Lowtax Network

Back To Top

Country Score

Country Rankings - European Union

  • Jul 26, 2018   European Union: FTA

    Europe and the United States aren't just separated physically by 3,000 miles of ocean. Often, the divides are economic, political, social, and cultural. Put it this way, Paris, France, is a very different place to Paris, Texas. There is also a widening gap to be bridged between these two economic superpowers on trade matters. Indeed, it is striking how the US's and the EU's trade policies are moving in different directions. President Trump's first act was to pull the US out of the Trans-Pacific Partnership. He has also shown his disliking for the existing NATFA text. Meanwhile, the EU is negotiating and signing free trade agreements like they're going out of fashion. Given rising concerns about a looming trade war (perhaps it has already begun?), the signing of an FTA between the EU and Japan flew in under the radar somewhat last week, even though this is one of Europe's most significant bilateral trade agreements to date. But that's far from the only item on the EU's negotiating agenda. Last month, it launched trade talks with both Australia and New Zealand, and negotiations are already underway with several other key economies, including with the Mercosur trade bloc (Argentina, Brazil, Paraguay, Uruguay, and Venezuela, although the latter is currently suspended), with Singapore, and with Mexico (to update the existing FTA). Furthermore, last month, the EU and Vietnam agreed on the final text of a new free trade agreement that will eliminate 99 percent of taxes on cross-border trade, while 2016 saw the EU-Canada FTA sealed amid great fanfare. The merits or drawbacks of either policy could be debated at great length, so intricate is the global trading framework. However, it is clear that, for businesses, tariffs are a major concern, so much so that iconic motorbike manufacturer Harley Davidson is shifting production in order to mitigate against them. And surely it won't be the only manufacturer that will re-examine its supply chain in the coming months and years, depending on how long any trade war rolls on, especially if they are importers of metallic components. So, just as BEPS has forced multinational companies to rethink where and how they are structured and where and how they operate, perhaps global trade policy will be the next major area of concern at board level. Perhaps the WTO will become the new OECD.
    Source: https://www.tax-news.com/news/EU_Japan_Ink_New_Trade_Agreement____86870.html

  • Jul 06, 2018   European Union: stubborn

    If I was to say "would those who actually think the EU's digital taxation plans are a good idea, please stand up" I'd be willing to bet that most of you would be still sitting comfortably. At least those who have an understanding of these issues. Because, as the catalogue of criticism of the European Commission's digital tax proposals mounts, so too does the list of business associations, economists, and EU member states expressing skepticism and concern about the idea. The way things are going, soon Jean-Claude Juncker and Emmanuel Macron will be only the ones left standing. One wonders how long the EU will continue to push the digital tax, given that in April reports emerged following an informal meeting of EU finance ministers that France was in a minority of one in fully supporting the proposals. Does this mean even Germany, normally a driving force behind new EU tax initiatives, isn't hugely keen on it either? More recent developments suggest those reports might have been over-egged somewhat. Italy and Spain are now looking at advancing digital measures possibly mirroring the EU's interim sales tax. Furthermore, France and Germany have just committed to reaching an EU agreement on "fair digital taxation" by the end of 2018, although what that means exactly is anyone's guess at present. And we've seen how persistent the EU can be in pursuing technically and legally questionable tax measures. The wheels seemingly fell off of the financial transactions tax before the vehicle had even left the forecourt, and the remaining member states have spent the last few years pulling it apart and trying to put it back together again, mostly unsuccessfully. So, it would be premature to write off the EU digital tax just yet. It's perhaps dangerous to dismiss EU corporate tax harmonization too, even after France and Germany issued, as part of the Meseberg Declaration, a plan for what looks like the EU common corporate tax base on steroids. Too much political capital has been invested in this proposal by its proponents to kick it into the long grass a second time around, even if it might need what would amount to a third relaunch following France and Germany's new contribution to the project. Discussions may well drag on for years, but this is clearly a political investment for the long-term, tied up as it is with the Franco-German push for the next phase of EU integration. One of the main issues with the CCTB is that there will be winners and losers. When consolidation is eventually added to the mix (making it the CCCTB), small member states fear losing out under its formulary apportionment system, which would replace the arm's length standard underpinning transfer pricing regimes and instead revenues would be distributed among member states based on factors tied to a company's economic substance in each member state. Under such, the bulk of revenues can be expected to be siphoned off to the larger member states, in which multinational companies make most of their sales. The other factors – the location of a group's assets and its workforce – would be more fluid and allow for competition between member states most notably on the effective corporate tax rate applied to the common base. What that would mean is that although effective corporate income tax rates will matter, there will be less room for competition under the CCCTB, and in particular if tax breaks for research and development activities are excluded (as proposed by Germany and France), much to Ireland's disdain. Perhaps this is why France is such a strong supporter of the measure.
    Source: https://www.tax-news.com/news/Tech_Groups_Raise_Concerns_About_EU_Digital_Tax____86852.html

