CFE’s Tax Top 5 – May 2019



EU Election Provisional Results

The European Parliament has published the provisional results of the EU elections held across the European Union Member states from 23 – 26 May 2019:

With the turnout at historic highs, approximately 51% of the registered EU citizens voted, making European democracy the single winner of this election. The above composition of the European Parliament is based on provisional or final national results in all Member States, based on the structure of the outgoing Parliament. Since 2009, according to Parliament’s rules of procedure, a parliamentary political group consists of at least 25 Members elected in at least seven Member States.

On basis of the above arithmetic, the political division of the European Parliament is as follows:

• EPP – European People’s Party (Christian Democrats) 180 (23.97%)
• S&D – Progressive Alliance of Socialists and Democrats: 145 (19.31%)
• ALDE&R – Liberals and Democrats + Renaissance + USR PLUS: 109 (14.51%)
• Greens/EFA – Greens/European Free Alliance: 69 (9.19%)
• ECR – European Conservatives and Reformists Group: 59(7.86%)
• ENF – Europe of Nations and Freedom Group: 58 (7.72%)
• EFDD – Europe of Freedom and Direct Democracy Group: 54 (7.19%)
• GUE/NGL – European United Left – Nordic Green Left: 39(5.19%)
• NI – Non-affiliated Members: 8 (1.07%)
• Others – Newly elected Members not allied to any of the political groups set up in the outgoing Parliament: 30 (3.99%)

The EU Parliament in 2014 informally introduced the Spitzenkandidat system, a lead candidate for the EU Commission presidency, allowing the largest parliamentary group to nominate the Commission President. Considering that the two largest groups no longer benefit from clear majority in the new Parliament, and with the opposition to the Spitzenkandidat process from French President Macron, it remains to be seen how will the process evolve politically and what type of coalitions could be formed. EU leaders meet on Tuesday to discuss the top EU roles to be reappointed for the next mandate.

According to the Treaties, Member states formally nominate EU Commission presidency candidate, but in doing so, they must take account of the European election results. The European Parliament approves the Commission President with an absolute majority (half of the MEPs plus one).


ECOFIN Meeting on Digital Taxation & the EU ‘Blacklist’

At its meeting on 17 May, the Economic and Social Affairs Council discussed the digital taxation in the EU and international context. Ministers reopened the discussion on the long-term comprehensive solutions addressing both the challenges of taxation in the digitalised economy and broader issues related to the allocation of taxing rights and tax competition. Considering the divergent views among EU Member states, the Council debate was without any firm conclusions. The Council presidency and the Commission presented the main outcomes of the G20, IMF and World Bank spring meetings and finalised the preparations for the June G20 meeting in Japan, were the OECD is expected to publish a detailed programme on digital taxation. The OECD task force aims at producing the final report by 2020.

The Council also decided to amend the EU list of non-cooperative jurisdictions for taxation purposes, removing Aruba, Barbados and Bermuda from the EU blacklist. As a result, 12 jurisdictions remain on the list of non-cooperative jurisdictions: American Samoa, Belize, Dominica, Fiji, Guam, Marshall Islands, Oman, Samoa, Trinidad and Tobago, United Arab Emirates, US Virgin Islands and Vanuatu. The Council will continue to regularly review and update the list in 2019, whilst it has requested a more stable process as from 2020 (two updates per year).

The Council adopted conclusions on the outcomes of the in-depth reviews and the implementation of the 2018 country-specific recommendations in the framework of the European Semester exercise for 2019. The country reports indicate that all member states have made progress in implementing country-specific recommendations, although the rate of progress varies.

“This Time I Am Voting” – European Parliament Elections 2019

The European elections will take place on 23-26 May 2019 giving all EU citizens with a right to vote the opportunity to select who will represent them in the European Parliament. CFE Tax Advisers Europe is among the partner-organisations of the European Parliament that promotes the importance of voting on this election. More information on the voting process can be found at the European Parliament’s “This time I am voting” page, a non-partisan platform dedicated to promote the importance of EU citizens in taking an active role on deciding the future of the European Union.

