Riga/Brussels, 27/04/2015 (Agence Europe) - The informal Ecofin Council held in Riga on Saturday 25 April left aside the question of the common consolidated corporate tax base ('CCCTB'), during its discussions on fighting the unfair tax optimisation practices of multinationals (anti-BEPS -'base erosion and profit shifting'- plan).
“We decided not to discuss the subject in order to avoid any confusion between the fight against tax optimisation and harmonisation”, said the French finance minister, Michel Sapin. He went on to say that on the 'harmonisation' plank, there were “differences of assessment between countries”, some of which are using “the pretext of reluctance about harmonisation in order to be reluctant to fight tax optimisation”.
The CCCTB was, however mentioned here and there. The Commissioner for Taxation, Pierre Moscovici, said during the debate behind closed doors that the Commission would present a revised proposal on the CCCTB, the Luxembourg minister, Pierre Gramegna, told EUROPE in a telephone interview. “It is too early to say whether the CCCTB will be a response to BEPS. It will certainly be a partial response to BEPS, but it will also depend on how the debate goes”, he continued. During the debate, he stressed the need to “fight optimisation, which is not the same thing as harmonising”. When asked what red lines Luxembourg has regarding the CCCTB, Gramegna responded that they had none. “The only thing we are saying is that what we decide at European level has to comply” with the OECD's work on BEPS, so as to guarantee a level playing field internationally.
The Belgian minister, Johan Van Overtveldt, is reported to have told the Ecofin meeting that harmonisation tended to mask an increase in tax levels.
“We have a clear policy stance, distinguishing between exchange of information and transparency (in taxation matters) from moves towards raising the minimum tax level or transforming taxation policy into an EU policy”, the Cypriot finance minister Harris Georgiades, told EUROPE in an interview on Friday 24 April. During the first attempt to move forward on the CCCTB, Cyprus was one of the countries in the opposition camp. At a previous Ecofin meeting, Pierre Moscovici rejected harmonisation of rates. The Cypriot minister also counselled caution on how to devise these policies. Their boundaries, Georgiades argues, “should be well determined and should not lead to decisions that will essentially erode the competitiveness of the European economies”. However, he offered a “clear yes” to transparency in the matter.
Moscovici believes in the need to “go beyond transparency and act towards making the place of taxation the same as the place of profit”. “That is why I will be putting harmonisation back on the table”, he added. His proposal is anticipated for mid-June. One of the problems for the states is the consolidated part of the base, as Sapin explained last week (see EUROPE 11301). “If it's not consolidated, this will not resolve the transfer price issue”, stated a source at the Commission, although this institution is open to a stage-by-stage approach. In order to relaunch the dossier, it is also considering the optional nature of the CCCTB for businesses.
Transparency on tax rulings. The ministers gave their general support to the Commission's proposal on the automatic exchange of information on 'tax rulings'. The tone which has been used at ministerial level is more consensual than that of the experts. The technical work has shown that almost all of the delegations feel that the Commission has selected an excessively broad definition of tax rulings and advance arrangements on transfer prices. The proposal concerns cross-border rulings, but the smaller countries with more open economies would prefer a broader scope. “Why limit it to cross-border rulings? This is one of the questions we put to the Commission, and we are by no means the only ones to have asked it. We await its response”, Gramegna explained.
Some states, with the exception of France, for instance, also have reservations about the pre-eminent role the Commission has given itself in this text. It has been reported that a number of reservations have been lifted on the idea of the central register the Commission wants to set in place to store the informations.
The 10-year retroactive effect for the exchange is felt to be too long, by Poland in particular, which argued to this effect at the Ecofin. Additionally, some states have suggested that it might be better to wait for the results of the work of the special TAXE committee at the European Parliament. Lastly, other countries do not feel that they will be able to apply this automatic exchange from 1 January 2016, as the Commission has called for. At the Ecofin, the Danish Minister stressed the importance of keeping to this deadline. His German opposite number said that this exchange should be set in place immediately. For his part, Sapin expressed his hopes for a political agreement on this dossier by June. Lastly, at the Ecofin meeting, the Swedish minister is reported to have warned about the administrative burden which could stem from the required exchange. Ultimately, Moscovici said that he was encouraged by the contributions of the ministers and welcomed what he described as “unanimity with a few nuances”.
Code of conduct. France and Germany reiterated the need to update the code of conduct, which dates from 1997, and which they feel is no longer adequate for the current situation. Michel Sapin argued in favour of more political governance and a new mandate. Italy also stated that the group's mandate should be reinforced. Germany and Malta laid emphasis on the criteria to define unfair competition. Spain pleaded in favour of a revision of the governance of the Council's working group. Only the Swedish minister expressed misgivings regarding the need to revise the group's mandate and working methodology.
Interest and royalties. The Ecofin Council briefly touched upon the revision of the 'interest and royalties' directive. Ireland, the Netherlands, Belgium and Sweden spoke in favour of splitting the proposal into two in order to secure an agreement on the anti-abuse provisions (the draft agenda of the May Ecofin currently provides for a political agreement on this dossier, but a number of sources believe that June is more likely). Other countries would prefer not to divide the proposal, so that the question of effective taxation is discussed. The compromise the Latvian Presidency of the Council is working towards is clearly to indicate, when the agreement on the anti-abuse rule is reached, that discussions will continue on the question of effective taxation. However, France is hoping for new proposals from the Commission in June, particularly on deductions at source on certain payments, such as patent remuneration. Denmark is also believed to be in favour of this.
Country-by-country reporting. The ministers did not discuss the issue of country-by-country reporting, to the great regret of the NGO ONE, which called last week upon them to do so. Ecofin has not shown any “concrete commitments”, ONE's policy officer, Valentina Barbagallo, told EUROPE. She argues that they should have called upon the Commission to make proposals on country-by-country reporting, either via the 'accounting standards' directive, or in a stand-alone directive. As to the idea of an impact assessment on the transparency of this reporting to the public, Barbagallo pointed out that the Commission's examination had shown no negative impacts on competitiveness when this provision was considered for banks ('CRDIV'). “At the moment, we are open to it”, Gramegna replied when asked about this. According to France and Germany, country-by-country reporting should initially cover administrations only. Even this would be a positive step forward, said Barbagallo. (Elodie Lamer)