Outcomes of the European Council meeting on 21-22 March
EU leaders met in Brussels on Thursday 21 March and Friday 22 March. On the first day of the summit, EU leaders adopted conclusions on Ukraine, security and defence, the Middle East, enlargement and reforms, migration, preparedness and crisis response and the European Semester. The conclusions reiterate the EU’s determination to continue to provide Ukraine and its people with all of the necessary political, financial, economic, humanitarian, military and diplomatic support for as long as it takes. The conclusions also stress that the EU and its Member States should accelerate and intensify the delivery of all of the necessary military assistance, including the procurement of ammunition for Ukraine. Concerning the Middle East, the EU leaders expressed their deep concern about the catastrophic humanitarian situation in Gaza. They called for an immediate humanitarian pause leading to a sustainable ceasefire, the unconditional release of all hostages and the provision of humanitarian assistance, and urged the Israeli government to refrain from carrying out a ground operation in Rafah, where over one million Palestinians are seeking safety. Finally, they gave their green light to open accession negotiations with Bosnia and Herzegovina. On the second day, the leaders discussed external relations and agriculture.
European Commission addresses unanimity voting in taxation in enlargement communication
The European Commission raised the possibility of moving from unanimity to qualified majority voting (QMV) on tax and other matters as part of a communication on pre-enlargement reforms and policy reviews published on Wednesday 20 March. As Albania, Bosnia and Herzegovina, Georgia, Moldova, Montenegro, North Macedonia, Serbia, Turkey, and Ukraine hold EU candidate status, the communication looks at the implications of a larger EU in four main areas: values, policies, budget and governance. “Questions around the EU’s capacity to act exist already in a Union of 27 Member States. This concerns in particular unanimity voting rules in the Council. While most decisions are now taken by qualified majority in the Council, in some areas, decisions need to be taken by unanimity in the Council, as is the case for tax, foreign policy and certain social matters. In a larger Union, unanimity will be even more difficult to reach, with increased risks of decisions being blocked by a single Member State”, the European Commission wrote. The communication recalls that the EU Treaties already foresee so-called “passerelle clauses” allowing for a shift from unanimity to qualified majority voting within the Council in key areas, which have to be activated with a unanimous decision either from the Council of the European Union or the European Council. Acknowledging the resistance from some Member States who fear becoming isolated on matters of essential strategic national interest, the European Commission said that a possible way forward could be to combine the activation of the “passerelle clauses” with appropriate safeguards, such as European Council conclusions providing for the possibility for one or several Member States to invoke exceptional national interest grounds to continue discussions to reach a satisfactory solution, or to seize the European Council to deliberate on the matter. The Commission said it will carry out the pre-enlargement policy reviews in early 2025 and will make substantive reform proposals in individual sectors.
European Commission issues economic brief on growth-friendly taxation in a high-inflation environment
The European Commission’s Directorate General for Economic and Financial Affairs published on Wednesday 20 March an economic brief focusing on challenges and possible solutions related to recurrent immovable property and labour taxation during periods of high inflation. Recurrent property taxes are among the taxes least detrimental to growth, the authors argued. If they are based on property values, then regular updates of the tax base are required to maintain their revenue potential and economic efficiency as well as the equal treatment of taxpayers. At the same time, the update of property values could lead to sudden and large upward revisions in tax liabilities when inflation is high, which may increase resistance against reforms aimed at shifting taxation towards immovable property. In the authors’ opinion, practices aimed at increasing the frequency and reducing the cost of updating property values and temporary tax reliefs on property taxes can help overcome such increased resistance. Resistance can also be linked to liquidity issues for the non-negligible number of taxpayers that own property but have relatively low incomes. Resistance in these cases could be dealt with by the possibility of tax deferrals or by targeted and means-tested tax relief for low-income households, according to the paper. The design of labour taxation for low-wage earners is also important to support inclusive growth, as workers with low incomes react more sensitively to work incentives at the extensive margin (i.e. the decision to work or not), the authors found.
Pascal Saint-Amans recommends broader external border taxes as new resources for the EU budget
In a policy brief published on Thursday 21 March Pascal Saint-Amans, former Director of the Centre for Tax Policy and Administration (CTPA) of the OECD and non-resident fellow at the think tank Bruegel, examined the 2023 revised package of new own resources proposals for the EU budget and proposed new ideas, including exploring external border taxes. “Failure to move forward would jeopardise the ability of the EU to keep funding its existing projects, especially at a time when interest rate increases will make the repayment of both capital and interest heavier”, Mr Saint-Amans wrote. In his view the 2023 revised package is “pragmatic and moves in the right direction but does not go far enough”. Mr Saint-Amans particularly welcomed the fact that the Commission did not go back to the idea of a European digital services tax (DST) as a substitute for the OECD deal. Beyond the urgent need to agree on this package, the debate about own resources should focus, in his view, on whether the EU will be able to build genuine own resources based on common tax policies. In this regard, the 15 percent global minimum tax could have offered an opportunity to mutualise some resources at the EU level as a genuine own resource, he said. While the prospect of new own resources deriving from harmonised taxes remains unlikely due to the unanimity requirement to decide on tax matters, he recommended exploring how other external tax borders of the EU could be a way to move towards genuine new own resources. For instance, in the area of personal income tax, establishing a common exit tax on EU countries’ residents moving abroad to avoid paying capital gain taxes could serve the purpose of protecting EU countries’ tax bases and developing a new own resource, he said. This could also be considered in the field of wealth taxation or inheritance duties. Rather than harmonising taxes, which proves difficult, focusing on protecting the revenues of EU members by common borders may unleash some potential, Mr Saint-Amans concluded.
New OECD working paper on the design of presumptive tax regimes in selected countries
On Tuesday 19 March, the OECD published a new working paper compiling information on the presumptive tax regimes existing in a selection of OECD and non-OECD countries (Argentina, Brazil, Colombia, Costa Rica, France, Hungary, Italy, Mexico, South Africa, Tunisia, Uruguay). Presumptive tax regimes (also known as simplified tax regimes) aim at encouraging tax compliance and business formalisation by reducing tax compliance costs and by levying lower tax rates as compared to the standard tax system. These regimes usually target micro and small businesses and levy tax on a presumed tax base that intends to approximate taxable income by indirect means. They can be particularly relevant where actual taxable income is difficult or costly to assess accurately. The paper identifies common practices adopted across the countries examined and provides multiple examples of best practices observed in these regimes. The paper also highlights the main challenges generally observed in the presumptive tax regimes under study, which might undermine the role of these regimes in incentivising business formalisation and strengthening tax compliance over time. The optimal design and administration of a presumptive tax regime requires a regular and evidence-based evaluation to verify the regime’s coherence and whether its objectives have been fulfilled, the authors argue. Presumptive tax regimes require further attention from tax policy makers and tax administrations, the OECD concludes.