On 15 May 2019 the Presidential Debate between the lead candidates took place in the European Parliament in Brussels, and the EU citizens had the opportunity to discover where the candidates stand on a range of issues. It transpires from this debate, and the manifestos of all candidates, that taxation policy will remain a priority in the next EU Commission agenda. All candidates were in agreement of the need for EU-wide digital tax to avoid fragmentation of the Single Market. For a 10-minute recap of where candidates stand on taxation policy, please follow this link.

DG TAXUD Survey on Dissemination Tools in the Area of Taxation

The European Commission has launched an online survey targeting users of DG TAXUD’s dissemination tools. The Commission enquires about the stakeholders’ experiences of use of each of the DG TAXUD’s dissemination tools, such as the user’s experiences with the Taxes in Europe Database, the Taxation Trends Report, the Tax Policies in the EU Survey and the Taxation Papers series.

The evaluation aims to help the Commission to improve the organisational and communication aspects of those tools, and will strengthen the evidence base for the dissemination tools at EU level. We invite you to partake in the survey and help the European Commission get better understanding of the use of these platforms.

CFE Forum on 06 June 2019 in Brussels – Limited Places Available

The CFE Tax Advisers Europe Forum will take place on 06 June 2019 in Brussels, this year entitled “Creating Tax Certainty in an Uncertain World: Double Taxation, Tax Rulings & Dispute Resolution Processes”.

An excellent line-up of speakers will discuss and analyse current means of avoiding tax disputes and exame the OECD and EU dispute resolution mechanisms. Tax certainty issues related to the State Aid challenges of tax rulings and advance pricing agreements (APAs) will also be discussed.

Interested attendees from the EU institutions, other public institutions, Member states’ representations to the European Union and journalists can attend free of charge. Please contact the CFE Brussels office for more details at [email protected]

There are a few places available, register now to avoid disappointment! More details about the Forum programme and registration process can be found here.

OECD Publishes Tax Morale Submissions

The OECD has published the submissions received in response to the public consultation on the draft report on tax morale.

The consultation was launched following a Public Consultation Document which updates previous OECD research on tax morale in individuals and, additionally, presents a new business section, using OECD tax certainty data to discuss business tax morale in developing countries. The forthcoming publication, entitled “What is driving tax morale? An empirical analysis on social preferences and attitudes towards taxation” is expected to be published later in 2019.

The comments submited from CFE on behalf of the Global Tax Advisers Platform can be viewed on our website.

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia



2019 EU Commission Presidential Debate to be held in Brussels on 15 May 2019

The European Broadcasting Union will be live broadcasting the 2019 Eurovision Presidential Debate between the lead candidates to be the next president of the European Commission. The debate will take place in the European Parliament in Brussels on 15 May 2019 at 21:00 CET and can be followed live online.

The candidates taking place in the debate are Nico Cué (Spain, European Left), Ska Keller (Germany, European Green Party), Jan Zahradil (Czech Republic, Alliance of Conservatives and Reformists in Europe), Margrethe Vestager (Denmark, Alliance of Liberals and Democrats for Europe), Manfred Weber (Germany, European People’s Party) and Frans Timmermans (The Netherlands, Party of European Socialists).

CFE has partnered with the European Parliament to promote the EU elections scheduled for 23 – 26 May, and EU citizens with a right to vote can directly elect Members of the European Parliament from their constituencies. European Parliament’s “This time I am voting” page has more information on the voting process.

EU Commission Publishes Intra-EU VAT Refunds Study

The EU Commission has published a study concerning domestic and cross-border intra-EU VAT refunds, examining in detail the current processes for tax administrations and taxpayers for VAT refund claims.

The report examines Member States’ implementation of the directive for cross-border intra-EU refunds into national legislation, and CJEU case law concerning domestic VAT refund claims. It also highlights practical issues stemming from implementation issues, particularly from the perspective of taxpayers and tax advisers in claiming VAT refunds in cross-border situations.

The results of the study will be used by the EU Commission to inform future action to address inconsistencies and implementation issues related to the cross-border intra-EU refunds directive.

Ireland and The Netherlands Set Out Position on Tax Sovereignty

At a joint press conference following a meeting in The Hague, Leo Varadkar and Mark Rutte stated that the countries “strongly believe that tax is a sovereign issue, that individual member states should decide for themselves.” The leaders met ahead of the EU summit which took place in Sibiu, Romania, concerning the future of the EU.

