, Cyprus, Slovenia, Austria and Finland now have two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the cases to the Court of Justice of the European Union.

The Council of the European Union formally approved on Tuesday 21 May the legislative proposal to mobilise the profits generated by the assets of the Central Bank of Russia that have been frozen in the EU since Russia’s military aggression against Ukraine began. In concrete terms, the Member States in which central securities depositories holding more than 1 million euros in assets are established will have to pay the European Commission these profits, which have been collected since mid-February 2024 and are, in total, estimated at around €3 billion per year. 90% of the sums will be allocated to the European Peace Facility and 10% to the Ukraine Facility. It will be reviewed regularly, with the first review is to take place before January 2025. An initial payment of around 1 billion euros is expected to be made at the beginning of the summer.

The European Commission recently published its follow-up to the European Parliament non-legislative resolution on further reform of corporate taxation rules, drafted by MEP Isabel Benjumea Benjumea (EPP, Spain) and adopted in December 2023. Concerning demands to reduce the burden of compliance on EU companies, particularly for SMEs (paragraphs 10-18), the Commission recalled that it proposed a package of tax simplification proposals in September 2023. This includes a Head office tax (HOT) system, which would allow SMEs that cross borders within the EU and create a taxable presence by way of a permanent establishment (PE) in another Member State, to continue applying the tax rules of the Member State of their origin, i.e. where their Head Office is resident. The Commission also said it supports further studies, evaluations, and impact assessments to improve the EU business tax environment. Regarding the need for the Commission to conduct an EU-wide study on the levels of tax compliance costs, the Commission said it has launched exploratory work in this field to assess the need for such a study and the appropriate timing, taking into account work of other organisations such as the OECD and the World Bank. With the submission of any new proposal, the Commission is committed to observing the smooth functioning, integrity, and level playing field of the Single Market and not creating a disproportionate burden on companies, it assured.

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