David Bradbury to step down as Deputy Director of the OECD CTPA
The Deputy Director of the OECD Centre for Tax Policy and Administration (CTPA), David Bradbury, announced on Monday 18 March in a LinkedIn post that he is leaving his position after nearly 10 years within the organisation for personal reasons and returning to Australia. Mr Bradbury was appointed deputy director of the CTPA in April 2023, when Manal Corwin became Director of the CTPA. Mr Bradbury played an instrumental role with the delivery of the OECD/G20 BEPS Project in 2015, the pivotal 2018 Interim Report of the Task Force on the Digital Economy and the landmark 2021 international tax agreement, which has been agreed by more than 140 jurisdictions and has delivered the global minimum tax that came into effect on 1 January 2024. “For the next three months, I remain committed to continuing my service to the OECD. Beyond that, I am excited by the prospect of taking on new challenges, and I am approaching the next steps in my career with an open mind and a continuing desire to make a contribution”, David Bradbury wrote.
ETAF annual report 2023
The European Tax Adviser Federation (ETAF) published on Monday 18 March its annual report presenting its main activities in 2023. In this edition, we put the spotlight on our work on the Anti-Money Laundering package, the rationalisation of EU tax reporting requirements, the VAT in the digital age package, DAC8, the proposal for a Head Office Tax system for SMEs (HOT), the Business in Europe: Framework for Taxation (BEFIT) proposal, the new proposed framework for “Faster and Safer Relief of Excess Withholding Taxes” (FASTER) and the Transfer Pricing Directive proposal. 2023 was also an eventful year, with two ETAF conferences, our participation in the EU Tax Symposium and the EU Tax Observatory’s annual conferences, our members congresses as well as several meetings with tax officials and stakeholders. “Looking ahead to 2024, a pivotal year marked by the EU elections, ETAF remains committed to advocate for balanced and fair tax rules, to support modernizing the international tax system, and to champion strong, independent and regulated tax professions across Europe”, ETAF President Philippe Arraou said in the foreword.
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European Commission launches targeted consultation on EU rules for resolving cross-border tax disputes
The European Commission launched on Tuesday 12 March a targeted public consultation to get feedback on the Directive 2017/1852 on Tax Dispute Resolution Mechanisms (DRM), which came into force in 2019 and sets out EU rules on cross-border tax disputes resolution in relation to double taxation issues. As foreseen by the Directive itself, the Commission is now conducting a review and preparing a report on the Directive’s implementation in its first years. Stakeholders are invited to express their views on whether the DRM improved the double taxation relief procedures in the EU compared to pre-existing mechanisms (i.e., MAP, the Arbitration Convention, and national relief procedures). The Commission is particularly seeking views of stakeholders on the application of Article 3 of the DRM (Complaint stage) and Article 4 (Mutual Agreement Procedure stage). The deadline for submission to this consultation is 10 May 2024.
Eurozone Finance Ministers’ statement on the future of the Capital Markets Union
Meeting in an inclusive Eurogroup format on Monday 11 March, the European Finance Ministers finalised and published a statement on the future of the Capital Markets Union (CMU). The statement contains 13 measures, where the Eurogroup invites the European Commission to act during the next legislative cycle 2024-2029. The ministers identified three main areas for action: strengthening the financial architecture to remove barriers to European integration, facilitating companies’ access to capital markets and introducing incentives to increase the participation of retail investors. In terms of tax measures, the European Finance Ministers make it clear that solutions to reduce the debt equity bias are needed but that they should be delivered through their national tax systems. The European Commission is only invited to provide analysis and advice on this topic. This statement sends a strong signal against the Debt-Equity Bias Reduction Allowance (DEBRA) proposal presented by the Commission in 2022. The Eurogroup also invites Member States to assess ways to make their respective personal income tax systems more supportive of investments in capital markets, for example, by reviewing the tax treatment of long-term retail investment products and of capital gains and losses.
European Commission proposes several updates to the EU AML blacklist
The European Commission proposed in a draft delegated regulation published on Thursday 14 March to update the EU blacklist of third-country jurisdictions which have been identified as having strategic deficiencies in Anti-Money Laundering (AML) with the listing of Kenya and Namibia. The Commission indeed considers that these two jurisdictions have strategic deficiencies in their respective AML regimes. The countries listed on the EU AML blacklist will be subject to enhanced customer due diligence measures. The Commission has also taken into account the fact that these countries were identified in the FATF list of ‘Jurisdictions under Increased Monitoring’ in February 2024. Again following similar measures taken by the FATF, the Commission also proposed to remove from the EU AML blacklist Barbados, Gibraltar, Panama, Uganda and the United Arab Emirates (UAE). The Commission considers that these 5 jurisdictions have remedied the strategic deficiencies in their respective AML regimes and no longer pose a significant AML threat to the international financial system. The draft delegated act is now submitted to the European Parliament and the Council for their scrutiny.
No European Parliament’s opinion on energy taxation during the current mandate
The ECON committee of the European Parliament reportedly failed to reach an agreement on its opinion on the revision of the Energy Taxation Directive (ETD), proposed in 2021. Under the revised directive, energy products would be classified according to their energy content and environmental impact, to ensure that the most polluting products are taxed at the highest rate. The main reasons for the failure of MEPs’ negotiations would be proposed measure imposing a maximum zero-rate tax on electricity until 2036, the attempt to exempt nuclear energy, provisions regarding inflation-based indexation as well as the timing of taxation of the shipping and aviation sectors. This failure to agree means that it will now be too late for the EP’s last plenary session in April to adopt an opinion on the ETD before the EU elections in June. Although the EP is only consulted on tax matters, this delay will have some legal implications as the Council of the EU cannot legally adopt a draft tax directive without the opinion of the European Parliament. In the Council, the Belgian Presidency has revived the discussions on the ETD but reportedly said that the positions of Member States are currently hard to reconcile and that more political guidance is needed to advance the file further.
Capital gains tax rates vary widely across Europe, according to a new Tax Foundation’s study
A study published on Tuesday 12 March by Tax Foundation Europe highlighted the great differences in capital gains tax rates across Europe. On average, EU Member States tax capital gains on the sale of listed shares at 18.6%. Denmark tops the list, with a tax rate of 42%. It is followed by Finland and France, with 34% each. At the other end of the scale are Bulgaria and Romania, with rates of 6% and 10% respectively. However, a number of European countries do not levy capital gains tax at all on the sale of long-held shares (Belgium, the Czech Republic, Luxembourg, Malta, Slovakia and Slovenia), the study points out. In many countries, investment income, such as dividends and capital gains, is taxed at a different rate than wage income. Tax Foundation believes that these capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. Higher taxes also cause investors to sell their assets less frequently, which leads to fewer taxes being assessed, it argues.