Leo Varadkar reiterated that both countries support global solutions to issues surrounding taxation of large corporations, and that the OECD was making good progress on finding a fair method to tax digital entities.

The comments appear to indicate that Ireland and The Netherlands will not be supportive of any further attempts to revive the EU digital tax proposals, or the plan as outlined in the Commission’s January 2019 communication proposing that decision making on tax matters could be modified to take place by way of qualified majority voting, rather than by unanimous agreement.

Council High Level Working Party (Taxation) Discuss Digital Taxation & FTT

The Council of EU High Level Working Party (Taxation) convened a meeting on 7 May in Brussels, to discuss significant taxation issues faced by the EU.

The Working Party exchanged views on international digital taxation in preparation for ECOFIN discussions, the state of play of Financial Transaction Tax, discussed a Commission Communication on energy/climate and taxation, transfer pricing and the Belt and Road Initiative conference held in China in April this year.

In relation to indirect taxation matters, the group examined excise duties on alcohol in relation to a submission to ECOFIN concerning amendments to the Council Directive, as well as the common system of VAT in relation to SMEs which is anticipated to be agreed in the coming month.

HMRC Must Delete Files Following GDPR Breach

The UK tax authority, HM Revenue and Customs, has been found by the Information Commissioner’s Office to have breached data protection rules set out in the EU General Data Protection Regulation by failing to give users an option to opt out of voice identification software.

Following investigation into a complaint lodged by privacy campaigner Big Brother Watch that the biometric data was not held in compliance with GDPR, the IOC held there had been a significant breach of data laws and gave HMRC until 5 June to delete the biometric data voice records of approximately 5 million users.

Big Brother Watch director, Silkie Carlo, said: “This is a massive success for Big Brother Watch, restoring data rights for millions of ordinary people around the country. To our knowledge, this is the biggest ever deletion of biometric IDs from a state-held database. This sets a vital precedent for biometrics collection and the database state, showing that campaigners and the ICO have real teeth and no government department is above the law.”

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia


EU Commission Presidency Candidates: Taxation Will Remain High Up on EU’s Agenda

In the run up to the EU elections, Politico Europe, Maastricht University and the European Youth Forum organised the Maastricht debate between the likely candidates for the post of EU Commission president. The debate was particularly aiming to target students and young Europeans, and in addition to digitalisation, climate change and sustainability, taxation was among the topics that raised interest and debate.

Bas Eickhout (Netherlands, The Greens), Jan Zahradil (Czech Republic, Alliance of Conservatives and Reformists in Europe), Frans Timmermans (The Netherlands, Socialists & Democrats), Guy Verhofstadt (Belgium, Alliance of Liberals and Democrats for Europe) and Violeta Tomić (Slovenia, Party of the European Left) met in Maastricht, with the notable absence of the Conservative frontrunner, Manfred Weber (Germany, European People’s Party) who chose to attend instead a Munich event celebrating the 80th birthday of Theo Waigel, a former German finance minister. Weber did attend another debate in Florence subsequently, where much of the discussions were revolving around the collective security and the need for a separate European army.

All candidates at the Maastricht debate expressed their support for more regulation of the American tech companies operating in the Single Market as a matter of priority. Considering the public interest in the regulatory and enforcement powers of the European Commission vis-a-vis these businesses, it is likely that many related policy areas such as taxation, copyright and data protection will continue to be high-up on the next Commission’s agenda.

With great power more responsibility should have come, apparently. All candidates said that tech companies are misusing their powers in ways that undermine the European democracy, such as failing to prevent hate speech online, harming competition in the Single Market and not paying their fair share of tax. Frans Timmermans stated that the EU must act to tax the big tech companies and to ensure that citizens retain ownership and control over their personal data. Member states “are getting arm-twisted by large companies and they can’t take them on individually anymore. These tech companies use the data you give them for free and make billions of it. Such data needs to be owned by you and they need to pay more tax”, Timmermans told the young audience. Guy Verhofstadt called for one European tech regulator to be established and to resist efforts by American companies to influence EU rules. “It’s not for Mark Zuckerberg to tell us what’s right and wrong,” Verhofstadt said.

Violeta Tomić, speaking for the European Left said that “all tax havens for companies must be abolished within the EU”, arguing that corporate fair taxation is essential to mitigate the fact that the young Europeans are the first generation to be financially worse off compared to their parents.

