As a response to the setback inflicted by the annulment of its decision on the Irish tax rulings in favour of Apple (see EUROPE 12528/1), the European Commission presented, on Wednesday 15 July, a package of new tax measures extending until 2024 to better fight against tax evasion and simplify tax procedures.
The goal of the package - consisting of an action plan, a communication on good governance in tax matters and a legislative proposal on the exchange of tax information (see EUROPE 12528/3) - is to “make life easier for honest taxpayers and harder for those actively trying to cheat the system”, EU Taxation Commissioner Paolo Gentiloni summarised at a press conference.
Every year, the EU loses more than €130 billion due to international tax evasion by individuals and businesses and cross-border VAT fraud, he said.
Among the 25 measures announced in its Action Plan (see EUROPE 12526/10), the Commission also indicates that it is preparing, for 2020-2021, a “European framework for cooperation on company tax compliance” with the Member States.
The Commission will also make proposals to strengthen the network of Member States’ anti-fraud experts, Eurofisc, and to improve the use of technology and the sharing of information between Member States.
In particular, by 2022-2023 it will make a legislative proposal to modernise VAT reporting obligations in order to combat fraud more effectively.
On the simplification of procedures, the Commission intends to propose, in 2022-2023, to amend the VAT Directive with the aim of moving towards a single VAT registration, whereby taxpayers will be able to provide services and/or sell goods anywhere in the EU.
Other measures announced include, for 2020-2021, a legislative proposal to amend obsolete VAT provisions on financial services and to simplify the special scheme for travel agents.
The Commission also intends to propose a legislative initiative to introduce a common and standardised EU-wide withholding tax system accompanied by a mechanism for information exchange and cooperation between tax administrations.
It should be noted that the Commission also proposes, in 2020-2021, to transform the status of the VAT Committee - an advisory committee composed of representatives of the Member States and the Commission which has no competence in the procedure for adopting implementing measures - into a “comitology committee, which, acting by qualified majority, would supervise the adoption of implementing acts by the Commission”.
The major gaps in the Action Plan are business taxation and environmental taxation. The Commission has indicated that it will present a specific Action Plan on company taxation in the autumn, including digital taxation.
Initiatives related to the Green Deal, such as energy taxation and the border carbon adjustment mechanism, are expected to be proposed in 2021. Tobacco and alcohol taxation has also not been directly addressed in the Action Plan.
Reform of the Code of Conduct
In its Communication ‘Tax Good Governance in the EU and beyond’, the Commission proposes a reform of the 1997 ‘Code of Conduct on Business Taxation’, which sets out criteria for assessing potentially harmful tax measures.
The scope of the Code should be extended to cover all measures that pose a risk to fair tax competition, the Commission says.
“Special citizenships scheme or measures to attract expatriate or wealthy individuals can also generate concerns”, said Commissioner Paolo Gentiloni.
The Commission also aims to improve the transparency of the Code of Conduct Group. It suggests, among other proposals, that the group should provide more information to the public on the important stages of its work. Introducing qualified majority voting within the group would also speed up decision-making, it points out.
On the external side, the Commission proposes a review of the geographical scope and criteria for inclusion in the European ‘black’ list of non-cooperative jurisdictions for tax purposes to ensure that it remains effective and responsive to current challenges.
It will update, by the end of 2020, the original scoreboard used to select the most relevant jurisdictions for review. “The new scoreboard will take into account the most recent data, as well as developments in the world economy and fiscal policy”, it said.
Other proposals included in the Communication: a strengthening of the EU’s rules on good governance in tax matters concerning EU funds and defence measures.
Use of Article 116 TFEU
This action plan is only “the first part of an ambitious tax agenda”, said Mr Gentiloni. And to achieve this agenda, the Commission intends to use all the tools at its disposal to go beyond unanimity voting in the EU Council on tax matters, including Article 116 TFEU, which allows it to present a legislative proposal by qualified majority if it finds a distortion of competition in the Single Market.
Reflection within the Commission is already under way. “The Commission is working in this area and is ready to come with a proposal on how to address certain harmful tax structures which hare creating distortion in the Single Market through this article”, confirmed European Commission Executive Vice-President Valdis Dombrovskis.
However, as the Article has never been used before, caution is called for and the Commission will have to choose a “legally defendable case”, he said.
See the action plan: https://bit.ly/30fY0bV and the communication: https://bit.ly/2CByjuw (Original version in French by Marion Fontana)