ETAF statement on the DAC8 proposal
On Thursday 30 March, ETAF replied to the European Commission’s public consultation on the proposal for an eighth amendment to the Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC8). While we welcome the main purpose of this proposal, which is to extend the mandatory automatic exchange of information between EU Member States to income earned through crypto assets, our main concern relates to the proposed minimum penalties. The DAC8 proposal introduces a set of different minimum penalties depending on the infringement, the turnover of the non-compliant entity and on whether it concerns a company or an individual whereas the current Directive only foresees that Member States shall lay down rules on penalties that should be “effective, proportionate and dissuasive”. In our feedback, we rejected the argument according to which the differences in the level of penalties between Members States would jeopardize the efficiency of the DAC. Moreover, we expressed some doubts about the legality of the determination of penalties levels by the European Commission and highlighted that the proposed minimum penalties are disproportionate as they would in reality amount to the maximum penalty for the vast majority of Member States. On a more general note, ETAF also pointed out that the successive changes to the Directive on administrative cooperation in the field of taxation (DAC) have been adopted at an incredible speed these last years and that the tax professionals have had difficulties to keep up with the fast-changing rules and assimilate them properly, in particular in small tax firms.
MEPs adopt their position on the AML package
On Tuesday 28 March, MEPs from the ECON and the LIBE committees of the European Parliament adopted their position on the AML Regulation, the sixth AML Directive and the proposal establishing an EU AML authority (AMLA). According to the adopted texts, entities, such as banks, assets and crypto assets managers, real estate agents and high-level professional football clubs, will be required to verify their customers’ identity, what they own and who controls the company. They will also have to establish detailed types of risk of money laundering and terrorist financing in their sector of activity, and transmit the relevant information to a central register. The Parliament text also clarifies that the legal privilege conferred to legal professionals should not be used to cover illegal practices and help clients to launder money. Following a recent Court of Justice ruling, MEPs decided that persons with legitimate interest, such as journalists, reporters, any other medias, civil society organisations, higher education institutions, should be able to access beneficial ownership registers, including the interconnected central registers. In their position, MEPs also significantly extend AMLA’s powers. Among other things, they wish to give the new agency the competence to drawing up lists of high-risk non-EU countries and to ensure a stronger oversight of the supervisors in the non-financial sector. In particular, according to the EP’s text, AMLA should be able to establish and participate in supervisory colleges for the biggest cross-border obliged entities from the non-financial sector. The European Parliament will be ready to start negotiations with the Council of the EU after a confirmation vote during the plenary session in April.
EU Tax Observatory releases new revenues estimates from Amount A of Pillar One
On Monday 27 March, the EU Tax Observatory published a new working paper that provides country-by-country estimates of net revenues that amount A of Pillar One (reallocation of taxing rights) would raise. According to the paper, amount A could bring in about 24 billion € in annual gross revenues, which decreases to 15.6 billion € after the elimination of double taxation. The EU would see a net revenue gain of 2.6 billion € while the United States and China will collect most of the amount A revenues. Overall, developed countries would collect an additional 0.17% of their total taxes, while developing and least-developed countries would increase by 0.15% of their total taxes, the paper says. Even if they acknowledge that amount A is a milestone in the reform of the global tax system, being the first agreement to introduce profit apportionment on such a global scale, the authors conclude that the current design of amount A limits the extent of taxing rights redistribution and does not necessarily generate more tax revenues than digital taxes. According to them, this can be explained by the high amount of global revenue required for firms to be under the scope of the reform which reduces the pool of eligible MNEs, by the 10% profitability requirement which excludes some large MNEs even when they are large enough in size and by the reallocation parameter of 25%.
New EP study on the effectiveness of windfall taxes
The Policy Department for Economic, Scientific and Quality of Life Policies of the European Parliament published on Wednesday 29 March a new study requested by the FISC subcommittee on “the effectiveness and distributional consequences of excess profit taxes or windfall taxes in light of the Commission’s recommendation to Member States”. The aim of this study is to analyse the effectiveness of the revenue cap on inframarginal technologies and the solidarity contribution for the fossil fuel sector introduced following the adoption of the Council Regulation of 6 October 2022 on an emergency intervention to address high energy prices. The authors found that the two measures fulfil the objective of collecting tax revenue. Based on profit data from 2021, the estimated revenue gains from the solidarity contribution amount to 4.4 billion € for the selected sample of firms. Since the Council Regulation is silent on the measure to distribute the collected revenue to vulnerable households or hard-hit firms, Member States are able to tailor the measures according to their country specific needs. However, the authors point out that, according to prior research, untargeted measures are a rather expensive way of reaching poor households. Moreover, in their view, incentives for reducing energy consumption should be restored as soon as possible. A coordinated introduction of excess profit taxes is preferable to reduce the scope for tax arbitrage, they say. Uncoordinated measures of EU Member States risk inducing diverging outcomes in neighbouring markets that are not grounded in fundamentally different economic conditions, they also warn.
EPPO asks for more cross-border power
Speaking before the FISC subcommittee of the European Parliament on Tuesday 28 March, the European Chief Prosecutor Laura Kövesi advocated for an extension of the European Public Prosecutor’s Office (EPPO) competence to facilitate smoother cross-border work and information sharing. Based on the latest Europol’s estimates, VAT carousel fraud or missing trader intra community fraud is the most profitable crime in the EU. It costs around 50 billion € in tax losses annually to Member States, she recalled. To better fight VAT fraud, Laura Kövesi said the EPPO needs a direct cooperation channel with Eurofisc without having to go through the Member States or other EU bodies or agencies to access the necessary data. The sooner the information is shared, the higher the chances are of success, she pointed out. During the hearing, FISC MEPs discussed the main legal and administrative obstacles to the fight against VAT carousel fraud as well as how the European Parliament and the EPPO can better work together to put an end to VAT fraud in the EU.
IESBA and IAASB merge in a new international foundation for ethics and audit
The International Ethics Standards Board for Accountants (IESBA) and the International Auditing and Assurance Standards Board (IAASB) announced on Monday 27 March their merging in a new entity called the International Foundation for Ethics and Audit (IFEA). The objective was to move in a new entity, independent from the International Federation of Accountants (IFAC), in order to strengthen the independence of the international standard-setting system for ethics, audit and assurance, they explained in a press release. Under the new structure, IESBA Chair Ms. Gabriela Figueiredo Dias and IAASB Chair Mr. Tom Seidenstein serve as Co-CEOs of the Foundation. On this occasion, the IFEA also launched its new website: www.ethicsandaudit.org.
Disclaimer
This newsletter contains information about European tax policies and developments gathered from official documents, hearings, conferences and the press. It does not reflect the official position of ETAF nor should it be taken as a written statement on behalf of ETAF.
