Tax policy work in the EU continues relentlessly in all three key institutions: European Commission, European Parliament and the Council. These initial steps are just a taster of the bigger legislative tax initiatives expected later this year on green, digital and minimum taxation.
The European Commission published, on 8 February, its anticipated public consultation on VAT for financial and insurance services. The Commission’s view is that the current EU rules – which date back to 1977 – have become outdated. The Commission tried to review these rules in 2007, but the Council negotiations stalled and the Commission withdrew the proposals in 2016.
It believes that it is now time for another try. Firstly, because a 2017 ruling by the CJEU found provisions of the rules, such as cost-sharing arrangements used by financial and insurance operators, to be inadmissible. Second, because the Commission finds the VAT treatment of financial and insurance services to be too difficult to apply in practice and no longer fit for purpose for services linked to crypto-assets and e-money. And finally, because the rules are inconsistently interpreted and applied by member states.
Stakeholders have until 3 May to respond to the public consultation. The stakeholder input will inform a Commission proposal, which is currently scheduled for fourth quarter of 2021.
Finally, on 3 February, the Commission published a roadmap for a communication titled Mind the VAT gap. As the name suggests, this initiative aims to reduce the VAT gap in the EU, in this case by helping EU countries to better share their best practices and support the implementation of proven-successful measures. Stakeholders have until 3 March to give feedback on the roadmap, and the subsequent communication is currently scheduled for sometime in March.
In the Council, work is again progressing on the public country by country reporting (CBCR) file. It seems the four-year long blocking by a minority on this issue may have come to an end. The Austrian government, which used to oppose the file, was forced by the national parliament to change its position to favourable, thereby shifting the balance of power in favour of those who would like to see the proposal adopted.
The Portuguese Council presidency has now added the file to the agenda of a 25 February meeting of EU’s competitiveness and economic affairs ministers – which is perhaps the strongest signal yet that there might be a way forward.
However, even if the Council manages to agree on its position, it would then have to negotiate with the European Parliament. The Parliament’s position, adopted in July 2017, is much more ambitious than the Council’s draft position. The two institutions must find a mutual agreement for the proposal to become EU law. However, it may very well be that the members of the Parliament (MEPs) will be happy to compromise for the sake of having some form of general public CBCR enshrined in EU law, rather than none at all.
And finally at the European Parliament, on 1 February the ECON Committee adopted its position on the EU/UK Trade and Cooperation Agreement. As expected, MEPs cricised the agreement for being lax on tax issues. Notably, the ECON resolution regretted the absence of tax measures on a dispute resolution and rebalancing mechanism, including a non-regression clause in corporate taxation. MEPs urged member states to use the anti-tax avoidance tools at their disposal (in particular, the CFC rules) to protect their tax revenues. They also called on the EU to integrate ‘robust commitments’ on anti-tax evasion and avoidance with regard to the UK’s different tax jurisdictions and its overseas territories.
The resolution is not legally binding; however, if the ECON resolution provisions become part of the Parliament’s final position on the trade agreement, they could potentially become ‘red lines’ before the Parliament approves the deal. The Parliament’s eventual approval is necessary in order for the deal to remain in place.
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EU watch: the latest from Brussels
Tax policy work in the EU continues relentlessly in all three key institutions: European Commission, European Parliament and the Council. These initial steps are just a taster of the bigger legislative tax initiatives expected later this year on green, digital and minimum taxation.
The European Commission published, on 8 February, its anticipated public consultation on VAT for financial and insurance services. The Commission’s view is that the current EU rules – which date back to 1977 – have become outdated. The Commission tried to review these rules in 2007, but the Council negotiations stalled and the Commission withdrew the proposals in 2016.
It believes that it is now time for another try. Firstly, because a 2017 ruling by the CJEU found provisions of the rules, such as cost-sharing arrangements used by financial and insurance operators, to be inadmissible. Second, because the Commission finds the VAT treatment of financial and insurance services to be too difficult to apply in practice and no longer fit for purpose for services linked to crypto-assets and e-money. And finally, because the rules are inconsistently interpreted and applied by member states.
Stakeholders have until 3 May to respond to the public consultation. The stakeholder input will inform a Commission proposal, which is currently scheduled for fourth quarter of 2021.
Finally, on 3 February, the Commission published a roadmap for a communication titled Mind the VAT gap. As the name suggests, this initiative aims to reduce the VAT gap in the EU, in this case by helping EU countries to better share their best practices and support the implementation of proven-successful measures. Stakeholders have until 3 March to give feedback on the roadmap, and the subsequent communication is currently scheduled for sometime in March.
In the Council, work is again progressing on the public country by country reporting (CBCR) file. It seems the four-year long blocking by a minority on this issue may have come to an end. The Austrian government, which used to oppose the file, was forced by the national parliament to change its position to favourable, thereby shifting the balance of power in favour of those who would like to see the proposal adopted.
The Portuguese Council presidency has now added the file to the agenda of a 25 February meeting of EU’s competitiveness and economic affairs ministers – which is perhaps the strongest signal yet that there might be a way forward.
However, even if the Council manages to agree on its position, it would then have to negotiate with the European Parliament. The Parliament’s position, adopted in July 2017, is much more ambitious than the Council’s draft position. The two institutions must find a mutual agreement for the proposal to become EU law. However, it may very well be that the members of the Parliament (MEPs) will be happy to compromise for the sake of having some form of general public CBCR enshrined in EU law, rather than none at all.
And finally at the European Parliament, on 1 February the ECON Committee adopted its position on the EU/UK Trade and Cooperation Agreement. As expected, MEPs cricised the agreement for being lax on tax issues. Notably, the ECON resolution regretted the absence of tax measures on a dispute resolution and rebalancing mechanism, including a non-regression clause in corporate taxation. MEPs urged member states to use the anti-tax avoidance tools at their disposal (in particular, the CFC rules) to protect their tax revenues. They also called on the EU to integrate ‘robust commitments’ on anti-tax evasion and avoidance with regard to the UK’s different tax jurisdictions and its overseas territories.
The resolution is not legally binding; however, if the ECON resolution provisions become part of the Parliament’s final position on the trade agreement, they could potentially become ‘red lines’ before the Parliament approves the deal. The Parliament’s eventual approval is necessary in order for the deal to remain in place.