Separately, the Austrian Chancellor Sebastian Kurz, who is the youngest EU prime minister, said that what the EU really needs in “is a generational change at the top”, in addition to a new EU treaty.

The EU elections are scheduled for 23 – 26 May, and EU citizens with a right to vote can directly elect Members of the European Parliament from their constituencies. European Parliament’s “This time I am voting” page has more information on the voting process.

EU Commission Publishes Letter of New ‘LuxLeaks’ Related Inquiry Against Luxembourg

The EU Commission has published on 3 May the decision which opened an in-depth investigation into whether tax rulings granted by Luxembourg to Huhtamӓki may have given the company selective advantage over competitors, in breach of the EU State aid rules. Huhtamӓki has its headquarters in Finland, but operates a group structure. The Commission will investigate three tax rulings of the Luxembourg government to the Luxembourg-based entity of the company, Huhtalux. One of these rulings was disclosed as part of the Luxleaks investigation.

The Luxembourgish tax rulings approved the tax treatment of intra-group financing structures in place, whereby Huhtalux received interest-free loans from a company in the group, then used this to finance other companies in the group through interest-bearing loans. The rulings allowed the Luxembourg company to deduct the interest payments from the interest-free loans, interest which was not actually paid, and reduce the company’s tax base. The Commission believes the ruling approving this deduction has resulted in a selective advantage being conferred on the group as compared with stand-alone companies.

Commenting, EU Competition Commissioner Margrethe Vestager, said of the investigation: “Member States should not allow companies to set up arrangements that unduly reduce their taxable profits and give them an unfair advantage over their competitors. The Commission will carefully investigate Huhtamäki’s tax treatment in Luxembourg to assess whether it is in line with EU State aid rules.”

The Czech Republic to Introduce Digital Tax

The Czech Republic has announced plans to introduce digital tax of 7% on digital companies, using targeted advertising and sale of personal data as a tax base. In addition, the Czech Republic will tax the sharing economy platforms, expecting estimated revenue of around 5 billion Czech crowns. Frustrated with the lack of progress at EU and OECD level, the Czech Republic decided to propose legislation with modified scope compared to the original EU Commission proposal, expecting the tax to be introduced by 2020 the latest, depending on the legislative process.

“The digital tax will apply to the most important global players and responds to the failure of the EU-level negotiations so far and the slow progress of the global solution in the OECD. The discussion is not about whether to introduce this taxation, but from when, in what form and in what amount. The Czech Republic will be among the countries that have found answers to these questions. We are sending a clear political signal to accelerate international cooperation”, the Czech Minister of Finance Alena Schillerova stated.

UN Tax Committee & ECOSOC Meetings Update

The UN Committee of Experts on International Cooperation in Tax Matters (“UN Tax Committee”) convened on 23-24 April 2019 to discuss the update of the UN Nations Model Double Taxation Convention between Developed and Developing Countries, as well as the next update of the UN Transfer Pricing Manual. The session was held alongside the ECOSOC Special Meeting on International Cooperation on Tax Matters, which discussed taxation and inequality.

The ECOSOC members examined the potential of fiscal systems to reduce inequalities: “As we embark on this great collective journey, we pledge that no one will be left behind. Recognising that the dignity of the human person is fundamental, we wish to see the goals and targets met for all nations and peoples and for all segments of society. And we will endeavour to reach the furthest behind first.”, an excerpt from the 2030 Agenda for Sustainable Development proclaims. In 2007, CFE obtained consultative status with the ECOSOC. As such, the CFE is able to attend meetings of the Committee of Experts on International Cooperation in Tax Matters and communicate its views on taxation issues that are raised for discussion.

ITI/ Harvard Kennedy School Global Tax Policy Conference in Dublin, 21-23 May 2019

The Irish Tax Institute (ITI), a member organisation of CFE Tax Advisers Europe, organises a global tax policy conference with distinguished speakers from the OECD, practice, business and academia. The conference is an excellent opportunity to listen to and engage with international colleagues who are at the frontier of global tax policy. Insightful commentary and open discussions will provide you with the latest news on the future of tax, both in Europe and internationally. To view the programme and register please visit the ITI website.

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia