On behalf of the Presidency of the Council of the EU, Maltese finance minister Edward Scicluna opened the informal meeting of economic and finance ministers on Saturday 8 April stressing that his document on fiscal certainty was not a sign to halt EU initiatives or the programme to tackle tax avoidance.
As we explained at the start of the week, in order to serve as a framework for the discussion (see EUROPE 11760), the Presidency said in a working document that the rapid succession of fiscal legislation could introduce elements of uncertainty into their interpretation, implementation and application. It called for some delay to formulate, assimilate and correctly apply the legislation in question.
Moreover, the Presidency document said that greater tax transparency in recent years would have the effect of providing more information to tax offices, which could lead to more audits. The Presidency writes that there could potentially be a significant increase in tax disputes among tax offices and such differences create uncertainty.
Finally, it said that tax avoidance involved finding and exploiting ambiguities in tax rules. In order to respond to this, legislators adopted new texts and the Presidency says that it is plausible that these new texts will create new complexity and ambiguity that could be exploited by new tax avoidance schemes.
Malta therefore recommended greater use of tax rulings or improving the quality of European tax texts, particularly ensuring that the Commission takes the time needed to propose updates for these texts. This would imply that the frequency of amendments to fiscal texts would have to be reduced.
The Commission took up arms against the Presidency’s document. Before the debate, Tax Commissioner Pierre Moscovici said legal security would come from common rules throughout Europe to reduce the current fraud and uncertainty and should never be used as a political alibi to stop us mid-way. A European source even said it was surprising to see a presidency dragging its feet when the member states and the European Commission have agreed on an ambitious tax agenda. The source added that slowing the pace would mean going against the direction of history.
During the meeting behind closed doors, Pierre Moscovici quoted from the alternative measures in the reform agenda, the sending of contradictory EU messages vis-à-vis the rest of the world about the EU’s ‘expectations’ for good tax governance.
‘We must finish what we’ve begun, he concluded. At a press conference, the vice-president of the Commission in charge of the euro, Valdis Dombrovskis, said that the fight against tax evasion covered both direct and indirect taxation. He pointed out that at the end of the year, the Commission will be proposing initiatives to stem VAT fraud.
Plenty of texts have been approved in a record time in recent years. ‘There's a momentum that can't be lost,’ admitted Scicluna at the press conference. The amendments to make the tax system fairer would take time to come into force and therefore the impact would be visible quite late, explained Scicluna, adding that a lot had been accomplished, as would be seen in the future.
During the debate behind closed doors, the German finance minister, Wolfgang Schäuble, said that tax certainty was a question of degrees and may never be achievable as such, but we should improve as much as possible, but this should not be about protection for fiscal injustice. He and his British, Polish and Hungarian counterparts said that the digital economy was a way of avoiding that which needed to be closed.
Socialist MEPs such as the chair of the Parliament’s economic and monetary affairs committee, Roberto Gualtieri (Italy), dipped their pens in ink at the weekend to express concern about the Maltese and Italian finance ministers.
‘It would be highly regrettable if the Finance ministers were to send the wrong kind of signal,’ wrote Roberto Gualtieri, Pervenche Bérès (France) and Udo Bullman (Germany). They said a lot remained to be done and called on the Council to continue working on country-by-country tax transparency and the combined consolidated corporate tax basis (CCCTB).
CCCTB, a panacea for tax certainty?
The Commission took advantage of the debate to promote CCCTB. During the debate, Pierre Moscovici said CCCTB could be the tax system for the most robust and competitive companies in the world, offering security, stability and efficiency to companies in the Single Market. The Commissioner added that CCCTB could deal with the challenges of modern economies and remove tax uncertainties that are hindering the EU today. Italy and Germany agreed. Berlin said that the fear about what was being prepared in terms of taxation on the other side of the Atlantic would boost Europeans’ need to make faster progress. Talking about CCCTB, he said the ‘EU should react as a whole otherwise we will suffer problems.’ This could mean that he is not in favour of enhanced cooperation. Finally, on the question of CCCTB, Ireland said that the breakdown key contradicted the OECD’s principle that profits should be taxed in the location where they are made. (Original version in French by Élodie Lamer)