European Commission to host a webinar on its HOT proposal on 17 April and 19 June
The European Commission will host a webinar on its proposal for a Head Office Taxation System (HOT), which would allow SMEs operating cross-border through permanent establishments the option to interact with only one tax administration – that of its Head Office. A first webinar will take place on 17 April at 10h and will cover a deep-dive into the proposal, comprising a presentation of the new proposal and a Q&A session where questions of the audience will be answered. A second webinar, with the same content, will be organised on 19 June at 10h. A recording of the session in all EU languages will be made available after the event.
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ECJ Advocate General delivers his opinion on DAC6’s professional privilege waiver to non-lawyers
On Thursday 29 February, Advocate General Nicholas Emiliou delivered his opinion in case C-623/22 Belgian Association of Tax Lawyers concerning the conformity with EU law and fundamental principles of the DAC6, Directive (EU) 2018/822 on the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. Mr Emiliou suggests that the CJEU should answer the questions put by the Belgian Constitutional Court to the effect that the examination of the questions has not revealed any problem affecting the validity of DAC6 and states that the obligation to report any aggressive cross-border tax arrangements to the competent authorities imposed by DAC6 does not represent a serious breach of the principles of Union law. Furthermore, Nicholas Emiliou stated in his conclusions that Member States may only exempt intermediaries from the obligation to report on cross-border reportable arrangements if the reporting obligation breaches the professional secrecy afforded to lawyers and other professionals who are treated in the same way as lawyers in exceptional circumstances and adopts a restrictive interpretation that this exemption cannot be extended to the activities of professionals such as accountants, auditors and tax advisers who are not involved in the administration of justice. However, the conclusions of Advocate General Nicholas Emiliou are not binding on the Court, which will deliver its judgment in the coming months.
European Commission proposes a VAT waiver on EU defence investments
On Tuesday 5 March, the European Commission presented a European Defence Industrial Strategy (EDIS) and a European Defence Industry Programme (EDIP), aimed at strengthening the industrial pillar of the EU’s defence readiness. These new proposals include a VAT waiver for EU defence equipment. The Commission proposed that Member States allow jointly procured and owned defence equipment, technology, or services to benefit from a VAT or excise duty exemption as part of the new Structure for European Armament Programme (SEAP). “A cooperation under this framework should also allow Member States, under certain conditions, to benefit from an increased funding rate, simplified and harmonised procurement procedures, and, where Member States jointly own the procured equipment, a VAT exemption”, the proposal says. Member States would also be able to issue bonds for financing long-term armament programs, according to the proposal. SEAP would be considered an international organization for the purposes of issuing VAT and excise duty waivers and bonds.
Finance Ministers meet in Brussels on 12 March
EU Finance Ministers are set to meet in Brussels on Tuesday 12 March to exchange views on the state of play of the implementation of the Recovery and Resilience Facility (RRF), as well as on the state of play of the economic and financial impact of Russia’s aggression against Ukraine. On this occasion, the Belgian Presidency of the Council of the EU and the European Commission will inform ministers on the main results of the G20 Finance Ministers and Central Bank Governors meeting of 26-29 February 2024. Moreover, the Council will seek to approve its guidelines for the 2025 EU budget and adopt its recommendation on the discharge to be given to the Commission for the implementation of the EU budget for 2022. On the same day, EU Finance Ministers will also take part in a debate with employment and social affairs ministers on social investments and reforms for resilient economies. No tax proposal is on the agenda for the March Ecofin meeting.
Ministerial discussion on the FASTER proposal set for May Ecofin
The Belgian Presidency of the Council of the EU has reportedly decided to postpone until the May Ecofin meeting a ministerial discussion on outstanding issues concerning the Faster and Safer Relief of Excess Withholding Taxes (FASTER) proposal. Member States still need to resolve a few issues, including Member States' self-assessments of their withholding tax relief systems, the carveouts in article 10 and exemptions from Chapter III of the proposal for EU countries with small stock markets and comprehensive relief-at-source systems. Defining small stock markets, who will determine whether Member States’ relief-at-source systems are “comprehensive” as well as carveouts are likely to be major points of discussion. Those outstanding issues will reportedly be further discussed at the technical level by the working party on tax questions on 15 March and 16 April, where the Belgian Presidency is expected to present new compromise texts.
New EU Tax Observatory’s study on the development of tax havens
The EU Tax Observatory published on Tuesday 5 March a new working paper analysing the determinants and consequences of the development of tax havens. The author, Sébastien Laffitte, used for his research a novel database that tracks the creation and development of offshore institutions in 48 tax havens. Building on the idea that tax havens are the suppliers in the market for offshore services, he showed that demand shocks explain why countries become tax havens. He also found that competition shocks explain why tax havens update their regulations. This reaction is facilitated by the diffusion of legal technologies between tax havens. Lastly, the author shows that becoming a tax haven generates GDP per capita gains and sectoral reallocation in countries adopting this status. In return, the tax structure of non-haven countries is affected by the rise of tax havens, resulting in an increased tax burden on labour relative to capital. Recent developments in the regulation of tax havens, such as the OECD-led Common Reporting Standard (CRS) and the two-pillar reform of the international corporate tax system introduced, in his view, substantial negative shocks on tax havens’ rents. According to the paper, these policies may induce tax havens to update their legal architectures, for instance by implementing "high-risk" Citizenship-by-Investment schemes to circumvent the CRS. Consequently, the paper underscores the importance of designing international regulations of tax havens to be robust against legal innovations and their diffusion.
Last FISC meeting of the mandate will discuss future global tax governance
The last meeting of the FISC subcommittee of the European Parliament for the current mandate will take place on Thursday 19 March, from 3:00 pm to 4:30 pm. On this occasion, FISC MEPs will hold an exchange of views with the European Commission, the OECD and the UN on the state of play and the future of European and international tax policies. The hearing will address in particular the recent UN resolution in favour of opening negotiations on a framework convention on international cooperation, which would strengthen the UN's role in international tax policies. MEPs and experts will discuss the future global governance of tax policymaking, including the question of the role of the UN and its cooperation with the OECD, as well as the EU's place within these two fora. The FISC subcommittee will discuss these matters with Manal Corwin (OECD), Gerassimos Thomas (European Commission) and Eamonn Prendergast (Delegation of the EU to the UN).
