G20 Finance Ministers adopt a declaration on international tax cooperation
Gathered in Rio on Thursday 25 July and Friday 26 July, G20 Finance Ministers adopted for the first time a declaration specifically on tax issues (The Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation) in which they acknowledged that: "It is important for all taxpayers, including ultra-high-net-worth individuals, to contribute their fair share in taxes. Aggressive tax avoidance or tax evasion of ultra-high-net-worth individuals can undermine the fairness of tax systems, which comes along with a reduced effectiveness of progressive taxation. […]. Promoting effective, fair, and progressive tax policies remains a significant challenge that international tax cooperation and targeted domestic reforms could help address. […] We will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.” Ahead of the meeting, the Brazilian G20 Presidency requested several reports from the OECD: a diagnostic report examining interactions between taxation and inequality with regard to progressivity and the taxation of high-net-worth individuals, a report on tax transparency and beneficial ownership, a report on tax transparency real estate properties and a report on bringing tax transparency to crypto-assets. In its tax report to G20 Finance Ministers, the OECD Secretary-General, Mathias Cormann, also reported “excellent progress” on the Two-Pillar international tax package. On Pillar One, members of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) have secured “near full consensus” on the Multilateral Convention to implement Amount A (MLC) and are working to resolve remaining gaps on a framework for Amount B. In their communiqué, G20 Finance Ministers encouraged the Inclusive Framework to expeditiously complete the negotiations.
European Parliament’s committees elect their Chairs
The European Parliament’s committees held their constitutive meetings on Tuesday 23 July. On this occasion, they elected their Chairs and Vice-Chairs for a two-and-a-half-year mandate. For the Committee on Economic and Monetary Affairs (ECON): - Aurore Lalucq (S&D, France) was elected Chair; - Damian Boeselager (Greens/EFA, Germany) was elected 1st Vice-Chair: - Ludovit Odor (Renew Europe, Slovakia) 2nd Vice-Chair, - Ludek Niedermayer (EPP, Czech Republic) 3rd Vice-Chair. The 4th Vice-Chair: will be elected at a forthcoming meeting, following a request by the ECR group to postpone the election of the fourth vice-chair in order to comply with the gender balance rules. For the Subcommittee on Tax Matters (FISC): - Pasquale Tridico (The Left, Italy) was elected Chair; - Kira Marie Peter-Hansen (Greens/EFA, Denmark) was elected 1st Vice-Chair; - Regina Doherty (EPP, Ireland) 2nd Vice-Chair; - Markus Ferber (EPP, Germany) 3rd Vice-Chair; - Matthias Ecke (S&D, Germany) 4th Vice-Chair. For the Committee on the Internal Market and Consumer Protection (IMCO): - Anna Cavazzini (Greens/EFA, Germany) was elected Chair; - Christian Doleschal (EPP, Germany) was elected 1st Vice-Chair; - Nikola Minchev (Renew, Bulgaria) 2nd Vice-Chair; - Maria Grapini (S&D, Romania) 3rd Vice-Chair; - Kamila Gasiuk-Pihowicz (EPP, Poland) 4th Vice-Chair. An overview of the results for all EP committees is available here.
New FISC Chair pledges to address tax fairness and tax evasion
In a special newsletter published on Friday 26 July, the newly elected Chair of the FISC subcommittee of the European Parliament, Pasquale Tridico, said that one of his key priorities will be to create a fairer and more balanced taxation system while addressing tax evasion. “It is essential to ensure that all businesses, regardless of size, contribute their fair share, while promoting healthy competition and economic stability across Member States”, he said. Mr Tridico also wants to address the unfair tax burden, advocating for a fairer and more progressive tax system. He also acknowledged that combating organised tax fraud, such as VAT carousel fraud, involves a close connection between tax evasion, organised crime and money laundering. Finally, Mr Tridico recognized the power of Artificial Intelligence to transform tax systems. “Striking the right balance between taxing labour and other income sources, financial rents, technology, capital, and assets is our greatest challenge in the near future”, he concluded. The first meeting of the FISC subcommittee will take place on 26 September 2024.
European Commission consults on its new electronic VAT exemption certificate
The European Commission opened on Friday 19 July a public consultation on its recent proposal for a Directive introducing an electronic VAT exemption certificate for certain transactions treated as exports under the VAT Directive. The proposal would amend Council Directive 2006/112/EC (the VAT Directive) and Council Implementing Regulation (EU) No 282/2011 (the VAT Implementing Regulation). It includes implementing measures laying down the technical details and specifications concerning the applicable electronic format of the certificate and the way in which it is to be processed electronically. This solution will include an e-form in PDF format and the electronic procedure for the VAT exemption certificate, which will also allow the use of advanced electronic signatures. Member States will be allowed to continue to use the paper version of the exemption certificate for a transitional period until 30 June 2030. The public consultation takes the form of an open feedback and runs until 13 September 2024.
European Commission assesses the application of VAT rules on vouchers
The European Commission published on Monday 22 July a report assessing the application of the VAT rules on vouchers by Member States in the 4 years since the rules were first put in place (between 2019 and 2022). The rules aim to simplify, modernise and harmonise the VAT rules applicable to vouchers, particularly in order to avoid inconsistencies, distortion of competition, double or non-taxation and to reduce the risk of tax avoidance. The results of a survey, carried out from 27 March to 9 June 2023, show that given the short period the VAT rules on vouchers have been applied, Member States have not had enough time to collect evidence, carry out audits, and formulate a final judgment on the general performance of the VAT rules on vouchers. However, no major problems were detected from the compliance checks in terms of formal transposition and no infringement procedures have been launched, the Commission said. Insofar as information was available, Member States confirm that the common EU rules on vouchers have broadly addressed the fragmentation and complexity of applying VAT to various business models resulting in simpler rules and a more uniform application across the EU. Consequently, the Commission concluded that, given the short period the VAT rules on vouchers have been applied and the limited data available for the assessment, any proposal to amend the current rules would be premature.
European Commission refers Belgium to Court over its tax exemption of remuneration received from savings deposits
The European Commission decided on Thursday 25 July to refer Belgium (INFR(2015)4212) to the Court of Justice of the European Union (CJEU) for maintaining discriminatory conditions for applying the tax exemption of remuneration received from savings deposits. The Commission considers that the Belgian tax exemption system applicable to income from savings deposits imposes discriminatory conditions for access to the Belgian banking market on service providers established in other Member States of the European Union or the European Economic Area and is, therefore, contrary to the freedom to provide services. The CJEU confirmed the violation of the above freedom by the Belgian law on 8 June 2017 and 27 March 2023 following preliminary ruling procedures. The Commission sent a reasoned opinion in July 2023 to Belgium. However, considering the efforts made by the Belgian authorities as insufficient, it decided to refer Belgium to the Court.
Hungary asked to correctly transpose the AML Directive
The European Commission decided on Thursday 25 July to send a second letter of formal notice to Hungary (INFR(2023)2098) for having incorrectly transposed the Anti-Money Laundering Directive. The first letter of formal notice sent to Hungary in September 2023 was related to the licensing of virtual asset service providers. In addition, the Commission now takes the view that the Hungarian legal framework also does not ensure the completeness of the National Beneficial Ownership Register by not including private equity funds in its scope. Hungary now has two months to respond and address the shortcomings raised by the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.
New EU Tax Observatory paper on the effects of automatic bank information exchange
On Tuesday 23 July, the EU Tax Observatory published a new study on the effects of automatic bank information exchange with foreign tax authorities on taxpayer behaviour and compliance along its key dimensions: repatriation of assets previously held abroad; increases in self-reporting; improvements in the auditing capacity of tax authorities. The authors, who include the Director of the EU Tax Observatory Gabriel Zucman, analysed information reports sent by foreign banks to Danish authorities, matched to population-wide micro-data on income, wealth, and cross-border bank transfers. Overall, they found evidence of large effects along each of these margins, with particularly large effects on the repatriation of wealth. They estimate that around 70% of the wealth that would have been hidden offshore by Danish individuals in the absence of this policy has been brought into compliance or has become observable by the tax authority. These results highlight, according to them, the power of international cooperation to improve tax compliance. However, realizing the full potential of this policy may require additional actions, such as sending letters or targeted audits and improving technology.