  • Mar 27, 2018   European Union: hasty

    Thousands of words have been written across countless pages by the OECD to describe, analyze, and consider the tax challenges of the digital economy. Yet it took only a 97-word press release from United States Treasury Secretary to potentially consign them all to the trash can. He might as well have used Twitter. Of course, Mnuchin's statement, and the publication by the European Commission of a proposal for an interim digital tax, won't kill the OECD's work in this area any time soon. Nevertheless, these developments tell us pretty much straight away that the OECD will struggle to attain the multilateral consensus that will be required to ensure that any new tax digital measures are workable. Statements issued by various EU member states, and also Switzerland, inform us of that. While businesses and tax practitioners against this interim measure might hope these schisms might eventually scupper the introduction of interim measures, a lack of a multilateral consensus may encourage individual jurisdictions to fill the vacuum. And the EU isn't the only one with itchy fingers (or should be itchy digits?) True to form, the Unilateral Kingdom – sorry, I think that's what you call a Freudian slip. I'll start again: true to form, the United Kingdom included options for a digital excise tax in the updated version of its working paper on corporate tax and the digital economy, and Canada has also announced that it is studying the issue. Doubtless, we'll read about similar developments at jurisdictional level in the coming weeks and months. An interesting aside: the Unilateral Kingdom (it might as well be as far as the BEPS project is concerned) was named recently as one of the countries that has provided support to the Platform for Collaboration on Tax. How ironic. That's a little like saying Brazil has contributed to a workshop on tax simplification for developing countries. Nevertheless, the fact that such initiatives exist for the promotion of international collaboration on tax shows how important it is for everyone to be pulling in the same direction if the desired outcomes are to be achieved. It's a shame, therefore, that the PCT is a joint venture of a group of plurilateral non-governmental organizations, including the OECD, the IMF, the World Bank, and the UN, rather than the governmental ones that need to do the actual collaborating. Still, if nothing else comes out of the OECD's digital tax work, at least we'll have a new acronym to add to the rich lexicon of abbreviations in the world of taxation, courtesy, by the looks of things, of the European Union – GAFA, or Google, Amazon, Facebook, and Airbnb, those companies most in the sights of the digital taxers. It has a certain ring to it I suppose. A little too close to "gaffe" for comfort perhaps...?
    Source: https://www.tax-news.com/news/EU_Announces_New_Digital_Tax_Plans____76588.html

  • Mar 21, 2018   European Union: irresistible

    But, since I'm on the subject of teeth, perhaps it has bitten off more than it can chew as far as its digital tax project is concerned. As the OECD has said itself during the BEPS project, the digital economy is, after all, increasingly becoming the economy itself. Which conveniently leads me to arguably the most significant development of last week, the release of the OECD's interim report on taxation and the digital economy. This was highly anticipated, but in reality, it felt like a bit of let-down. The report, much like Action 1 of the BEPS project, is more a set of observations, plus a commitment to achieve a consensus on the matter by 2020, rather than proposals for concrete solutions. OECD Secretary General Angel Gurria nevertheless described the report as an important step towards resolving the tax challenges posed by the digital economy. But that, of course, depends on which way we are stepping here, and how difficult the ground will be. Indeed, this could quite easily become a quagmire, and somehow I can't see that this is going to be particularly easy territory for the OECD to traverse. For starters, a behemoth in the form of the European Union could stand in the way of a global consensus, and when the EU gets the bit between its teeth, it tends to become something of an immovable object. Just ask David Davies, the UK's Brexit negotiator. But then the OECD was always likely to run into trouble while attempting to police the world of taxation. For while it surely has influence, it's certainly no irresistible force.
    Source: https://www.tax-news.com/news/Countries_Agree_To_Push_For_Global_Digital_Tax_Solution_By_2020____76557.html