OECD Tax and Development days 2024
The OECD is hosting the fourth edition of its “Tax and Development Days” on 12-13 March virtually on Zoom. All members of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) and key stakeholders are invited to participate, with all sessions also open to the public, allowing a glimpse into the various international tax-related workstreams undertaken by the Inclusive Framework to date. More specifically, the event will provide an update on some of the OECD's initiatives to strengthen tax capacity and improve tax policy and compliance in developing countries and explore future challenges. The topics include the implementation of the Two-Pillar Solution, new realities of carbon pricing and implications for developing countries, tax transparency, tax morale as well as taxation and inequality. To follow the sessions, register here.
G20 Finance Ministers discuss global minimum wealth taxation
The Finance Ministers of the G20 countries discussed the issue of taxing the super-rich at a meeting in São Paulo on Thursday 29 February, at the request of the Brazilian G20 Presidency. “Despite recent progress, it is undeniable that the world’s billionaires continue to evade our tax systems through a variety of strategies”, deplored the Brazilian minister, Fernando Haddad, in his opening speech. He referred to the European Tax Observatory’s latest report on tax evasion, which shows that billionaires pay an effective tax rate equivalent to 0 to 0.5% of their wealth. The minister mentioned Brazil's experience on the topic, noting that the tax reform in the country was successful, and each nation can do much for itself domestically. "However, effective solutions for the super-rich to make their fair tax contribution depend on international cooperation", he pointed out. To push discussions forward, Mr Haddad announced that the Brazilian G20 Presidency has commissioned economist Gabriel Zucman, Director of the EU Tax Observatory, to study the feasibility of a minimum tax on the super-rich and present proposals to the group. Zucman had addressed delegates during the meeting, urging them to use tax policy to tackle global wealth inequality. In his tax report to G20 Finance Ministers, OECD Secretary-General Mathias Cormann pointed out the OECD work on the taxation of capital income and capital gains. “Work may also be needed to identify the specific challenges involved in taxing high-net worth individuals, particularly in a globalised economy”, the report says.
EP adopts its opinion on the FASTER proposal
On Wednesday 28 February, the European Parliament adopted its opinion on the proposal for a Directive on Faster and Safer Relief of Excess Withholding Taxes (FASTER) in plenary. The opinion, spearheaded by MEP Herbert Dorfmann (EPP, Italian), contains several changes to the original Commission’s proposal on the use of the electronic tax residence certificate (eTRC). Moreover, they added that Member States shall process a refund request within 25 calendar days unless the Member State has reasonable doubts on the legitimacy of the refund request and that a refund request may be rejected if any verification procedure or tax audit is initiated. MEPs also want to strengthen controls and the exchange of information. They suggest that the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) regularly monitor the risk of ‘cum-cum’ and ‘cum-ex’ tax optimisation practices in the EU. A summary of the proposed changes can be found here and the adopted is available here.
Update to the Commentary on Article 26 of OECD Model Convention
On Tuesday 27 February, the OECD announced that its Council approved on 19 February 2024 an update to the commentary on Article 26 (Exchange of information) of the OECD Model Convention on Income and Capital, which serves as basis for negotiation and application of bilateral tax treaties between countries. The update clarifies that information received through administrative assistance can be used for tax matters concerning persons other than those in respect of which the information was initially received, the OECD explained in a release. It also provides interpretative guidance on confidentiality, in particular regarding the access of taxpayers to information exchanged when such information has a bearing on their tax situation and regarding reflective non-taxpayer specific information, including statistical data, about or generated on the basis of exchanged information. The updated text is available here.
Experts discuss international perspectives on tackling corruption
On 26 February 2024, as part of the 25th Anniversary of the OECD Anti-Bribery Convention, IFAC (The International Federation of Accountants), ICAEW (the Institute of Chartered Accountants in England and Wales) and IBA (The International Bar Association), joined the OECD, for an online event on the need to foster cultures of integrity and active enforcement to tackle the risk of corruption. Laura Hough (ICAEW), MEP Ramona Strugariu (Renew Europe, Romania), Scott Hanson (IFAC) , France Chain (OECD), Jeroen Blomsma (European Commission), Scarlet Wannenwetsch (Basel Institute on Governance) and Sara Carnegie (IBA) discussed the various periods of economic turmoil recently experienced, which may create new opportunities for those seeking to corrupt public and private activities. It emerged from the discussion that a joint approach by all players, public and private, is needed to effectively prevent and combat the insidious nature of corruption and illicit financing. In this respect, renewed regulatory efforts to combat corruption are visible in various jurisdictions, including the EU, where the anti-corruption package currently under negotiation seeks to strengthen the existing legal framework, based on the United Nations Convention against Corruption. Finally, the speakers took the time to answer a number of questions, such as the future strategies to be put in place, the tools available, the subject of cross-border collaboration, the relationship between the private sector and international organisations.
More than 330 EPPO’s investigations into serious cross-border VAT fraud in 2023
The European Public Prosecutor’s Office (EPPO) published on Friday 1 March its 2023 annual report showing that at the end of 2023, it had a total of 1 927 active investigations, with an overall estimated damage to the EU budget of €19.2 billion – 59% of which (€11.5 billion, corresponding to 339 investigations) was linked to serious cross-border VAT fraud. According to the EPPO, new sources of EU funding are also being targeted by fraudsters, the EPPO found. By the end of 2023, the EPPO had 206 active investigations relating to the first NextGenerationEU funding projects, with an estimated damage of over €1.8 billion. This represents approximately 15% of all cases of expenditure fraud involving EU funds handled by the EPPO during the reporting period, but in terms of estimated damage, it corresponds to almost 25%, it said. In 2023, the EPPO received and processed 4 187 crime reports, which is 26% more than in 2022. This increase has been driven mainly by reports from private parties (2 494 – 29% more than in 2022), as well as from national authorities (1 562 – 24% more than in 2022), it explained. According to the EPPO, this evolution proves that the level of detection of fraud affecting the financial interests of the EU in the participating Member States has further improved. In 2023, with 139 indictments filed (over 50% more than in 2022), the EPPO started to bring more perpetrators of EU fraud to judgment in front of national courts.
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Ursula von der Leyen candidate for a second mandate
On Monday 19 February, Friedrich Merz, the Chair of the CDU, reportedly proposed to the European People’s Party (EPP) that the current President of the European Commission, Ursula von der Leyen, be designated as the lead candidate (so-called “Spitzenkandidat”) at the European Party Congress on 6 and 7 March in Bucharest, with a view to the European elections in June. Mr. Merz praised the successes achieved by the ‘von der Leyen’ Commission since 2019, in particular its ability to ensure unity in the face of multiple crises, such as the COVID-19 pandemic and Russian military aggression in Ukraine. Ms. von der Leyen is, however, reportedly not seeking a seat in the European Parliament. If the EPP wins the European elections in June, Ms. von der Leyen will be eligible to preside over the European Commission for a further 5 years, provided she is nominated by the European Council and secures a majority in her favour in the European Parliament. Other political parties are also making up their mind about their “Spitzenkandidat”. Nicolas Schmidt is reportedly the only candidate for the Party of European Socialists (PES) while Terry Reintke and Bas Eickhout have been nominated co-Spitzenkandidaten for the European Greens Party (EGP) and Walter Baier is set to be nominated for the European Left (EL).
