Weekly Tax News – 8 July 2019

The EU top jobs and European Parliament’s committees

On 2 July, the 28 Heads of State or Government of the European Union took a consensual decision on a package of appointments of key European positions. They decided to propose: Ursula von der Leyen (Germany) as first woman President of the European Commission; Charles Michel (Belgium) as President of the European Council; Josep Borrell i Fontelles (Spain) as High Representative of the Union for Foreign Affairs and Security Policy; Christine Lagarde (France) as President of the European Central Bank. The designated Commissioners and Commission President have to win the approval of Parliament before the Commission can enter into office, at the beginning of November. On 3 July, the European Parliament has elected David Maria Sassoli (S&D, Italy) as its President. Furthermore, the European Parliament has established its working committees: contrary to the expectations, no permanent TAX Committee was set up.

New EU Tax Disputes Resolution Mechanism enters into force

On 1 July, the new rules introduced by the Council Directive (EU) 2017/1852 on Tax Disputes Resolution Mechanisms in the European Union entered into force. They apply to complaints submitted from 1 July 2019 onwards on questions of disputes in matters of income or capital earned in a tax year commencing on or after 1 January 2018. The Directive should facilitate the resolution of tax disputes by forcing Member States to take conclusive decisions. These rules provide more certainty to taxpayers (businesses and citizens) in resolving disputes related to the interpretation of tax treaties, covering issues related to double taxation. Member States will now be required to take enforceable decisions under the resolution mechanism within two years. If no solution is found within this timeframe, Member States have to set up an Advisory Commission to deliver an opinion, otherwise the taxpayer can bring the case before the national courts and force Member States to act. The Advisory Commission must deliver a binding opinion within 6 months and the Member States must enforce such decision within months. ETAF has recently welcomed the “Commission Implementing Regulation” draft seeking to streamline procedures and harmonize the rules of functioning of the Advisory Commission in the framework of the Tax Disputes Resolution Mechanism.

EESC study on the impacts of corporate tax on the European economy

On 5 July, the European Economic and Social Committee (EESC) organized a Conference to  present its study on “The Role of Taxes on Investment to Increase Jobs in the EU”. The conference, in which ETAF took part, was opened by Jacek Krawczyk and Violeta Jelić (respectively President and Vice President of the EESC Employers' Group) and attended by Valère Moutarliere (DG TAXUD Director), David Bradbury (Head of the Tax Policy and Statistics Division, OECD), Scott Hodge (President, Tax Foundation), Chiara Putaturo (Tax Policy Advisor, Oxfam), James Watson (Director of Economics, BusinessEurope) Michael Smyth (Member of Group III, EESC) and Krister Andersson (Vice-President of the Employers' Group, Chair of BusinessEurope's Tax Policy working group). The study emphasizes that the growing public concern over the level of corporate tax has often been characterized by a certain lack of information on the level of tax revenues as a share of GDP and its trajectory over the past few years. Furthermore, it highlights the need to consider the economic impact of corporate tax and not simply the legal one, since the final incidence will ultimately fall on individuals (shareholders, workers or consumers) rather than on the corporation. Finally, the analysis finds that economies that have reduced their effective corporate tax rates in recent years have seen increased investments in the following years.

Tax Trends Report of the European Commission

On 28 June, the European Commission has published its Taxation Trends in the European Union Report that contains a detailed statistical and economic analysis of the tax systems of the 28 Member States of the European Union, plus Iceland and Norway. For each country, key taxation indicators are provided on tax revenues as a percentage of the GDP for the years 2005 to 2017 and are supplemented by factual tables presenting the latest tax reforms. In particular, the press release of the European Commission emphasizes the slight decrease of environmental and energy taxes in the European Union in 2017 to less than 2,5% of the GDP.

ESMA preliminary findings on cum ex scandal

On 2 July, the European Securities and Markets Authority (ESMA) published its Report on preliminary findings on multiple withholding tax reclaim schemes to respond to the European Parliament’s resolution of 29 November 2018 that requested ESMA to conduct an inquiry into Cum/Ex and Cum/Cum. ESMA has analysed multiple withholding tax (WHT) reclaim schemes in order to assess how widespread they are across the EU and any potential solution to prevent/detect the phenomena. ESMA’s initial analysis indicates that multiple WHT reclaim schemes have been reported and are being investigated in three Member States; Germany, Denmark and Austria. The formal inquiry will aim at gathering additional information on the nature of the entities involved and assess the potential involvement of other vehicles or funds set up through shells in other jurisdictions.