Euro Tax Flash from KPMG's EU Tax Centre

Euro Tax Flash from KPMG's EU Tax Centre

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Moscovici presents the Commission’s working programme for 2016 on corporate tax

Commission’s working programme – anti-BEPS Directive – Country-by- Country reporting – CCCTB – FTT – Minimum Effective Taxation

On January 11, 2016 Commissioner Moscovici addressed the Economic and Monetary Affairs Committee (ECON) and the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE 2) of the European Parliament in a joint meeting. This was a first exchange of views on the European Commission's working programme for 2016 in the corporate tax area, including the upcoming proposals on anti-corporate tax avoidance.

Background

On January 11, 2016 Commissioner Moscovici addressed the Economic and Monetary Affairs Committee (ECON) and the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE 2) of the European Parliament in a joint meeting. This was a first exchange of views on the European Commission's working programme for 2016 in the corporate tax area, including the upcoming proposals on anti-corporate tax avoidance.

Details of the Commission’s programme

During his introductory speech, Commissioner Moscovici reiterated the strong political commitment of the Commission to play a major role in Europe’s fight against tax evasion and tax fraud. He also clarified the next steps in the Commission’s legislative plans for corporate taxation this year, underlining that work is progressing on CCCTB, Transfer Pricing and the Interest and Royalties Directive.

Anti-BEPS Directive
On 27 January 2016, the Commission will present a new anti-tax avoidance package.
 

  • The package will go beyond the OECD recommendations on BEPS. It is a comprehensive package including both legislative proposals to address BEPS issues (especially on non-public reporting, GAAR, and anti-hybrid rules, see ETF 269) and a pan- European strategy vis-à-vis third countries on tax good governance.

  • The new Dutch presidency already expressed the wish to adopt the anti-BEPS directive before the end of its 6-month mandate (see the Presidency’s programme). On this basis, Moscovici expects a strong cooperation between the Commission and the Presidency.

  • Generally, he expressed his confidence that there will be a strong political support to adopt the anti-BEPS Directive, as agreement on most features have already been reached at OECD level and by the G20.
    When challenged by some members of the European Parliament (MEPs) on the quality of the compromise reached by the Council on automatic exchange of tax rulings, he expressed his satisfaction.


CCCTB
As already reported on several occasions, Moscovici repeated that the project for a Common Consolidated Corporate Tax base (CCCTB) will be re-launched in 2016. Proposals will be presented to implement a. 2-step approach. The Commission is currently conducting a public consultation on the CCCTB proposal as a whole (see ETF 260).

Country-by-Country Reporting 
The Commission’s package to be presented end of January should already entail a proposal to implement Country-by-Country (CBC) reporting to the local tax administrations (i.e. implementation of the OECD recommendations on BEPS).
Impact assessments addressing inter alia the issues relating to EU companies’ competitiveness in case of public CBC reporting and the possibility to implement a Fair Taxpayer Label should be finalized by the Commission’s services by the end of March 2016. Based on this analysis, the Commission should present additional proposals in 2016.


During the joint meeting, Moscovici expressed his personal preference for public reporting standards within the European Union that would go beyond the OECD recommendations. When questioned by certain MEPs, he stated he does not share the views that public CBC reporting could represent a competitive disadvantage for EU companies, if not implemented at a global level. Nevertheless, he also underlined that any proposals made by the Commission on CBC reporting will have to take into account the impact assessment, which is yet to be finalized, advocating for an approach that is “determined but not irresponsible”.

Minimum Effective Taxation 
Minimum effective taxation was discussed at the last informal ECOFIN. Moscovici’s personal opinion is that there is no need for a minimum tax rate to achieve fair and effective taxation, but that it is crucial to ensure effective taxation, i.e. taxation of profits where they are generated.

Financial Transaction Tax 
The implementation of an EU-wide Financial Transaction Tax (FTT) under the enhanced cooperation mechanism was shortly discussed, including in relation to the debate on the EU’s own resources. Moscovici underlined that the 10 participating countries have committed to find a compromise on the open issues by the end of June 2016 (see ETF 267). Although a number of issues such as the tax rate, or the destination of the tax still need to be discussed, Moscovici strongly believes that FTT will become a reality.

State Aid 
Moscovici refused to comment on the recent state aid decisions (e.g. on the Belgian Excess Profit tax rulings) or in respect of questions asked by MEPs on e.g. procedural state aid rules, arguing that such questions do not fall within the scope of his mandate. Commissioner Verstager is expected to be interviewed by the TAXE 2 Committee in the coming weeks.

Addressing the ECON report
On December 16, 2015 the European Parliament adopted the ECON’s report entitled “Bringing transparency, coordination and convergence to Corporate Tax policies in the Union” (see ETF 268). Under this legislative own-initiative procedure, the Commission has three months to respond to the recommendations made by the European Parliament, either with a legislative proposal or with an explanation for not doing so. Moscovici informed the MEPs that the Commission will address the report’s recommendations in February 2016.

Other issues
VAT fraud will also be discussed during 2016 and the Commissionshould present a VAT package in the coming months.The fight against financing of terrorism was briefly mentioned duringthe discussions with the MEPs. Moscovici reported that the Commission is ready to make proposals upon request of the Council.

EU Tax Centre Comment

Moscovici’s comments should be interpreted in light of the EU’s overall focus on aggressive tax planning and the Commission’s agenda to tackle tax evasion and avoidance. Moscovici highlighted the strong political support the Commission is receiving from the European Parliament, and how such cooperation helps maintain a political momentum in the fight against aggressive tax planning.

Should you require further assistance in this matter, please contact the EU Tax Centre or, as appropriate, your local KPMG tax advisor.

Robert van der Jagt
Chairman, KPMG’s EU Tax Centre and Partner, Meijburg & Co
vanderjagt.robert@kpmg.com

Barry Larking

Director EU Tax Services, KPMG’s EU Tax CentreDirector, Meijburg & Co
larking.barry@kpmg.com

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