  • Mar 13, 2018   European Union: fractured

    The European Union might be about to add to the historical record with its determination to bring into being a "digital tax," according to a recent critique by the European Centre for International Political Economy. What's interesting about this is that EU-level tax initiatives – the digital tax included – are often described as EU proposals, which implies they have unanimous support of the member states and the EU's legislative institutions. But in fact, as far as the digital tax is concerned, this is far from the case. Increasingly it seems, "EU" initiatives are not EU initiatives at all, but more like "European Commission/Franco-German + a few other member states" initiatives. The stalled EU financial transactions tax legislation is a classic example. And just look at the difficulties this proposal has encountered, even under the rarely used "enhanced cooperation" (surely a misnomer in this context) mechanism, which bypasses the difficult terrain of consensus-building on controversial matters. It's dangerous to make too many predictions, but given the EU's political complexities, it wouldn't be too much of shock if the same fate befell the digital tax. It is known that several member states have deep reservations about the idea, with some saying it will be unworkable in practice and possibly economically counterproductive. What's more, other major EU tax files are far from universally supported. Ireland is vehemently opposed to the CCCTB, while the Netherlands is also uncomfortable with it, stating in its recently announced anti-avoidance plan that the idea of a minimum rate of corporate tax, which is fast gaining traction in the EU's core, is not an idea it can back either.
    Source: https://www.tax-news.com/news/Think_Tank_Critiques_EU_Digital_Tax_Proposal____76542.html

  • Dec 20, 2017   European Union: wagging the dog

    Never underestimate the power of negative publicity. Especially in the age of social media. Words of bad deeds can travel at the speed of light these days, and if, as an individual, a company, or even a country, you are on the wrong end of a public relations backlash, you may have no choice but to appease your accusers. Multinational companies are increasingly worried about the reputational impact of negative exposure of their tax affairs in the media. Indeed, last year, Taxand surveyed chief financial officers and tax finance directors across Europe, Asia, and the Americas and found that 91 percent of respondents felt media scrutiny of their tax planning activities had a negative impact on their public standing compared with 51 percent in 2011 and 77 percent in 2015. Although Facebook didn't explicitly say so, it seems likely that the increasingly negative perceptions of the tax affairs of large internet companies played some part in its decision to significantly restructure its tax affairs so that it will pay more tax in countries where its users are based, instead of in Ireland. Yes, to name and shame seems to have become very much part of the zeitgeist. But this is nothing really new. Some tax authorities have been at it for years. It has almost become an integral part of their tax enforcement arsenals. Indeed, it has become commonplace for whole countries – groups of countries in fact – to stand in righteous judgment over their peers, in the belief that the "uncooperative" will become cooperative, and mend their unsavory tax ways. And in the process, it may help deflect people's attention from shortcomings that lay much closer to home. The naming and shaming method of choice seems to be the tax blacklist. EU member states have them. And now the EU itself has one. Curiously, the OECD used to have one, but by 2009 it had considered all territories which were once on it to be suitably chastised and penitent enough to be given a second chance. It begs the question: if the OECD had a blacklist now, which jurisdictions would be on it? The same ones as are on the EU's? It's impossible to say, but I suspect not. While countries seemed to be on the same page when the BEPS project was first fathomed, there seems to have been a breakdown of the international consensus on how to mount challenges to those not towing the line.
    Source: https://www.tax-news.com/news/Barbados_To_Challenge_Unfair_Inclusion_On_EU_Tax_Blacklist____75964.html

