On Friday 12 February, MEPs from the European Parliament’s Subcommittee on Tax Matters (FISC) sought new insights on digital taxation from a number of experts in order to contribute to the draft own-initiative report (see EUROPE 12646/20) drawn up by the MEPs Andreas Schwab (EPP, Germany) and Martin Hlaváček (Renew Europe, Czech Republic).
Among the guests: Professor Jeffrey Owens, Director of the Vienna University of Economics and Business and former Director of the OECD's Centre for Tax Policy and Administration.
For the time being, the EU needs to ask itself two questions, he said: - in the event of an international agreement at the OECD, how will this be implemented at the European level?; - in the absence of an agreement, what is the EU’s “plan B?”.
“At this stage, it remains unclear whether a consensus will be reached in July 2021”, said Owens, pointing to the uncertainty about the position of the United States, but also of developed countries.
There are still many technical issues to be resolved (see EUROPE 12636/13) and, even when these have been resolved, it will still take another 3 to 5 years for the whole process to be fully implemented, he recalled.
For him, it is imperative for the EU to develop criteria to assess whether the results achieved at international level are satisfactory from a European point of view.
“Listening to the debate over the past 6 months, I get the impression that the only criteria is: there has to be a global consensus”, said Mr Owens, warning against a “consensus at any price”.
This said, he suggested five criteria that could be used, including whether there is a strong commitment from key actors to implement these outcomes in a “consistent, predictable and equitable manner” and, most importantly, whether all countries have the capacity to do so.
The EU should also assess the impact of the agreement on the competitiveness of European multinationals and SMEs and whether the redistribution of tax rights is perceived as fair.
The European institutions should also, in his opinion, ask themselves whether there is an effective mechanism for resolving the “tsunami” of cross-border tax disputes to be expected during the transition period.
Article 116 TFEU. Regarding the European solution envisaged (see EUROPE 12637/16), MEPs questioned Anne Van de Vijver, professor of tax law at the University of Antwerp, on the applicability of Article 116 TFEU, which allows the Commission to present a legislative proposal on taxation by qualified majority, instead of unanimity, if she finds a distortion of competition in the Single Market.
One of the arguments generally invoked against its application is that it requires very specific distortions, such as those affecting a given industry and a distortion between two or three countries, she explained.
But there are, in her view, other arguments in favour of its application. The Court of Justice of the European Union itself confirmed, as early as 1974, that the predecessor of Article 116 could be used to eliminate generic distortions caused by tax measures, which, according to her, demonstrates the possibility of broadening the scope.
One can also question which legislations would be sources of distortion: those of countries that have already introduced a tax on digital services or those of countries that do not tax digital businesses, she stressed.
The draft own-initiative report by Andreas Schwab and Martin Hlaváček will be discussed for the first time on 24 February, before a vote in the European Parliament’s Committee on Economic and Monetary Affairs (ECON) scheduled for 23 March. (Original version in French by Marion Fontana)