On Monday 19 February, Friedrich Merz, the Chair of the CDU, reportedly proposed to the European People’s Party (EPP) that the current President of the European Commission, Ursula von der Leyen, be designated as the lead candidate (so-called “Spitzenkandidat”) at the European Party Congress on 6 and 7 March in Bucharest, with a view to the European elections in June. Mr. Merz praised the successes achieved by the ‘von der Leyen’ Commission since 2019, in particular its ability to ensure unity in the face of multiple crises, such as the COVID-19 pandemic and Russian military aggression in Ukraine. Ms. von der Leyen is, however, reportedly not seeking a seat in the European Parliament. If the EPP wins the European elections in June, Ms. von der Leyen will be eligible to preside over the European Commission for a further 5 years, provided she is nominated by the European Council and secures a majority in her favour in the European Parliament. Other political parties are also making up their mind about their “Spitzenkandidat”. Nicolas Schmidt is reportedly the only candidate for the Party of European Socialists (PES) while Terry Reintke and Bas Eickhout have been nominated  co-Spitzenkandidaten for the European Greens Party (EGP) and Walter Baier is set to be nominated for the European Left (EL).

Frankfurt will host the future EU Anti-Money Laundering Authority

The ambassadors of the Member States to the European Union and the 14 shadow rapporteurs of the European Parliament decided, on Thursday 22 February, that the future Anti-Money Laundering Authority (AMLA) will be based in Frankfurt. Co-legislators had the choice between applications from nine Member States to host AMLA: Brussels, Frankfurt, Dublin, Madrid, Paris, Rome, Riga, Vilnius and Vienna. The Commission prepared a preliminary assessment of these applications and all nine applicants presented their application in joint hearings that took place in the European Parliament on 30 January 2024. The decision was taken following a vote that included, for the first time, both institutions, with 27 votes each. Frankfurt received 28 votes in the first round, compared with 16 for Madrid, 6 for Paris and 4 for Rome. The agreement on the location of the seat was the last element needed to conclude the negotiations on the Commission’s package of four legislative proposals to strengthen the EU’s anti-money laundering and countering terrorism financing rules.  The location of the seat will be included in the AMLA Regulation and formally adopted by co-legislators as part of the text. The Commission will now be responsible for ensuring the procedural steps relating to the establishment and initial operations of the Authority until mid-2025, which is the date on which the Authority should become operational.

Enrico Letta shares with MEPs his intermediate findings on the Future of the Single Market

On Thursday 22 February, MEPs from the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO) held a second exchange of views with Enrico Letta, former Italian head of government and President of the Jacques Delors Institute, on the future of the Single Market. Mr Letta has been tasked with drafting a High-Level report on this topic and is set to present it on 17 April 2024. After 9 hearings in 9 committees in the EP, many meetings with all EU institutions, meetings in the Member States and with stakeholders, he presented his intermediate findings. He enumerated four sectors which are, at the moment, not included in the Single Market: Defence, Telecom, Energy, Financial Services, and proposed to consider them as “European strategic assets”. At the heart of his report will be how to speed up these sectors, how to finance the green and digital transitions and how to properly enforce EU rules, he said. Cohesion will also be an important dimension, including in relation with the enlargement discussion, he said. Representatives from standard bodies, the BEUC and Business Europe also participated to the hearing.

Outcomes of the informal ECOFIN meeting in Ghent

EU Finance Ministers met informally in Ghent from Thursday 22 February to Saturday 24 February around the topic of competitiveness. Addressing the competitiveness challenge is a top priority for the Belgian Presidency of the Council of the EU and will remain a key focus for the upcoming European Commission. In particular, Ministers stressed the importance of avoiding subsidy races, both on a European and a global level. During the informal Ecofin meeting, three major debates were organised. The first one was a debate on the future of the European Investment Bank with the President of the EIB Nadia Calvino. A follow-up on this discussion will be held in Luxembourg at the annual meeting of the Board of Governors in June. The second one was a debate on retail investor participation and financial literacy. Ministers outlined three lines of action in enhancing financial literacy and retail investor participation: offering better access to clear information for citizens, providing tools to compare different investment products and proposing attractive EU-wide saving products for retail investors. These findings will be followed-up in the coming formal Ecofin meetings. Finally, EU Finance Ministers also held a discussion on the future of EU competitiveness with Dr. Mario Draghi in light of his upcoming report on this topic. During the discussion, Ministers emphasized the need to shift the perspective from identifying problems to defining concrete solutions. Dr. Draghi’s comprehensive report is expected by the end of June.