  • Dec 12, 2017   European Union: intervention

    Indeed, it has taken the European Union most of the post-World War Two era to develop to its current state. And what is that state? Well, it would be possible to argue about that all day. But in the context of international tax issues, you could describe it as a state of confusion. Not that the European Commission, which is driving the agenda at the request of the Council, would say it is confused. It's just that everybody else is. We've already seen it take ownership of the digital tax issue – who's in charge of this now, the EU or the OECD? Furthermore, it seems to have confounded the Irish Government – and many other governments come to that, including the US Government – with its demand that it collect EUR13bn in extra tax from Apple. And now we have a tax blacklist that features not a single offshore financial center, at least not the ones everybody thinks of when asked to name a "tax haven," but features a major economy like South Korea. Explain yourself please, Moscovici! In a sense, the composition of the blacklist isn't surprising. The IOFCs have told us for years that they meet every new international transparency standard going, and that they have removed harmful elements of their tax regimes. Perhaps with this blacklist the evidence is there to back them. As to South Korea's presence on the list, this is more puzzling, especially as one of the main reasons cited by the Commission is tax concessions provided by the country's free economic zones and foreign investment zones. Does this mean, as South Korea's Government seemed to suggest in challenging the EU's assessment, that the BEPS harmful tax remit has expanded to tax regimes which help shift physical production as well as financing and profits? That would be a bold move, because such zones number in their thousands and are positioned all over the globe. The EU has a long track record of intervening in the tax affairs of third countries. But perhaps it's time an intervention was staged in Brussels, because the Commission appears to be forgetting where its power ends. Maybe the OECD should do it. After all, it's their project. If they jumped on the early morning Thalys they could be there by breakfast.
    Source: https://www.tax-news.com/news/Offshore_IFCs_Absent_From_EUs_New_Tax_Blacklist____75912.html

  • Nov 28, 2017   European Union: usurper

    Are we in danger of seeing the wheels fall off the BEPS vehicle? If multilateralism is supposed to the be lynchpin holding the whole thing together then some members of the international community, intentionally or not, seem to be doing their best to pull it out. And the danger is that the wheels could go careering off in different directions, which surely helps nobody. The European Union is one party in an awful hurry to find solutions to the riddle of the digital economy. Indeed, EU Competition Commissioner Margrethe Vestager more or less threatened to wrest the digital taxation project from the OECD last week, when she said that the Commission would publish its own proposals for more effective taxation of the digital economy early next year if the OECD hadn't got its act together by then. Some would applaud the European Commission for taking this issue by the scruff of the neck and dragging it forward, given the public outrages over the tax affairs of big internet-based companies. But equally there is a danger that rushing to quell public uproar could result in measures that are ill-conceived and have unintended consequences in practice. And perhaps this is the reason why the OECD isn't moving as fast as the EU would like, because it recognizes that there are no easy answers, and that blunt tax instruments (as the EU's proposed equalization has been described) tend, by definition, to result in collateral damage. As many have observed, taxing company revenue is a major departure from international norms in taxation, and could lead to instances of double taxation, not to mention legal uncertainty with regards to the application of double tax avoidance treaties. And as the OECD's final report on BEPS Action 1 acknowledged, it would be difficult, if not impossible, to "ring-fence" the digital economy from the rest of the economy for tax purposes because of the increasingly pervasive nature of digitalization. The strong response to the OECD's latest consultation on the taxation of the digital economy – it received comments from a total of 62 stakeholders, an unusually high number compared with the responses received in earlier consultations on BEPS Action items – certainly suggests that taxpayers and other stakeholders consider this to be one of the most important pieces of the BEPS puzzle. And by extension, this calls for considered and measured responses from the relevant authorities. Marry in haste, repent at leisure, as they say.
    Source: https://www.tax-news.com/news/Vestager_Urges_OECD_To_Hurry_Up_On_Digital_Taxation____75824.html

  • Nov 07, 2017   European Union: unilateral

    It used to be that a corporate tax rate below 40 percent was considered competitive, at least among the wealthy industrialized nations. However, 30 percent is seemingly the new 40 percent in the corporate tax stakes. So if 30 percent is the new 40 percent, can the European Union be the new OECD in terms of tackling the inadequacies of global tax rules? The European Commission seems to think so, judging by its recent output with regards to the issue of ensuring appropriate taxation of the digital economy. Or to put it another way – and if I may be permitted to stretch the sporting analogy just a little further – it looks like the EU has stopped batting for the same team as the OECD. As usual, the EU's intentions here are laudable. But, as is also becoming customary, it has approached this issue in a rather heavy-handed way. Some have called its proposals in this area – particularly a digital "equalization tax" on the revenue of "digital companies (whatever they may be) – a blunt instrument which could lead to various unintended consequences, such as double taxation. What's more, with its digital tax agenda, it has broken ranks with the BEPS project, within which there is no place for unilateralism, especially from such an important partner, as OECD Secretary General Angel Gurria warned recently. But then perhaps we shouldn't be too surprised. The EU has increasingly become a law unto itself recently. Just ask Apple or the Irish Government, to name but two exponents.
    Source: https://www.tax-news.com/news/EU_Consults_On_Taxing_The_Digital_Economy____75601.html

