2021 is promising to be another tax-heavy year for the EU policy scene. A number of key tax initiatives are expected from the European Commission this year, while the Council and the European Parliament are also preparing for a taxing year ahead.
European Commission
June is also the Commission’s self-set deadline for issuing a proposal on digital taxation (pillar one), presumably for minimum taxation (pillar two) as well. The details of the Commission’s plans are probably not known to the Commission itself either, as the direction will depend on whether the OECD has reached an agreement by that point.
On the European Commission’s side, green and digital will continue to dominate the agenda as has been previously reported. As a reminder, June will be a key month, as that is when the Commission is expected to issue its proposals on a carbon border adjustment mechanism (or ‘tax’) and revision of the EU’s Energy Tax Directive.
We already know that, without an OECD agreement, the Commission will move ahead with a standalone ‘digital levy’ proposal. And even with an OECD agreement, the Commission is mulling to what extent and how to go even further than what that agreement entails, in particular with regard to ensuring that a part of the digital tax income also flows into the EU’s own coffers. For minimum taxation, the Commission is likely to issue a stand-alone proposal, but is also considering the need to make targeted revisions into the Anti-Tax Avoidance Directive (ATAD) and the Interest and Royalties Directive.
In addition, the Commission is launching yet another, the 8th, revision of the Directive on Administrative Cooperation (DAC). This revision will focus on enabling the exchange of information on crypto-assets and e-money for taxation purposes. A public consultation will be launched in February, with the proposal to follow in the second half of 2021.
And finally, the Commission’s communication on business taxation for the 21st century is now scheduled for February. The Commission previously indicated this would be due on 3 February, but it will probably be delayed by a few weeks after that.
The Council
On the Council’s side, Portugal took over the Council’s rotating presidency from Germany in January. Readers may recall the German presidency’s ambitions of advancing on the financial transaction tax (FTT) and public country by country reporting (CBCR). In the end, neither progressed much during Germany’s term, but Portugal has renewed commitments to try to unlock both files.
In March, EU leaders will meet to take stock of OECD progress on international tax reform and will, possibly, provide further political guidance to the Commission on how to proceed. Portugal will have to work hard to find balanced wording for a statement that can be unanimously supported by all 27 EU member states.
European Parliament
And finally, on the European Parliament’s side, MEPs have found potential new leverage on tax in the EU’s trade agreement with the UK, which is yet to be ratified by the Parliament. At a hearing of the Parliament’s ECON Committee on 11 January, a number of MEPs raised concerns about the ambiguity of the anti-tax dumping elements of the agreement.
The agreement commits the UK to following existing international OECD standards on exchange of information on financial accounts, cross-border tax rulings, CBC reports between tax administrations, and potential cross-border tax planning arrangements, as well as rules on interest limitation, controlled foreign companies and hybrid mismatches.
Moreover, the agreement obliges the UK to maintain the public CBCR requirement for credit institutions and investment firms that exists in EU law (capital requirements Directive, CRD IV). However, some MEPs are worried that the UK still has room to engage in aggressive tax competition with the EU and asked the Commission how this can be prevented.
At the hearing, the European Commission replied that if the UK engages in a model that is ‘very aggressive in terms of tax competition’, the EU can retaliate by restricting its access to the single market. Moreover, the Commission representative highlighted that UK crown dependencies can be subjected to the EU’s screening of non-cooperative third jurisdictions. We will know more in the coming days whether the Parliament will be satisfied by these provisions.
2021 is promising to be another tax-heavy year for the EU policy scene. A number of key tax initiatives are expected from the European Commission this year, while the Council and the European Parliament are also preparing for a taxing year ahead.
European Commission
June is also the Commission’s self-set deadline for issuing a proposal on digital taxation (pillar one), presumably for minimum taxation (pillar two) as well. The details of the Commission’s plans are probably not known to the Commission itself either, as the direction will depend on whether the OECD has reached an agreement by that point.
On the European Commission’s side, green and digital will continue to dominate the agenda as has been previously reported. As a reminder, June will be a key month, as that is when the Commission is expected to issue its proposals on a carbon border adjustment mechanism (or ‘tax’) and revision of the EU’s Energy Tax Directive.
We already know that, without an OECD agreement, the Commission will move ahead with a standalone ‘digital levy’ proposal. And even with an OECD agreement, the Commission is mulling to what extent and how to go even further than what that agreement entails, in particular with regard to ensuring that a part of the digital tax income also flows into the EU’s own coffers. For minimum taxation, the Commission is likely to issue a stand-alone proposal, but is also considering the need to make targeted revisions into the Anti-Tax Avoidance Directive (ATAD) and the Interest and Royalties Directive.
In addition, the Commission is launching yet another, the 8th, revision of the Directive on Administrative Cooperation (DAC). This revision will focus on enabling the exchange of information on crypto-assets and e-money for taxation purposes. A public consultation will be launched in February, with the proposal to follow in the second half of 2021.
And finally, the Commission’s communication on business taxation for the 21st century is now scheduled for February. The Commission previously indicated this would be due on 3 February, but it will probably be delayed by a few weeks after that.
The Council
On the Council’s side, Portugal took over the Council’s rotating presidency from Germany in January. Readers may recall the German presidency’s ambitions of advancing on the financial transaction tax (FTT) and public country by country reporting (CBCR). In the end, neither progressed much during Germany’s term, but Portugal has renewed commitments to try to unlock both files.
In March, EU leaders will meet to take stock of OECD progress on international tax reform and will, possibly, provide further political guidance to the Commission on how to proceed. Portugal will have to work hard to find balanced wording for a statement that can be unanimously supported by all 27 EU member states.
European Parliament
And finally, on the European Parliament’s side, MEPs have found potential new leverage on tax in the EU’s trade agreement with the UK, which is yet to be ratified by the Parliament. At a hearing of the Parliament’s ECON Committee on 11 January, a number of MEPs raised concerns about the ambiguity of the anti-tax dumping elements of the agreement.
The agreement commits the UK to following existing international OECD standards on exchange of information on financial accounts, cross-border tax rulings, CBC reports between tax administrations, and potential cross-border tax planning arrangements, as well as rules on interest limitation, controlled foreign companies and hybrid mismatches.
Moreover, the agreement obliges the UK to maintain the public CBCR requirement for credit institutions and investment firms that exists in EU law (capital requirements Directive, CRD IV). However, some MEPs are worried that the UK still has room to engage in aggressive tax competition with the EU and asked the Commission how this can be prevented.
At the hearing, the European Commission replied that if the UK engages in a model that is ‘very aggressive in terms of tax competition’, the EU can retaliate by restricting its access to the single market. Moreover, the Commission representative highlighted that UK crown dependencies can be subjected to the EU’s screening of non-cooperative third jurisdictions. We will know more in the coming days whether the Parliament will be satisfied by these provisions.
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