Frankfurt will host the future EU Anti-Money Laundering Authority
The ambassadors of the Member States to the European Union and the 14 shadow rapporteurs of the European Parliament decided, on Thursday 22 February, that the future Anti-Money Laundering Authority (AMLA) will be based in Frankfurt. Co-legislators had the choice between applications from nine Member States to host AMLA: Brussels, Frankfurt, Dublin, Madrid, Paris, Rome, Riga, Vilnius and Vienna. The Commission prepared a preliminary assessment of these applications and all nine applicants presented their application in joint hearings that took place in the European Parliament on 30 January 2024. The decision was taken following a vote that included, for the first time, both institutions, with 27 votes each. Frankfurt received 28 votes in the first round, compared with 16 for Madrid, 6 for Paris and 4 for Rome. The agreement on the location of the seat was the last element needed to conclude the negotiations on the Commission's package of four legislative proposals to strengthen the EU's anti-money laundering and countering terrorism financing rules. The location of the seat will be included in the AMLA Regulation and formally adopted by co-legislators as part of the text. The Commission will now be responsible for ensuring the procedural steps relating to the establishment and initial operations of the Authority until mid-2025, which is the date on which the Authority should become operational.
Enrico Letta shares with MEPs his intermediate findings on the Future of the Single Market
On Thursday 22 February, MEPs from the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO) held a second exchange of views with Enrico Letta, former Italian head of government and President of the Jacques Delors Institute, on the future of the Single Market. Mr Letta has been tasked with drafting a High-Level report on this topic and is set to present it on 17 April 2024. After 9 hearings in 9 committees in the EP, many meetings with all EU institutions, meetings in the Member States and with stakeholders, he presented his intermediate findings. He enumerated four sectors which are, at the moment, not included in the Single Market: Defence, Telecom, Energy, Financial Services, and proposed to consider them as “European strategic assets”. At the heart of his report will be how to speed up these sectors, how to finance the green and digital transitions and how to properly enforce EU rules, he said. Cohesion will also be an important dimension, including in relation with the enlargement discussion, he said. Representatives from standard bodies, the BEUC and Business Europe also participated to the hearing.
Outcomes of the informal ECOFIN meeting in Ghent
EU Finance Ministers met informally in Ghent from Thursday 22 February to Saturday 24 February around the topic of competitiveness. Addressing the competitiveness challenge is a top priority for the Belgian Presidency of the Council of the EU and will remain a key focus for the upcoming European Commission. In particular, Ministers stressed the importance of avoiding subsidy races, both on a European and a global level. During the informal Ecofin meeting, three major debates were organised. The first one was a debate on the future of the European Investment Bank with the President of the EIB Nadia Calvino. A follow-up on this discussion will be held in Luxembourg at the annual meeting of the Board of Governors in June. The second one was a debate on retail investor participation and financial literacy. Ministers outlined three lines of action in enhancing financial literacy and retail investor participation: offering better access to clear information for citizens, providing tools to compare different investment products and proposing attractive EU-wide saving products for retail investors. These findings will be followed-up in the coming formal Ecofin meetings. Finally, EU Finance Ministers also held a discussion on the future of EU competitiveness with Dr. Mario Draghi in light of his upcoming report on this topic. During the discussion, Ministers emphasized the need to shift the perspective from identifying problems to defining concrete solutions. Dr. Draghi's comprehensive report is expected by the end of June.
Belgian Presidency wants to unblock the Directive on energy taxation
The Belgian Presidency of the Council of the EU reportedly wants to unblock the Directive on energy taxation, presented by the European Commission in July 2021, by proposing new exemptions, particularly for biomass plants. On the basis of a previous Spanish Presidency's proposal, Belgium’s new compromise proposal would reiterate that Member States should be able to exempt electricity produced by plants with less than 850 MWh/year or 500 kW installed production capacity, provided that the electricity produced is not fed into a public grid. The same applies to biogas not injected into a public grid from a production of 3,000 GJ/year or an installed production capacity of 500 kW. Moreover, in the event of an "unexpected and exceptional" increase of at least 15% in the price of a product compared with the average retail price of that product over the previous 12 months, the Belgian Presidency is also proposing a six-month exemption. Discussions are reportedly still underway to determine whether thresholds should be differentiated according to the type of electricity. Member States will discuss the new compromise proposal when they meet on 29 February.
MEPs want a quicker application of new EU Transfer Pricing rules
MEPs from the Economic and Monetary Affairs (ECON) Committee of the European Parliament adopted on Thursday 22 February their opinion on the proposal for a Directive on Transfer Pricing, presented in September 2023. The non-binding opinion, drafted by MEP Kira Peter-Hansen (Greens/EFA, Denmark), particularly aims to shorten by one year the entry into force of the directive (2025 instead of 2026) and to align as closely as possible to the latest OECD Transfer Pricing Guidelines. It also proposed to re-establish the EU Joint Transfer Pricing Forum, a nonbinding body whose mandate expired in 2019. The forum would be made up of representatives of the Member States and a balanced representation of taxpayers, academics and civil society. The European Parliament would be an observer member. The text also acknowledges the potential for the emergence of alternative guidelines in the future which could be relevant to the EU, such as those from the United Nations. Finally, MEPs want the Commission to be empowered to put forward further implementing rules on the matter rather than the Council. The report still has to be adopted in Plenary session in April, before being transmitted to the Council. On the same day, the ECON committee also adopted its opinion on the HOT proposal while MEPs couldn’t agree yet on the BEFIT proposal.
Commission publishes new progress report on the Directive on eInvoicing in public procurement
On Monday 19 February, the European Commission published a new report on the impact of the Directive 2014/55/EU on electronic invoicing in public procurement. According to the report, the introduction of this system has “simplified cross-border invoicing procedures, promoted efficiency and reduced costs in the EU and beyond”. All EU Member States now accept electronic invoices conforming to this new standard for public procurement. The report also notes that the impact of the directive has extended beyond the public sector: electronic invoicing has become more widespread in business-to-business (B2B) transactions. It admits, however, that the objectives of the directive have not been fully achieved and that differences in implementation at national level and the existence of several different electronic invoicing platforms imposed by the Member States are causes frequently cited. Finally, the report shows that the EU approach is being adopted in different parts of the world, such as in Australia, Japan and New Zealand.
