Our main interests are cooperation between tax authorities, Common Consolidated Corporate Tax Base, VAT regulations and the work of the TAXE, TAXE2 and PANA committees which investigated tax fraud and money laudering.
The Brussels office submitted a response to the Commission’s consultation on the Common Consolidated Corporate Tax Base in January 2016, and since then it has closely followed the developments. The Office has reported on these initiatives in several Brussels Agenda Newsletters and organised a seminar together with ICAEW on state aid law and taxation. Furthermore, we will be looking to add an input on the CCCTB and the VAT developments.
EU competencies in the field of taxation
When it comes to direct taxation, the EU has power only to adopt initiatives where the differences between the national regimes form an obstacle for the internal market (Article 114 TFEU). The EU cannot adopt harmonisation measures on the Member State’s tax systems and it does not have the power to set a tax rate for direct taxation measures, for example. These are matters for national legislators.
With this in mind, the main objectives of the EU tax policy are:
- To address the concerns of individuals and businesses operating within the internal market by focusing on the elimination of tax obstacles to all forms of cross-border economic activity;
- To continue the fight against harmful tax competition;
- To promote further cooperation between tax administrations in assuring control and combating fraud and tax evasion;
- To remove cross boarder tax obstacles and inefficiencies affecting EU citizens, such as double taxation and difficulties in finding information on foreign tax rules; and
- To support wider EU polices, for example sustainable and inclusive growth in the Single Market.
Article 114 TFEU sets out a special procedure for taxation measures. According to this, the Member States must adopt all initiatives with unanimity and whilst the European Parliament is consulted, it does not have joint decision making powers this area. This has meant that beyond the indirect taxation initiatives, the progress in this area has been slow. The main developments until 2015 relate to the Court of Justice’s case law as to what kind of national taxation measures are discriminatory against EU operators and form obstacles for individuals or companies, and on that basis they cannot be upheld.
Current developments in EU tax law
Since the Lux leaks broke in the news in 2013, the EU initiatives in relation to corporate taxation in particular have started to take pace. The Commission has initiated state aid proceedings against those Member States which they consider have given selective tax advantages to multinationals. The first of these cases are out now in 2016 and have all been appealed to the General Court by the Member States. Furthermore, the European Parliament has set up special committees dedicated to the topic. The TAXE I and TAXE II have specifically tackled tax rulings and in Spring 2016, in the wake of the Panama Papers, the Parliament has set up a separate Committee of Inquiry for the topic.
Legislative initiatives have also followed. In the summer of 2015, the Commission adopted an Action Plan for fair and efficient corporate taxation, which has been followed rapidly by several new proposals and communications in order to strengthen the fight against corporate tax evasion and aggressive tax planning. The focus for these new initiatives is two-fold: improving tax transparency and tax fairness.
The tax transparency initiatives have gradually expanded from automatic exchange of information on tax rulings between tax authorities to automatic exchange on all tax information for entities operating in the EU area. Furthermore, there is currently a proposal pending which would require multinationals to make this information public, in a country by country format. It is proposed that this information should also be made available for third countries.
These tax transparency proposals are likely to be supplemented by proposals for a common list of tax havens and further rules to support tax transparency.
Tax fairness initiatives aim to limit the scope for tax evasion or aggressive tax planning practices. The Member States agreed on the anti-tax avoidance directive in June 2016, which will bring several new ways to tackle aggressive tax planning into the scope of EU law. Furthermore, in 2016 and 2017 the Commission is likely to revive the common consolidated tax base proposal which was first introduced in 2011.
The Commission is also proposing to overhaul the common VAT system. The Commission published an action plan on this reform in Spring 2016 and the Member States have so far endorsed the Commission’s plans.