Brussels, 22/10/2014 (Agence Europe) - The outgoing Commissioner for Taxation, Algirdas Semeta, believes that concluding an agreement on the financial transaction tax by the end of the year, as pledged by the eleven states wishing to set it in place, is a “question of credibility”. With just a few days to go until the next European Commission takes up its duties, Semeta met EUROPE to take stock of the dossiers he will bequeath to his successor, Pierre Moscovici of France. (EL)
Agence Europe: What do you think of the decision of the President-elect of the Commission, Jean-Claude Juncker, to merge the Taxation and Economic and Monetary Affairs portfolios? Are there concerns that taxation matters could be diluted within this enlarged portfolio?
Algirdas Semeta: When one looks at the national situations, the finance ministers also have responsibility for taxation policies, so I think that there's nothing wrong with having those policies merged. It is important that the mission letters to Pierre Moscovici, and also to some other future Commissioners, clearly request that the priority be on key tax matters. It is important that the future Commission takes this policy as seriously as we did in the Barroso II Commission and I think this will be the case.
Like you, Mr Moscovici believes that the unanimity rule is an obstacle to progress in taxation matters. He recommends the use of enhanced cooperation in this area. What is your view of this?
I fully agree that the unanimity rule actually slows down progress in the tax field. I have said this many times: whenever the Treaty is revised in the future, I think this issue has to be on the agenda. But we have to be realistic, it won't happen tomorrow. Enhanced cooperation is an important tool to progress in the taxation field. Of course one has to be very prudent when going for enhanced cooperation, because there are fields where this could help, for the CCCTB for instance, but there are others where it is more difficult, like for VAT and indirect taxes, where we need to keep a sort of harmonisation approach across the EU. Enhanced cooperation should be used whenever it's feasible. One of the issues which have to be looked at is the decision of the Court of Justice that says that enhanced tax cooperation should only be a last-resort solution.
Enhanced cooperation on the financial transaction tax (FTT) must lead the way, according to Mr Moscovici. The deadline set by the ministers at May's Ecofin is approaching, but there is still no agreement on any of the outstanding issues. What are the chances of the project concluding in time?
Everything is in the hands of the eleven member states which decided to go for enhanced cooperation. They committed themselves very clearly that they want to reach an agreement by the end of the year, so what we need now is for them to really meet this commitment. The discussion going on currently still demonstrates that there are serious differences in the positions of the member states, but what we need now is to have a compromise text proposed by the Presidency and try to reach a compromise among the eleven member states. Any major tax proposal needs time for implementation. This means that the later the agreement is reached, the later implementation will take place. It is also really a matter of credibility for them to meet what they promised in the declaration, there is a strong need to work very hard during the remaining two months in order to achieve an agreement as promised. We also have to take into account the fact that there are strong expectations from our citizens on this proposal.
The Commission has opened investigations into possible state aid in the framework of the 'tax rulings', such as Apple in Ireland, Starbucks in the Netherlands and Amazon in Luxembourg. Various member states have also been asked for information about the 'patent boxes', which have also been assessed by the Code of Conduct group. Are we not missing a global vision of these questions, which are currently being dealt with in different bodies?
State aid rules require an assessment of individual cases and I'm very glad that my colleague, Joaquin Almunia, decided to use this instrument to address the problem of tax avoidance in the member states. We are currently addressing this problem from all possible angles, not a patchwork of different approaches but a systematic fight against this phenomenon. I hope this investigation will also lead to some sort of systematic conclusions for future action. For instance, it would be a good idea to consider how to shape these 'tax rulings', in principle there is nothing wrong with them, but it would be worth considering making these rulings public. Some rulings remain secret and it is difficult to get information about concrete cases.
Ecofin is planning to use the 'Common Consolidated Corporate Tax Base' directive (CCCTB) to make progress on the OECD's project BEPS (Base Erosion and Profit Shifting, which aims to fight tax optimisation) at EU level. Could we not speed things up, for instance by using the anti-abuse clause of the parent/subsidiary directive?
We agreed with the member states very quickly on the first part of the parent/subsidiary directive to address hybrid mismatches (in June of this year: Ed). There was also an agreement to work quickly on the second part: the general anti-abuse clause. The Italian Presidency is working very hard in order to reach an agreement by the end of the year. We discussed the way ahead in the fight against tax fraud and evasion at the last Ecofin in Luxembourg. And these individual initiatives are important in terms of making fast progress in the most urgent areas. For example, anti-abuse measures could be addressed in the framework of the parent/subsidiary directive and there is the interest and royalties directive proposal where we could address the problem of intangibles. But at the same time, I see CCCTB as a sort of good opportunity to systematically address all the problems. This was discussed, we agreed work has to go in parallel, we need to fix obvious problems as fast as possible, but work hard on an agreement on CCCTB which could lead to systematic solutions.
Everybody welcomed the OECD's BEPS project, with the exception of the NGO Eurodad, which criticises, amongst other things, the level of transparency required in the transmission of data country by country reporting. Does the project go far enough?
It is important to understand the difficulty to reach a consensus among so many different countries and I think that it is very important that we actually took huge steps forward and reached a common understanding on BEPS. We still have one year to address the issues which have not been covered in the first step of BEPS. All of the problems related to BEPS have to be thoroughly looked at and we need to have this agreement ASAP. On the EU's side, I strongly advocated that we need to demonstrate leadership in this global work. This is the way we can influence and drive progress in this area.
President-elect Juncker argues in favour of a single digital market. A Commission report presented earlier this year concludes that there should not be a tax regime specific to the digital economy. How can we ensure that this sector pays its fair share of tax?
It is true that the high-level group I set in place concluded that the phenomenon of the digital economy exists across the board, so it is almost impossible to identify its scope. This is why we need to take measures to address the phenomenon, but applicable not specifically for companies, but as general rules. Some issues have to be discussed at global level, such as the question of the permanent establishment and the treatment of intangibles and transfer pricing rules for intangibles. In the work of the OECD, the first action is to address the problems of the digital economy. This is an ongoing work which needs further debate and discussion. It is not so easy to get an agreement on these issues, but it is important to have strong understanding from the participating countries that we need to adopt instruments to allow us to arrive at a situation where profits are taxed in proportion to the activity of a particular company.
Do you still contend that tax competition is a driving force for growth?
We must implement all measures to fight harmful tax competition, either within the EU or with neighbouring countries. A certain degree of competition has nothing wrong with it. In the area of indirect taxation, we need clear minimum rates, as for excise duties or VAT, in order not to have a situation of distortion in the single market. We also need to ensure that the rules which were created for the single market, like the parent/subsidiary directive, do not lead to a situation of double non-taxation. I don't think full harmonisation of taxes across the EU could be a solution. I am in favour of a harmonisation of the rules which govern corporate taxation, but I think that the member states should maintain the possibility to act according to their particular situation in terms of corporate tax rates.
What are your regrets, your successes and, lastly, your advice to your successor?
There has been huge progress over the past five years. I am glad that taxation came back to the top of the political agenda. I am proud that the automatic exchange of information became not only an EU standard, but a global standard. This is a major historical achievement I didn't expect five years ago. One regret is the energy directive. We made a wonderful proposal, but the appetite of our member states was not enough to swallow it. I do not think it will see daylight. As regards my recommendations, we have to take into account that taxation is a unanimity area and progress in this area is normally slower than politicians would like to see. A lesson is that one has to be patient and insist and work hard in order to finally arrive at positive results.