OECD publishes new report on Amount B of Pillar One
On Monday 19 February 2024, the OECD/G20 Inclusive Framework on BEPS published a report on Amount B of Pillar One, which provides for a simplified and streamlined approach to the application of the arm's length principle to core marketing and distribution activities, with a particular focus on the needs of low-capacity countries. The changes to the OECD transfer pricing guidelines agreed in this report will give jurisdictions the ability to apply clear and simple rules to these activities, enabling them to secure revenue and preserve valuable tax administration resources, while providing additional certainty for multinational enterprises, the OECD said. The report, which presents two implementation options for jurisdictions opting for the simplified and streamlined approach from January 2025, describes the circumstances in which a distributor falls within the scope of the B amount, including cases where it also carries out certain non-distribution activities, such as manufacturing. It also describes the activities that may exclude a distributor from the scope of the simplified and streamlined approach, such as the distribution of commodities or digital goods. Content from the report has now been incorporated into the OECD Transfer Pricing Guidelines and is accompanied by conforming changes to the Commentary on Article 25 of the OECD Model Tax Convention.
First meeting of the ad hoc committee on the UN Framework Convention on International Tax Cooperation
On Wednesday 21 February, the ad hoc committee tasked with drafting the terms of reference for a UN Framework Convention on International Tax Cooperation met for the first time. During the meeting, several OECD countries reportedly said the terms of reference for a UN Framework Convention on International Tax Cooperation should be based on consensus rather than simple majority voting. On the other side, several low-income countries said that while the ad hoc committee should strive for consensus, it should move for a simple majority vote if consensus is not achieved, as the rules of the U.N. General Assembly state. The ad hoc committee is tasked with developing and finalizing the framework convention by August. Since the decisive vote in December 2023, EU Member States have been quite vocal in opposing a UN Framework Convention on International Tax Cooperation, as it would risk, in their view, duplicating the work done at the OECD. They also fear a risk of losing momentum if we change the forum of discussion on the Two-Pillar solution.
US Treasury announces extension of its DSTs’ agreement with five countries
The US Treasury announced on Thursday 15 February the extension of the 2021 agreement reached with Austria, France, Italy, Spain and the United Kingdom over their digital services taxes (DSTs) until 30 June 2024. Under the agreement, the five countries will give tax credits to American companies subject to their DSTs against any future income tax liabilities under Pillar One's amount A rules once they take effect. In exchange, the United States, which considers the DSTs as discriminatory against American companies, agreed to withdraw proposed retaliatory tariffs on some US imports of goods from the five countries. The extension of this agreement comes the OECD is working to finalize the text of a multilateral convention (MLC) for implementing Pillar One, with the view to hold a signing ceremony by the end of June.
Four jurisdictions removed from the EU tax blacklist
EU Member States’ permanent representatives reportedly agreed on Wednesday 14 February to remove the Bahamas, Belize, the Seychelles and Turks and Caicos Islands from the EU list of non-cooperative jurisdictions for tax purposes (so-called EU Blacklist). The Bahamas and Turks and Caicos Islands were added to the list of non-cooperative tax jurisdictions in October 2022, while Belize and the Seychelles were added in October 2023. The agreement is expected to be formally approved at the ministerial level on 20 February during a meeting of the General Affairs Council. The revised list is available here.
Work Programme of the Code of Conduct Group under the Belgian Presidency
The EU Council’s Code of Conduct Group on Business Taxation has recently agreed and published its work programme for the duration of the Belgian Presidency of the Council. The Group will complete the review of the tax measures notified by Member States under the standstill and rollback process. The current notification is the first time Member States will notify, if applicable, tax features of general application as defined in the revised Code of Conduct. The Group will also continue to monitor jurisdictions covered by the geographical scope and the implementation of the commitments taken by cooperative jurisdictions. Moreover, the Group will start the screening process of the three new jurisdictions (Brunei Darussalam, Kuwait and New Zealand) included in the geographical scope. The Group will also work on the future criterion 1.4 to incorporate beneficial ownership as a fourth criterion of the EU list on tax transparency, the preparation for the assessment in the second semester of 2024 for criterion 3.2 on country-by-country reporting (CbCR) of relevant jurisdictions that joined the Inclusive Framework after 31 December 2021, the possible screening exercise for trusts and other similar legal arrangements in 2.2 jurisdictions, as well as the interaction between the OECD/G20 BEPS Inclusive Framework GloBE rules under Pillar Two and the criterion 2.2 of the EU list on fair taxation. Three meetings of the group are scheduled under the Belgian Presidency on 7 February, 24 April and 10 June 2024.
MEPs quiz experts on the remaining tax-related obstacles in the Single Market
On Tuesday 13 February, experts presented their views and discussed with MEPs from the FISC subcommittee of the European Parliament how to address remaining tax-related obstacles and distortions in the Single Market, in particular in the context of Enrico Letta’s mandate to prepare a High-Level report on the future of the EU's internal market. Mr Letta announced that the report will not be presented at the end of March as expected, but on 17 April 2024 to allow him to complete his consultations through Europe. He identified three key areas of concern. The first is a weak enforcement of EU directives, which creates fragmentation. The second is the fact that countries use low tax rates and incentives to compete. The third area of concern is that SMEs face 27 different tax systems, he said, adding that the EU may need to invent, in a creative way, something like a 28th regime for SMEs, but maybe also for other companies, both on the corporate law level and on taxation. The other invited experts were Christian Kaeser, Head of tax and Corporate at Siemens, Dominika Langemayr, Professor of Economics at the Catholic University of Eichstätt-Ingolstadt, and Jost Heckemeyer, Professor at Kiel University and Research Associate at the Leibniz Center for European Economic Research, Mannheim. On the same day, the Policy Department for Economic, Scientific and Quality of Life Policies organized a workshop with FISC Members to present and discuss the study on "Good tax practices in the fight against tax avoidance - The signalling role of FDI data".
Enrico Letta to present his first findings on the Single Market’s future on 22 February
MEPs from the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO) will hold a second exchange of views with Enrico Letta, former Italian head of government and President of the Jacques Delors Institute, on Thursday 22 February 2024. The conclusions of the European Council of 29 and 30 June 2023 called for an independent High-Level Report on the future of the Single Market and tasked Enrico Letta with drafting this report. A first exchange of views between IMCO MEPs and Enrico Letta was held on 19 September 2023, allowing for a discussion of their views and priorities on the future of the single market. At this second exchange of views, ahead of the presentation of the final report to the European Council in April, Enrico Letta will present to MEPs, in the presence of representatives from standard bodies, the BEUC and BusinessEurope, his first findings and recommendations in view of the finalization of his report. The session can be followed live here.
