On 15 July, the European Commission published an extensive Package for fair and simple taxation. The package consists of three main elements: Action Plan for fair and simple taxation supporting the recovery; Revision of the Directive on administrative cooperation (DAC 7); and Communication on tax good governance in the EU and beyond.
1. Action Plan for fair and simple taxation:
The Action Plan consists of a Communication and an Annex, outlining a set of 25 actions that the Commission will bring forward between now and 2024 in the field of taxation. It is designed to make taxation simpler, fairer and better adapted to the modern world, while supporting the fight against tax fraud and avoidance. The Communication highlights states that a deep reform of the corporate tax system to fit the increasingly digitalized economy is needed to support growth and generate needed revenues in a fair way. The Commission is actively supporting the global discussions led by the OECD and the G20 and stands ready to act if no global agreement is reached. Before the end of the year, the Commission will set out the next steps in an Action Plan for Business Taxation for the 21st century. Interesting is also that the Commission will explore how to make full use of the provisions of the Treaty on the Functioning of the EU (TFEU) that allow proposals on taxation to be adopted by ordinary legislative procedure, including article 116 TFEU. A move away from the unanimity principle in the Council on taxation could facilitate the adoption of tax legislation at EU level but would likely also be highly controversial among Member States.
Concretely, in 2022/2023, the Commission will propose an amendment to the VAT Directive in view of further extending the scope of the VAT One Stop Shop (OSS) which is in place since 2015 for the declaration and payment of VAT on e-services and which is to be extended in 2021 by the VAT E-commerce Package to distance sales of goods and services other than e-services. This action aims at including all remaining business to consumer (B2C) transactions not yet covered. Taxpayers should then be able to report all B2C transactions in the EU through a single VAT return to be submitted in their Member State of establishment, in other words a substantial simplification measure for businesses. The possibility to provide for the obligatory use of the Import One Stop Shop (IOSS) and the threshold set for its use will also be examined in this context. A full list can be found in the Annex.
2. Revision of the Directive on administrative cooperation:
The Commission has also proposed to amend the Directive on Administrative Cooperation with an Annex, detailing due diligence and reporting rules for platform operators in order to extend the EU tax transparency rules to digital platforms. In terms of due diligence, platforms will be obliged to collect and verify the seller’s name, address, TIN and VAT numbers, as well as business registration number and permanent establishment in the EU in the case of business sellers. Platforms could rely on a third-party service provider to fulfil the due diligence obligations and follow the requirements for time and manner of reporting, stated in the Annex.
3. Communication on Tax Good Governance:
The Communication on Tax Good Governance focusses primarily on soft law measures and external actions, setting out the priority areas for action over the coming years, to enhance tax good governance standards and ensure fair taxation. The measures include a reform of the Code of Conduct for Business Taxation, a review of the EU list of non-cooperative jurisdictions, as well as strengthened partnership and integration of developing countries into the global tax framework, in line with the 2030 Sustainable Development agenda.