Weekly Tax News – 1 July 2019

The European Commission answers to the TAX3 Report

The European Commission has recently drafted its replies (still to be formally transmitted) to the TAX3 Committee report on financial crimes, tax evasion and tax avoidance. In particular, the Commission comments that the use of Article 116 of the Treaty of Functioning of the European Union (TFEU) to approve the CCCTB proposal is not possible since the requirements for using this article are not met. On the proposed Digital Services Tax, the Commission highlights that using enhanced cooperation appears unrealistic for timing and political reasons, since the focus is now at OECD level. The OECD is working on a comprehensive solution that should be ready by the end of 2020. Regarding new technologies, the Commission took the view that the proposals made by some experts to use blockchain technologies for VAT payments are based on an oversimplification of the VAT system and that the current VAT system seems to prevent the utilization of such solutions. In the meantime, the Commission is ready to re-examine the European legislation on cryptoassets in order to ensure an appropriate framework at EU level to fight potential money laundering and terrorism financing threats.

The Netherlands propose EU taxation of aviation sector

The Netherlands are ready to officially require the European Commission to take the initiative for taxing the aviation sector. The announcement was made on 26 June during the Environment Council meeting by the Deputy Permanent Representative of the Netherlands following a Conference on carbon pricing and aviation taxes held in The Hague on 20 and 21 of June. The information note provided to the EU Ministers pushes for a coordinated EU approach in order to avoid a fragmented approach that could lead to the disruption of the internal market. The Netherlands hope to get the signature of all the Member States on the letter to the European Commission and immediately received a positive answer from Luxembourg but also expects French and Belgian ministers to support this initiative.

In the meantime, the Dutch State Secretary of Finance has launched a consultation document on a possible new corporate tax group regime in the Netherlands. The consultation follows the emergency reparatory legislation announced in late 2017, when the European Court of Justice decided that the Dutch fiscal unity regime was in breach of the EU freedom of establishment.

The European Committee of the Regions supports qualified majority voting on tax

On 26 June, the European Committee of the Regions (CoR) expressed its support to the Commission’s initiative to shift the tax decision-making system at EU level from unanimity to qualified majority.  The approved opinion drafted by the French mayor Christophe Rouillon (PES) highlights that taxation should not become the weakest link of European integration. Furthermore, the opinion states that the CoR “would like qualified majority voting to be introduced for initiatives which do not have a direct impact on Member States' taxation rights, bases or rates, but which are necessary for improving administrative cooperation and mutual assistance between Member States in the fight against fraud and tax avoidance”.

Finland takes over Council presidency for the next six months

The Finnish presidency program outlines the main focus of newly elected Prime Minister Antti Rinne and his government. In a broader sense, the Finnish presidency will strengthen the rule of law, enhance competitiveness and social inclusion, be at the forefront in the fight against global warming and guarantee the security of citizens. In addition, Finland will focus on advancing the discussion on CCTB and follow the developments on OECD-level regarding the taxation of digital giants. VAT topics like the definitive VAT system, VAT rates and the SME package will also be high on the agenda for the next six months. The Finnish presidency will equally concentrate on preventing harmful tax competition and tax evasion while strengthening authorities in the fight against money laundering and terrorist financing.