  • Sep 26, 2017   European Union: hasty

    It's been an interesting few days for the European Union, or more specifically its executive arm, the European Commission. First came the announcement of a screening framework for FDI. This is intended to shine a light on the more shadowy sources of foreign investment into the EU. It's quite ironic really; after all, the European Commission is hardly the most democratic and transparent of governmental organizations. More on the matter of transparency later. The other notable development was the publication by the Commission of its vision for "fair" taxation of the digital economy, which came after France, Germany, and other influential member states had been pushing the issue of digital taxation for a number of weeks. We can't say for sure whether the Commission's announcement is the result of increasing political pressure for solutions to tax issues in the digital economy, or whether it was working towards it independent of influence from member states. Either way, there is a sense that the EU is rushing towards legislation in this area, and that is never a good idea.
    Source: https://www.tax-news.com/news/EU_Unveils_Proposals_On_Digital_Taxation____75309.html

  • May 30, 2017   European Union: positive

    Credit goes to EU Trade Commissioner Cecilia Malmstrom for talking up the possibility of a free trade agreement between the European Union and the United States. But is her optimism misplaced? That the 11 non-US signatories of the Trans-Pacific Partnership have agreed to forge ahead with what initially promised to be the most ambitious regional free trade to date suggests that they consider any attempt to renegotiate the deal with the US to be a waste of time. So perhaps expecting the EU and US to make progress on what could be the world's most complex FTA to date in the current political environment is unrealistic. Besides, the US perhaps has enough in its trade inbox to cope with for now after formally beginning the legislative process to renegotiate the North American Free Trade Agreement, which is unlikely to be a smooth ride all the way. Coincidentally, Malmstrom was recently in Mexico – the southern third of the NAFTA trio – to discuss renegotiating the existing EU/Mexico FTA. It will be interesting therefore to see how these two negotiations progress over the coming months, as well as to compare the outcomes, should any outcomes be achieved. If Malmstrom is to be believed, the EU is confident that its new deal can be concluded by the end of this year, which is likely to be well ahead of any renegotiated NAFTA text. Or perhaps that's another piece of wishful thinking on her part.
    Source: http://www.tax-news.com/news/Malmstrom_EU_US_Need_More_Time_On_Trade_Deal____74328.html

  • May 23, 2017   European Union: reproachful

    Indeed, wouldn't it be great if taxpayers could get together and blacklist those countries which make life unnecessarily hard for compliant taxpayers, whilst letting the rotten apples still slip through the net? What tends to happen instead is that jurisdictions that intentionally make life easier for taxpayers, with low tax and easy taxes, get blacklisted by their peers, ostensibly for making life too easy for tax dodgers and criminals as well. And rightly so, you may say. Except that things are rarely so black and white in this world. The OECD doesn't have a blacklist of non-cooperative jurisdictions right now. At least, if there is a sheet of paper filed somewhere in its Paris headquarters under "blacklist," there are no jurisdictions on it. However, blacklists, it seems, are all around us. Individual countries, particularly in the European Union, maintain them, and the EU is at present attempting to compile a definitive blacklist of jurisdictions that are supposedly soft on tax and financial crime, albeit with some difficulty. The fact that the EU is struggling to complete what should be, on the surface, an easy task – after all, it's only a list of countries and territories – hints at the flaws inherent in a blacklist. The criteria used to determine a "bad" jurisdiction in tax and legal terms is subjective, and can vary from one country to another. One state's bad egg is another's good neighbor. Politics also plays a key part. After all, it's a near certainty that the United States will not appear on the EU blacklist – or the majority of other countries' lists of bad guys for that matter – despite the fact that a Delaware corporation is as ironclad confidentiality-wise as an international business company in any tax haven you care to mention. And the same goes for many advanced economies that fail to practice what they preach on transparency. What's more, being named on a blacklist is no trifling matter for the jurisdictions concerned, or for foreign investors. For it can mean that transactions between the source country and the blacklisted country are restricted, or at worse, barred completely. Blacklists, therefore, can be dangerous things. Maybe we should all be on a blacklist unless we can show we are well beyond reproach. The proverb about people in glass houses springs to mind...
    Source: http://www.tax-news.com/news/MEPs_Reject_Commissions_Blacklist_A_Third_Time____74279.html