MEP Paul Tang’s last FISC meeting
The Dutch Socialist MEP Paul Tang chaired his last FISC Subcommittee meeting in the European Parliament on Tuesday 13 February as he will not run for the European elections in June. The last FISC meeting of the mandate will take place on 19 March but Paul Tang will be unable to chair it as he will be travelling on that day. Paul Tang has chaired the FISC Subcommittee since its creation in September 2020. “I think it’s very good that at least one parliament in Europe is informed about the discussions on European and international taxation”, he said. Mr Tang also hoped that the European Parliament will continue to be active in this area in the future. “I think taxation will be high on the agenda in the years to come, given the demand for fairness in general, but also the stress on the public sector”, he concluded.
Cameroon commits to start automatic exchange of financial account information in 2026
Cameroon has committed to implement the international Standard for Automatic Exchange of Financial Account Information in Tax Matters (AEOI) by September 2026, the OECD announced on Wednesday 14 February. The country is a member of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes since 2012. The Global Forum will accompany Cameroon’s progress in delivering its commitment to start exchanging automatically by September 2026 and updates will be provided to the Global Forum members and the G20. Hundred twenty-five of the 171 Global Forum members are now committed to start AEOI by a specific date, including 12 between 2024 and 2026, and the vast majority have commenced exchanges, the OECD said.
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Fight against harmful tax practices is continuing, OECD says
Jurisdictions continue to make progress in addressing harmful tax practices through the implementation of the international standard under BEPS Action 5, the OECD said on Tuesday 6 February. It had examined 322 preferential tax regimes and found that over 40% of them had been or were in the process of being abolished. In particular, the OECD found that the preferential tax rate for family offices in Hong Kong and the free-trade zones in the United Arab Emirates are not harmful anymore. The OECD also noted that the preferential tax regimes in Albania and Armenia have now been abolished. These four jurisdictions are currently on the EU's grey list of third countries with tax risks but which have committed themselves to take corrective measures. The next update of the EU black and grey lists is reportedly expected to be adopted on 20 February 2024.
European Commission grants Canada DAC7 equivalence
On Monday 5 February, the European Commission reportedly confirmed that information to be automatically exchanged between Canada and the 17 Member States signatories of the OECD Multilateral Competent Authority Agreement on Automatic Exchange of Information on Income Derived Through Digital Platforms is equivalent to the information required under the seventh amendment to the Directive on Administrative cooperation in tax matters (DAC7). With this decision, Canadian platforms that have reporting obligations under DAC7 will report the information to Canada, which will then exchange the information with the relevant EU countries, on the condition that the Canadian legislation enters into force and the exchange relationships between Canada and the EU Member States are activated. The 17 Member States that have signed the Multilateral agreement are Belgium, Bulgaria, Croatia, Cyprus, Estonia, Finland, Ireland, Latvia, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, and Sweden. Canada’s DAC7 equivalence will apply as of 2024.
European Commission calls on Germany to comply with EU VAT rules regarding private tuition services
On Wednesday 7 February, the European Commission issued a reasoned opinion to Germany for failing to correctly apply the EU rules on VAT exemption for private tuition services, as set out in the VAT Directive and clarified by the European Court of Justice. This directive requires Member States to exempt private tuition covering school or university education from VAT. Member States may lay down additional conditions only to ensure the correct and straightforward application of this exemption and to prevent tax fraud, evasion and abuse. They must exercise this discretion in such a way as to ensure that the taxpayer entitled to the VAT exemption can actually benefit from it. In Germany, private teachers must present a certificate in order to qualify for VAT exemption. This certificate must be issued by the competent authority of the German "Land" and attest that the teaching services prepare for the exercise of a profession or for an examination before a legal entity governed by public law. According to the Commission, this provision does not comply with EU law as interpreted by the European Court of Justice. For this reason, Germany is considered to be in breach of its obligations under the VAT Directive. Germany now has two months to respond to the Commission and take the necessary measures. Should it fail to do so, the Commission may refer the matter to the European Court of Justice.
Greece asked to remove its excise duty exemption for tax-free shops at land borders with non-EU countries
The European Commission decided on Wednesday 7 February to open an infringement procedure by sending a letter of formal notice to Greece for failing to comply with the EU rules on general arrangements for excise duty. Greece exempts from excise duty goods supplied by tax-free shops located at its land borders with Albania, North Macedonia, and Türkiye. Until January 2017, the Directive allowed Member States which held tax-free shops located outside an airport or port on 1 July 2008 to use such exemption. Despite this no longer being permitted under EU legislation, Greece continues to use this exemption. The Commission is therefore sending a letter of formal notice to Greece, which 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.
FISC hearing on tax obstacles in the Single Market
The FISC subcommittee of the European Parliament will hold on Tuesday 13 February a public hearing on “Tackling Tax Obstacles in the Internal Market and the Role of Tax Policies in Promoting Economic Growth”. Experts will present their views and discuss with FISC Members on how to address remaining tax-related obstacles and distortions in the Single Market. Mr. Enrico Letta, President of the Jacques Delors Institute, mandated by the Council of the EU to prepare a high-level report on the future of the EU internal market and present it to the European Summit on March 20-21, 2024, will attend the hearing to comment on the tax aspects of his work on this report. Moreover, on the same day, the Department of Economic, Scientific and Quality of Life Policy will host a workshop with FISC members to present a study on "Good tax practices in the fight against tax evasion - The signalling role of FDI data". Pr. Arjan Lejour will present the report, which examines the role of foreign direct investment (FDI) in tax havens.
EU leaders agree on an extension of 2021-2027 EU budget
As a follow-up to their meeting in December, EU leaders discussed, on Thursday 1 February during an extraordinary summit, the mid-term revision of the multiannual financial framework (MFF) 2021-2027. In this context, the leaders agreed to greenlight additional funding for a limited number of priority areas through a mix of new and existing funds. The additional funding covers support for Ukraine, migration and the external dimension, the strategic technologies for Europe platform (STEP), Next Generation EU interest payments, special instruments, new own resources and elements that reduce the impact on national budgets. Of the total amount, €33 billion are loans and €10.6 billion are redeployments from existing funding. The extra funding should be distributed as follows: - €50 billion for the Ukraine Facility (€17 billion in grants and €33 billion in loans); - €2 billion for migration and border management; - €7.6 billion for the neighbourhood and the world; - €1.5 billion for the European Defence Fund under the new STEP instrument; - €2 billion for the flexibility instrument; - €1.5 billion for the solidarity and emergency aid reserve. Next, the Council of the EU and the European Parliament need to adopt the mid-term revision. Moreover, in light of the demands of farmers, who protested the same day in Brussels, EU leaders discussed challenges in the agricultural sector and decided to launch a project to simplify the rules of the Common Agricultural Policy (CAP).
