Analysis: “ECOFIN Report to the European Council on Direct tax Issues – still waiting for the OECD to move on…” by Ricardo García Antón
On 5 June 2020, the ECOFIN Report to the European Council on Tax Issues presented an overview of the progress in tax matters achieved during the Croatian Presidency and the upcoming roadmap. In the field of direct taxation, the Report provides an update of the following issues, bundled into three categories: (i) old proposals (common consolidated corporate tax base (CC(c)TB) and Financial Transaction Tax (FTT)) ; (ii) digital taxation; and (iii) administrative cooperation. As a headline for the Report, the ECOFIN adopts a ‘wait and see’ approach until the OECD reaches the long-waited consensus under the Pillars I (‘the Unified Approach’) and II (‘Global Anti-Base Erosion’).
There is not much progress shown on the two layers of the CC(c)TB proposal, which on the one side lays down common rules for computing the tax base of multinational companies within the EU (CCTB), and on the other side introduces a consolidation element. Disagreement in certain areas of the CCTB remains largely unchanged: extension of the scope to a broader range of companies, anti-tax avoidance measures and tax incentives. In relation to the CCTB, the Report echoes the need to redirect the Council works to the OECD discussion on the Pillars to be concluded by the end of 2020. The 2013 FTT seems to have been dumped despite its initial brave intention to apply enhanced cooperation and hence, overcome the unanimity requirement for harmonisation in direct tax matters.
The ‘digital taxation package’ presented by the European Commission on 21 March 2018 is also on hold. Such a package, aiming to tackle the challenges of the digitalised economy, was structured around two prongs: (i) the Digital Service Tax (DST) and (ii) the ‘significant digital presence’. While the Report acknowledges the lack of consensus under the Bulgarian, Austrian and Romanian and Croatian Presidencies, it echoes that common solutions are preferred to unilateral measures. The EU response will wait for the consensus to be reached at the OECD level. As COVID-19 has delayed the OECD works, the peril of unilateral DSTs, which are either proposed or just introduced in several EU Member States (France, Italy, Spain), may trigger serious distortions to the internal market.
In terms of administrative cooperation, and due to COVID-19, the Report mentions the difficulties of the Member States to comply with the deadlines to implement the reporting and automatic exchange of financial account information (DAC 2) and cross-border arrangements (DAC 6). Finally, the Report refers to the works of the Code of Conduct Group (COCG) to update the list of non-cooperative jurisdictions.
Dragging behind the OECD and putting on standby flagship EU proposals like the CC(C)TB and digital taxation package could be harmful for our integration project in the long-term. Not only are the chances of unilateral distortions to the internal market highly increased as the Member States’ DST prove, but ‘arriving late’ also triggers more and more disaffection with the European project.
In times of uncertainties and anxieties derived either from the current social and economic consequences of the pandemic or from institutional challenges (Judgment of the German Federal Constitutional Court (BVerfG) on the legality of the ECB’s decisions, what is missing from the ECOFIN Report is the emergence of a truly European voice, a more solid compromise of the Member States to foster solidarity by means of EU taxes.
Ricardo García Antón is an Assistant Professor of Tax Economics at Tilburg University (Fiscal Institute Tilburg) and former Associate Researcher at the IBFD