  • Jan 09, 2017   European Union: contradiction

    That the European Commission insists on transparency from member states in the area of taxation, when the EU's executive arm itself is seen by many as an opaque and undemocratic organ of EU governance, is just one of those contradictions that often seem to define the EU (non, Jean-Claude?). One could ask whether the investigations and subsequent conclusions regarding national tax rulings were conducted in a fully transparent way. So perhaps we should take the claim that there is now full transparency of tax rulings throughout the EU with a pinch of salt. It might make EU corporate taxation more transparent for governments, but it's unlikely to make it so for taxpayers. Given that in a recent survey 80 percent of tax professionals responded that complicated tax laws are hindering business growth in Europe, perhaps the Commission should refocus its efforts.
    Source: http://www.tax-news.com/news/New_EU_Tax_Rulings_Now_Transparent____73118.html

  • Jan 05, 2017   European Union: listens

    As if coping with one country's VAT regime wasn't hard enough though, imagine trying to reckon with up to 28, as intra-EU traders must. In theory, the EU has a single VAT area. But member states are allowed to charge up to two lower rates in addition to their standards rates. Consequently, there are more than 70 separate VAT rates across the EU, plus various other permitted derogations from the VAT directive. In other words, a complicated mess. The EU VAT regime was recently named among the top-three barriers to the spread of e-commerce in the EU, which is why, as mentioned in this column last month, the EU is rightly taking steps to ease the compliance burden for e-commerce businesses, especially small and micro-businesses. And since its landmark announcement on December 1, it has followed up with consultations on the business-to-business selling rules, exemptions for small businesses, and VAT rates – all of this could lead to more harmonization of the VAT rules in the EU. But while this might sound like an eminently sensible enterprise at first, inevitably there will be winners and losers. The European Commission would dearly love to do away with lower VAT rates so that member states are permitted to levy only one standard rate. This could help to iron out VAT anomalies, distortions, and disputes and raise substantial revenues for member states, although taxpayers in sectors subject to lower rates could be disadvantaged. Similarly, many taxpayers may grumble if greater VAT harmonization led to more coordination of registration thresholds. These currently vary greatly, from as low as approximately EUR6,700 in Denmark, up to in excess of EUR100,000 in the UK. However, most taxpayers and tax professionals who have experienced the EU VAT regime would probably agree that changes are sorely needed. It would be tragic, however, if the Commission and the European Council contrived the make a bad situation worse for small businesses. Therefore, the Commission should consider very carefully the feedback it receives from taxpayers in the extensive consultative process that will run between now an early spring 2017. What the Commission proposes next could ultimately make or break many small companies selling goods and services across EU borders. However, large companies have plenty of compliance issues to be getting on with too – largely because of changes brought about by the BEPS project. Indeed, country-by-country reporting requirements, which are spreading rapidly across the globe, have been described by many senior tax and business advisors as a "game-changer" in the field of transfer pricing, itself a major focus of BEPS. Surveys show that a great deal of affected companies are scrambling to align their systems with the new rules. So just imagine if CbC reports were made public. That certainly would represent something of a paradigm shift in tax transparency. Supporters of such proposals – which include the European Commission – argue that, with reputations such a valuable currency these days, tax avoidance would be discouraged because the public would be able to see how a company conducts its financial affairs, and where it pays its taxes. On the other hand, companies subject to CbC reporting regimes would, as the French Constitutional Court concluded recently, be put a major competitive disadvantage to those that aren't, while opening themselves and their employees up to other risks. What's more, how many people are going to fully understand such complex financial data? Not many, I suspect. And if this is the case, what value would public CbC reports really have? With Wolfgang Schäuble and other European finance ministers skeptical about public CbC reporting, there is by no means a consensus on this issue. We also await the position of the incoming United States administration on CbC reporting, and BEPS in general (although it's probably safe to assume that Republicans are cautious over many aspects of BEPS, judging by the comments of senior party figures in the past couple of years). But with tax transparency arguably never higher on the political agenda and in the public consciousness all over the world, this will continue to be a hotly debated topic in 2017, even if most members of the general public – the one's supposed to benefit the most from increased transparency – probably couldn't make head nor tail of a CbC report in the first place.
    Source: http://www.tax-news.com/news/EU_Seeks_Feedback_On_VAT_Systems_For_SMEs____73040.html

