The European Parliament’s Committee on Economic and Monetary Affairs (ECON) is set to vote on Tuesday 23 March on the draft own-initiative report by Martin Hlaváček (Renew Europe, Czech Republic) and Andreas Schwab (EPP, Germany) on digital taxation at OECD and EU level (see EUROPE 12646/20).
According to the compromise amendments hammered out between the political groups and seen by EUROPE, MEPs should support an international agreement at the OECD by June 2021 on the two Pillars of international tax reform, but also ask the EU to have a plan B.
“An ambitious international solution is preferable to a patchwork of national or regional digital taxes bearing potential risks, and is significantly more likely to find unanimity support in the EU Council”, acknowledges the draft text negotiated between the groups.
MEPs should also call on the Commission and EU Council to ensure that future compromises at the OECD take into account the EU’s interests and avoid further complexity for SMEs and citizens.
They seem particularly concerned about the complexity of Pillar I of the reform (digital taxation) and point out that an overly complex system could actually add opportunities to circumvent the future rules. The text calls on Member States to work towards a “simple and achievable solution”.
The text also welcomes the change in attitude of the new US administration, notably the abandonment of the request for a voluntary scheme (see EUROPE 12667/4) and calls on the EU to further intensify the dialogue with the Americans.
The compromises do not go into as much detail as some of the political groups wanted and do not set thresholds or percentages for the proposals (see EUROPE 12680/20).
Have a fall-back position
At the same time, MEPs believe that regardless of the progress of the OECD negotiations, the EU should have a “fall-back position” and be ready to present its own proposal for digital taxation by the end of the year, especially as the OECD proposals apply only to a small group of companies and may not be sufficient, says the text.
The text also recalls that the Commission is bound by the interinstitutional agreement on the 16 December 2020 budget and that it must present a proposal for a digital levy by June, but also asks it to anticipate the compatibility of this proposal with the possible OECD agreement.
The Commission is thus invited to present a roadmap taking into account different scenarios and to consider the introduction of a temporary European tax on digital services as a first step.
It should be noted that a compromise supported by the EPP, S&D, Renew Europe and Greens/EFA Groups also calls for a stronger role of Parliament in taxation. The text does not explicitly mention Article 116 TFEU, but invites the Commission to “explore all possibilities offered by the Treaties” in this sense.
The aim of the co-rapporteurs is that the text be adopted by a large majority in order to send a strong message (see EUROPE 12666/9) just before the meeting of EU Heads of State or Government on 25-26 March, where the subject will be discussed (see EUROPE 12682/15).
Optimism in the EU Council
On Monday 22 March, MEPs discussed the issue with Portuguese Finance Minister João Leão in Parliament’s Subcommittee on Fiscal Affairs (FISC).
Mr Leão was confident that an agreement could be reached by the summer at the OECD - an optimism that was reportedly shared by several Member States at the last Ecofin Council (see EUROPE 12679/4).
At the last G20 meeting, the contacts were very positive and the messages given, for both Pillars, were very encouraging, he told MEPs.
The results of the international process will take some time to be implemented, he said. He recalled that the European Commission will have to make a legislative proposal to transpose the agreement, which will then have to be adopted by the EU Council. (Original version in French by Marion Fontana)