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EU watch: Germany kick-starts autumn with intense tax discussions

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Germany currently holds the six-month rotating presidency of EU’s Council, one of the two co-legislating bodies of the EU together with the European Parliament, bringing together all 27 member states. The German finance ministry has now unveiled further details on its tax agenda for the months ahead.

On 2 September, Germany’s finance minister Olaf Scholz attended a public hearing of the Economic Affairs (ECON) Committee of the European Parliament. Moreover, ahead of a 11–12 September meeting between EU finance ministers, Germany prepared discussion documents to frame the discussions. Through these two occasions, observers were provided additional detail on the tax topics that the German presidency of the Council will be advancing in the next three months.

At the ECON hearing, Mr Scholz underlined the need for the EU to increase its own sources of income, a need which is further exacerbated by the Covid crisis and the July recovery package. He hinted that the council will discuss as options the so-called carbon border adjustment mechanism (or ‘tax’ – CBT), a digital levy and the financial transaction tax (FTT) – an initiative that is particularly close to Mr. Scholz’s heart. He expressed explicit optimism on the prospect of reaching an agreement on FTT now, in the Covid context, despite the file having been in negotiations since 2013. Mr Scholz also expressed optimism about reaching international agreement on minimum taxation and at least a blueprint of an agreement on digital taxation.

When asked about public country by country reporting (CBCR), Mr Scholz appeared less hopeful. He contended that the German government coalition does not have a unified position on this. He hinted that Germany might seek ‘further clarity’ on current country positions on CBCR (recently for example Austria gave a strong signal of being now in favour), but he did not commit to bringing the file on ministerial agendas.

The German discussion documents ahead of the 11 September ministerial meeting give indications of some very interesting debates. Finance ministers were invited to express their views on the following:

  • How can the EU best react to the results of the OECD process for pillar one, including on reallocation of taxing rights?
  • How to achieve a ‘common approach’ and a level playing field in the EU on effective minimum taxation?
  • What role should the EU’s Code of Conduct Group on Business Taxation play in ‘the future EU architecture for fair and effective taxation’? Which elements of its mandate would require amending to this end?
  • Which VAT-related measures from the Commission’s 15 July action plan for fair and simple taxation are of particular importance?
  • More discussion on FTT, ‘digital levy’ and a common corporate tax base (CCTB) as EU budget contributions by ‘those stakeholders who benefit most from the EU Single Market’

These points were covered in a mere 90 minute session on the morning of 12 September. I look forward to reporting back next time with some indications of how the discussion went.

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