Corporate tax policy in the EU – key priorities and Q&A

From the IAFEI December 2020 Quarterly Bulletin. Prepared by the CFE Tax Technology Committee. Submitted to the EU Commission Platform for Tax Good Governance.

CFE Tax Advisors Europe Is a leading European Association of tax institutes and associations of tax advisors. CFE is part of the European Union Transparency Register No. 3543183647-05. we will be pleased to answer any questions you may have concerning our opinion statement.

For further information, please contact Piergiorgio Valente, CFE President, of Aleksandar Ivanovski, tax policy manager at info@taxadviserseurope.org.

CFE at a glance

CFE Tax Advisors Europe represents members from over 33 national professional tax advisor organisations in 26 European countries, making CFE the most representative voice for tax professionals in Brussels. CFE invokes a broader European perspective concerning the work it undertakes, rather than representing the views of any particular industry or country. CFI is also a founding member of the Global Tax Advisors Cooperation Platform, GTAP.

CFE aims are: to safeguard the professional interests of tax advisors; To exchange information on national taxables and contribute to the development of tax law in Europe; To maintain relations with the authorities at national and international levels, and share with the authorities of the European Union the experience and insights of our member tax advisors from all areas of taxation and professional law ; To promote the coordination of national laws governing the profession, and to achieve the protection of each national tax advisors title in Europe; To inform the public about the services that tax advisors provide; And to seek to provide the best possible conditions for tax advisors to carry out their profession.

The executive board is responsible for devising the work priorities and output of CFE Tax Advisors Europe and reports to the General Assembly , the governing body of CFE.

10 key priority policy areas

  1. Taxpayers rights and tax certainty
  2. Taxation of the digital economy
  3. Common approach to anti avoidance and substance measures
  4. Mandatory disclosure rules
  5. Tax climate change – sustainable tax policies
  6. Tax systems and tax competition
  7. Double taxation and dispute resolution
  8. Anti-money laundering
  9. Simplification of indirect taxes
  10. Global tax policy within the Global Tax Advisors Platform (GTAP).

The future of corporate tax policy – Q&A  

  1. what is the nature of the problem we currently face when it comes to the global tax debate?
  2. What Are the global tax principles that should guide any response?
  3. Is there now general agreement that digital companies or a digital economy cannot be separated out from the economy as a whole?
  4. Is it simply a matter of strengthening anti avoidance rules?
  5. Do we need more fundamental reform of the CT system?
  6. Are there other alternatives to CT – for instance can indirect land and other taxes be applied more effectively and fairly than CT?
  7. How is any of this accomplished without tax wars, or adding layer upon layer of complexity or double taxation?
  8. Are response is meeting future developments and challenges?
  9. Are The institutions we have capable of delivering any new agenda – do they need developing or do we need new bodies?

Key policy areas for the new EU Commission (summary)

Taxpayers rights and tax certainty: CFE has strongly advocated in favor of binding, or other equally effective mechanisms that set out in clear terms the rights and obligations of taxpayers so that these can be adhered to in followed by tax administrations and relied upon by taxpayers. This needs to be the case not only in Europe but also in all other countries in the world. We believe the fundamental rights of taxpayers need to be enshrined in law or in arrangements which had the full support of tax administrations. CFE Has fully endorsed the EU’s approach and views expressed by the European Commission that a Code or Charter of Taxpayers Rights can enhance the efficiency and effectiveness of tax administrations and can also increase the tax morale of European citizens.

After a public consultation in 2012 and an intensive work program the EU member states published guidelines for a model for a European taxpayers code, which we believe could form the basis of future work by the European Commission in this area.

Taxpayers face similar tax obligations in most countries in Europe but they are not guaranteed equal rights by the different member states of the EU. Specifically, in relation to the obligations imposed by the Directive On Administrative Cooperation And Exchange Of Information in relation two reportable cross border arrangements (DAC6), CFE has raised concerns about potentially different implementation among the member states.

Taxation of the digitalising economy

Under the designation “taxation of the digitalising economy”, we are witnessing perhaps the most fundamental change in the design and modus operandi of the international tax system. We recognize the difficulties in pinpointing all digitalising business models as current definitions are likely to become outdated in due course. However it is precisely because of the fast paced change of the digital environment that today’s solutions must be future-proof and consistent with the principles of aligning profit with underlying economic activities and value creation.

As noted in CFE’s submission to the OECD public consultation on the tax challenges of the digitalising economy, it emerges that a new international tax framework would be required to make the new profit allocation methods operational in a global setting: knew legal instruments, guidance and widespread multijurisdictional consensus. Inevitably, the issue of double taxation would arise, which is already difficult to address considering the bilateral nature of double taxation treaties and inadequacy of tax dispute resolution mechanisms and present.

Common approach to anti avoidance and substance measures

A related point follows regarding tax certainty, which CFE would like to draw focus on, concerning issues related to anti avoidance and substance measures. Taxpayers and tax advisors have had to ensure that they are compliant with an unprecedented scale of recently introduced anti avoidance measures, which brought with them new concepts such as the Principle Purpose Test (PPT), the GAAR introduced by ATAD, Substance requirements based in CFC rules, have as well as local and different approaches and introducing tax evasion.

While it is fully understandable that certain actions are needed in order to preserve tax fairness, it would be highly desirable to create a common EU understanding under which substance related terms are applied and understood.

Mandatory disclosure rules

following the implementation of the European Union Mandatory Disclosure Rules Directive, will continue to be a priority for CFE Tax Advisors Europe. In the course of implementing the directive, CFE has set out its expectation that EU member states will fully respect the legal professional privilege reporting waiver of article 8ab [5] of DAC6 in the transposition of this directive , in those member states where such rights exist for tax advisors under domestic law.

Tax and climate change – sustainable tax policies

Climate change affects us all. CFE Members aspire to share their unique knowledge on tax with governments and other international stakeholders in the process of transition to a low carbon global economy. Tax policy is a key tool to internalize environmental costs and forced the transition to a low carbon economy, for generations to come.

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