European Parliament and the Council organize a public hearing on the future AMLA site
On Tuesday 30 January, the European Parliament and the Council of the EU held a public hearing with regard to selecting the future site of the Anti-Money Laundering Agency (AMLA). The nine candidates (Brussels, Dublin, Frankfurt, Madrid, Paris, Riga, Rome, Vienna, and Vilnius) to host the future AMLA presented their bids and answered questions from MEPs and Council representatives. This was the first time that public hearings are part of the process to select the seat of a new EU agency, following the EU Court judgment that gave Parliament an equal say with Council in determining the host cities of future agencies. Next, the final decision on the location of AMLA’s seat will be made by the co-legislators in a joint vote on 22 February. The location of the seat resulting from the process will be included in the AMLA regulation and formally adopted as part of the legislative text. Parliament and Council have reached provision agreements on other parts of the package of measures against money-laundering and terrorist financing. Before the package can enter into law, the co-legislators need to formally adopt the laws, which they have committed to doing before the EU elections in June 2024.
Belgian Presidency proposes new compromise text on the FASTER proposal
The Belgian Presidency of the Council of the EU has reportedly proposed exempting only small stock markets with comprehensive withholding tax relief-at-source systems from the related provisions of the Faster and Safer Relief of Excess Withholding Taxes (FASTER) proposal. The Belgian presidency seems to pursue the idea to exempt Member States that already have a comprehensive relief-at-source system based on Chapter III of the proposed directive. The Belgian Presidency is reportedly introducing a quantitative eligibility criterion on top of the four qualitative criteria suggested by the previous Spanish Presidency of the Council of the EU. Under the Belgian proposal, which was presented to Member States on 25 January, EU countries with comprehensive relief-at-source systems that have, during two preceding consecutive years, a market capitalization ratio equal to or more than 1 percent shall irrevocably apply Chapter III. The presidency defined market capitalization ratio as “the ratio expressed as a percentage of the market capitalization of a Member State on [31 December] to the overall market capitalization of the European Union" on the same day. The proposal says countries without a comprehensive relief-at-source system would also be required to apply Chapter III, regardless of whether their market capitalization is below, equal to, or above the 1 percent threshold. The Belgian Presidency aims at reaching an agreement on the FASTER proposal at the April Ecofin Council meeting, according to an indicative calendar.
MEPs support better data sharing and less red tape for companies
MEPS from the Economic and Monetary Affairs (ECON) Committee from the European Parliament adopted on Monday 29 January their position on the Commission’s proposal amending several EU financial regulations as regards certain reporting requirements in the fields of financial services and investment support, published in October 2023. MEPs stressed that growing demand for data makes it necessary to gather them in a consistent and standardised way across jurisdictions. They propose to enlarge the scope of the original Commission proposal and decided that not only all European Supervisory Authorities (ESAs) responsible for supervision in the financial sector in the EU, but also the Single Resolution Board (SRB) responsible for resolving banks in distress and the European Anti-Money Laundering Authority (AMLA) would be obliged to follow new rules. MEPs want these authorities to regularly review the reporting and disclosure requirements in order to remove those that are obsolete, disproportionate or duplicative. They should also provide opinions on how to address inconsistencies, redundancy and possible gaps in reporting request included the financial sector legislation both in force and in ongoing legislative procedures. MEPs also want the authorities to strive for the “report once” principle, so that information from financial institutions or other reporting entities is only reported once to one authority. The authorities should share and reuse this information while safeguarding data protection, professional secrecy and intellectual property, they say. The text was adopted with 33 votes in favour, 1 against and no abstentions.
Markus Pieper appointed EU SME Envoy
On Wednesday 31 January, the European Commission appointed Markus Pieper as EU small and medium-sized enterprises (SME) Envoy, to provide guidance and advice on SME issues. Mr Pieper has been a Member of the European Parliament since 2004. He served in the Committee on Industry, Research, and Energy and has been rapporteur on crucial SME-related matters. Prior to his role in the European Parliament, Mr Pieper served as the Managing Director of a regional Chamber of Commerce in Germany. Mr Pieper will take office in the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW). He will report directly to President Ursula von der Leyen and to the Commissioner for Internal Market on all SME-related activities. The EU SME Envoy will also chair the SME Envoy Network. He will notably work towards bureaucratic burden reduction for companies, filtering upcoming SME-related EU legislation and signalling to the Commission those that merit close attention from an SME perspective. The date of effect of his appointment will be determined later, the Commission said.
European Commission reports technical issues with the CBAM transitional registry system
On Monday 29 January, the European Commission reported technical issues which have led some businesses being unable to submit data and reports related to the EU Carbon Border Adjustment Mechanism (CBAM) and the Import Control System 2 (ICS2). This is due to an incident involving a technical component affecting several EU customs systems, including ICS2, and the functioning of the CBAM Registry, the Commission said. To facilitate reporting declarants who may have experienced difficulties in reporting and have not yet submitted their quarterly CBAM report, a new functionality has been made available as of 1 February on the Transitional Registry, allowing them to “request delayed submission”, giving an additional 30 days to submit their CBAM report. No penalties will be imposed on reporting declarants who have experienced difficulties in submitting their first CBAM report. Delayed submission of a CBAM report due to system errors would, by definition, be deemed justified as long as the submission occurs promptly once the technical errors are overcome, the Commission clarified. Reporting declarants who do not encounter any major technical issue are still encouraged to submit their CBAM report by the end of the reporting period.
An employee using employer’s details to issue fake invoices is liable for amount of tax involved, CJEU says
On Tuesday 30 January, the Court of Justice of the European Union (CJEU) issued a ruling in response to a request for a preliminary ruling under Article 267 TFEU from the Polish Supreme Administrative Court concerning false invoices issued by an employee using his employer's details without his knowledge. In response to the referring Supreme Court's question as to which of the company whose details were illegally used on the invoice and the employee who issued the invoice is liable for the VAT, it was ruled that an employee of a company who issues false invoices and uses the details of his VAT-registered employer is liable for the amount of tax entered on them. This can only happen on condition that the employer, who is subject to VAT, has exercised the diligence reasonably necessary to control his employee's behaviour, the CJEU adds. The CJEU considers that VAT cannot be owed by the apparent issuer of a false invoice when he is acting in good faith and the tax authorities are aware of the existence of a false invoice. A different interpretation would be contrary to the aim of the VAT Directive, which is to prevent fraud and prevent individuals from fraudulently relying on the rules of European Union law, it says. In order to be considered as having acted in good faith, the employer must prove that he has exercised the care reasonably necessary to control the taxable amount, the CJEU concludes.
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