Belgian Presidency wants to unblock the Directive on energy taxation

The Belgian Presidency of the Council of the EU reportedly wants to unblock the Directive on energy taxation, presented by the European Commission in July 2021, by proposing new exemptions, particularly for biomass plants. On the basis of a previous Spanish Presidency’s proposal, Belgium’s new compromise proposal would reiterate that Member States should be able to exempt electricity produced by plants with less than 850 MWh/year or 500 kW installed production capacity, provided that the electricity produced is not fed into a public grid. The same applies to biogas not injected into a public grid from a production of 3,000 GJ/year or an installed production capacity of 500 kW. Moreover, in the event of an “unexpected and exceptional” increase of at least 15% in the price of a product compared with the average retail price of that product over the previous 12 months, the Belgian Presidency is also proposing a six-month exemption. Discussions are reportedly still underway to determine whether thresholds should be differentiated according to the type of electricity. Member States will discuss the new compromise proposal when they meet on 29 February.

MEPs want a quicker application of new EU Transfer Pricing rules

MEPs from the Economic and Monetary Affairs (ECON) Committee of the European Parliament adopted on Thursday 22 February their opinion on the proposal for a Directive on Transfer Pricing, presented in September 2023. The non-binding opinion, drafted by MEP Kira Peter-Hansen (Greens/EFA, Denmark), particularly aims to shorten by one year the entry into force of the directive (2025 instead of 2026) and to align as closely as possible to the latest OECD Transfer Pricing Guidelines. It also proposed to re-establish the EU Joint Transfer Pricing Forum, a nonbinding body whose mandate expired in 2019. The forum would be made up of representatives of the Member States and a balanced representation of taxpayers, academics and civil society. The European Parliament would be an observer member. The text also acknowledges the potential for the emergence of alternative guidelines in the future which could be relevant to the EU, such as those from the United Nations. Finally, MEPs want the Commission to be empowered to put forward further implementing rules on the matter rather than the Council. The report still has to be adopted in Plenary session in April, before being transmitted to the Council. On the same day, the ECON committee also adopted its opinion on the HOT proposal while MEPs couldn’t agree yet on the BEFIT proposal.

Commission publishes new progress report on the Directive on eInvoicing in public procurement

On Monday 19 February, the European Commission published a new report on the impact of the Directive 2014/55/EU on electronic invoicing in public procurement. According to the report, the introduction of this system has “simplified cross-border invoicing procedures, promoted efficiency and reduced costs in the EU and beyond”. All EU Member States now accept electronic invoices conforming to this new standard for public procurement. The report also notes that the impact of the directive has extended beyond the public sector: electronic invoicing has become more widespread in business-to-business (B2B) transactions. It admits, however, that the objectives of the directive have not been fully achieved and that differences in implementation at national level and the existence of several different electronic invoicing platforms imposed by the Member States are causes frequently cited. Finally, the report shows that the EU approach is being adopted in different parts of the world, such as in Australia, Japan and New Zealand.

OECD publishes new report on Amount B of Pillar One

On Monday 19 February 2024, the OECD/G20 Inclusive Framework on BEPS published a report on Amount B of Pillar One, which provides for a simplified and streamlined approach to the application of the arm’s length principle to core marketing and distribution activities, with a particular focus on the needs of low-capacity countries. The changes to the OECD transfer pricing guidelines agreed in this report will give jurisdictions the ability to apply clear and simple rules to these activities, enabling them to secure revenue and preserve valuable tax administration resources, while providing additional certainty for multinational enterprises, the OECD said. The report, which presents two implementation options for jurisdictions opting for the simplified and streamlined approach from January 2025, describes the circumstances in which a distributor falls within the scope of the B amount, including cases where it also carries out certain non-distribution activities, such as manufacturing. It also describes the activities that may exclude a distributor from the scope of the simplified and streamlined approach, such as the distribution of commodities or digital goods. Content from the report has now been incorporated into the OECD Transfer Pricing Guidelines and is accompanied by conforming changes to the Commentary on Article 25 of the OECD Model Tax Convention.

First meeting of the ad hoc committee on the UN Framework Convention on International Tax Cooperation

On Wednesday 21 February, the ad hoc committee tasked with drafting the terms of reference for a UN Framework Convention on International Tax Cooperation met for the first time. During the meeting, several OECD countries reportedly said the terms of reference for a UN Framework Convention on International Tax Cooperation should be based on consensus rather than simple majority voting. On the other side, several low-income countries said that while the ad hoc committee should strive for consensus, it should move for a simple majority vote if consensus is not achieved, as the rules of the U.N. General Assembly state. The ad hoc committee is tasked with developing and finalizing the framework convention by August. Since the decisive vote in December 2023, EU Member States have been quite vocal in opposing a UN Framework Convention on International Tax Cooperation, as it would risk, in their view, duplicating the work done at the OECD. They also fear a risk of losing momentum if we change the forum of discussion on the Two-Pillar solution.