EU watch: European Commission will unveil tax plans in June

In June, the Commission will publish an action plan to fight tax evasion and to ‘simplify taxation’. This plan will be accompanied by two legislative proposals.

The first one will amend the Directive on administrative cooperation in tax (DAC) to enable exchange of information from digital platforms to tax authorities. A public consultation is currently open on this topic.

With the second legislative proposal, the Commission will seek the authorisation of EU member states to open negotiations on an agreement between EU and ‘a major economic player’ on administrative cooperation, combating fraud (in particular in e-commerce) and recovery of VAT claims.

The action plan itself, which is to be published in conjunction with these two proposals, will indicate the Commission’s timeline for other legislation and measures in the next months and years. Based on the Commission’s recently published documentation and speeches at public conferences, we know that the Commission will be looking into at least the following:

• encouraging cooperative compliance, possibly through a specific proposal for EU cooperative compliance;
• procedures for withholding taxes on cross-border investment;
• new digital solutions to improve tax administrations' data analysis capacities;
• digital solutions to levy taxes at source in real time;
• switching from exchange of information to sharing of tax data real-time;
• additional mechanisms to solve cross-border tax disputes in both direct and indirect taxes; simplification of VAT rules, without specifying what measures; and
• a follow-up to the EU tax haven list, including common defensive measures and technical assistance for third countries.
  

Some of the above will come in the form of an actual legislative proposal. For others, we could be looking at soft guidance, exchange of best practices, recommendations or similar measures. Moreover, whenever relevant and especially when actual legislation is planned, the Commission will launch public consultations.

In addition to the above, we are also awaiting a communication on business taxation for the 21st century, as I mentioned in the last EU watch article. The timing of this communication is still to be confirmed.

In the area of green taxation, the Commission also published initial impact assessments on its planned Energy Tax Directive (ETD) revision and the so-called carbon border adjustment mechanism (CBAM).

CBAM would introduce a border tax on imports from such third countries whose environmental standards are not on par with those of the EU, in an effort to protect European businesses. The Commission has insisted that its priority is to ensure that the mechanism is aligned with WTO rules.

On ETD, the Commission aims to address minimum tax rates for energy products and electricity, how to use taxation to incentivise renewable energy and energy efficiency, review the treatment of electricity and natural gas products and streamline current reductions, exemptions and subsidies for fossil fuels – including the kerosene exemptions for aviation and maritime sectors.

The Commission announced that public consultations on both of these would be launched during the first and second quarters of 2020. The actual proposals are scheduled for second quarter of 2021.