19 June 2017
1. Financial Transaction Tax on the Agenda at ECOFIN meeting
The proposal for a financial transaction tax by means of enhanced cooperation was discussed at the recent ECOFIN meeting held in Luxembourg on Friday 16 June. Proposals for an EU-wide directive failed in 2011 and subsequently a procedure for enhanced cooperation was initiated. 10 Member States are proceeding with the proposal. The Member States seeking to introduce the tax are Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
The proposals seek to ensure that the financial sector pays its fair share of tax; and discourage transactions that do not enhance the efficiency of financial markets. The proposal envisages the introduction of a minimum 0.1% tax for transactions in all types of financial instruments or in the case of derivatives a minimum tax of .01%.
In order for the proposal to be finalised and become a directive unanimous agreement must be reached by the 10 participating countries after consultation with the European Parliament. Whilst it is open to all member states to participate in discussions only the 10 member states outlined above can vote.
2. More work to be done before agreement can be reached on the temporary reverse charge proposal
European finance ministers failed to reach agreement on allowing certain member states to apply a generalised reverse charge mechanism. The proposal seeks to combat VAT fraud.
The generalised reverse charge proposals follow a request from member states significantly affected by VAT fraud, namely Austria and the Czech Republic.
The proposed directive offers a solution to the so-called ‘missing trader’ or ‘carousel’ fraud, where supplies are traded several times without payment of VAT due on the transactions. Under present rules, reverse charge can be applied as temporary measure only, whereas the proposed directive would established a generalised system applicable on a voluntary basis until 30 June 2022.
The Commission presented an analysis of the possible application of the generalised reverse charge mechanism in Austria and the Czech Republic.
Whilst the finance ministers were positive about the proposals they discussed the potential problems including legal difficulties and disputes arising along with an increase in untaxed goods and services. It was therefore agreed that more work was required before the proposals could be finalised.
3. VAT on E-books - Failure to secure approval on the proposed reduction of VAT Rate
A proposal to align the VAT rate on electronic publications with that of traditional publications failed to get unanimous support at the recent ECOFIN meeting. Although the proposal had strong support from many member states the Czech Republic voted against it requesting a wider solution for VAT rates and the digital economy be looked at. The proposal will be discussed again later in the year.
4. European Parliament’s ECON and JURI committees votes on public country-by country reporting
On 12 June, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) and Committee on Legal Affairs (JURI) approved a proposal requiring multinationals to report details of their activities in every EU country in which they operate. The information to be published will include turnover, profits and taxes paid.
An exemption does exist so that multinationals will not be obliged to publish commercially sensitive information.
Whilst the vote was a step further towards public country-by-country reporting, the Committees failed to reach the qualified majority required to enter into negotiations with the Council. Therefore, the draft report will next be debated in a plenary session of the European Parliament.