  • Dec 28, 2016   European Union: destabilized

    Well, that was certainly an interesting year! Indeed, it's difficult to pick out just three or four tax developments in a year that has been so eventful. But I'm not planning on sitting here until Christmas 2017 writing about what happened in 2016, so I'm going to have to try! Oh, where to start? Brexit? It's not a tax development in and of itself, but it's going to have huge ramifications for tax legislation and future tax policy in the United Kingdom, especially if the Government goes for the "hard Brexit" option i.e. out means out. Let's start at the beginning of the alphabet. And one can always trust the European Commission to stir things up and upset the apple cart. In 2016 that's precisely what it did, with its demand that Ireland recover EUR13bn in state aid from US technology firm Apple. EU law experts could argue at length over the Commission's detailed legal justification for its ruling. Indeed, Ireland and the EC are expected to battle long and hard over it in the European Court of Justice over the coming months, and probably years. But in a sense, it is not the legal nuances of the case that are the concerning aspect of this. It's the fallout in store for the tax environment of the EU. The Apple case shows the lengths that the Commission is prepared to go to combat tax avoidance. This is laudable, but it is also worrying for taxpayers. Much uncertainty has already been generated by the ongoing investigations into private tax agreements between member states and multinationals. But what the Commission is essentially telling taxpayers now is that you can no longer rely on arrangements negotiated in good faith with tax authorities, or tax legislation that may have been in place for many years. Imagine if the Commission's logic was applied to a sport. Let's say soccer. There was your team, two-nothing up and seeing the game out comfortably. Then some official rocks up and tells the referee that under local law, he's been applying the wrong rules since the first minute. And, actually, your team is 10-nothing down. I'd probably pick up the ball and play elsewhere. Preferably somewhere out of said official's jurisdiction.
    Source: http://www.tax-news.com/news/European_Commission_Publishes_Final_Decision_In_Apple_Case____73022.html

  • Dec 13, 2016   European Union: distant

    Now, it would be mischievous of me to compare bureaucratic Brussels with Communist China, but there are also parallels between the EU and China. Legal reforms are largely driven by unelected officials who could be accused of being distant from the people and businesses that they claim to be helping. And despite a long-standing commitment to removing regulatory and tax barriers to the single market, I suspect few would say that doing business in the EU was a seamless experience. The EU is also attempting deep reforms to the bloc's VAT regime, and last week the Commission announced with much fanfare new proposals designed to ease the VAT compliance burden on e-tailers as part of its much vaunted digital market strategy. However, before we get too excited about the changes, perhaps we should remember that the EU's track record in this area isn't brilliant. Just ask the micro-business owners who shut down in the wake of changes to place-of-supply rules for suppliers of electronic services. Not that we should be too hard on the EU. At least it recognizes that the VAT regime is not fit for purpose in many ways. Indeed, I learned recently that the Commission actually offers courses for national tax authority staff on EU VAT legislation. When the tax man struggles with EU VAT, what chance have taxpayers got!
    Source: http://www.tax-news.com/news/EU_Announces_Massive_Overhaul_To_EU_Digital_VAT_Rules____72889.html

  • Nov 24, 2016   European Union: mind the gap

    European Tax Commissioner Pierre Moscovici claimed last week that the EU is at the forefront of its own tax "revolution." A revolution in international tax transparency, that is, rather than tax reform. Which is true, and laudable. But with its heavy emphasis on tax avoidance, is the EU taking its eye off the competitiveness ball? Europe is actually pretty competitive when it comes to corporate tax rates. According to the Washington-based Tax Foundation, the region has the lowest average corporate tax burden, at 18.88 percent. However, the European average has been dragged lower in recent years by some substantial corporate tax cuts in Eastern Europe. Total corporate tax rates in parts of Western Europe still exceed 30 percent. Indeed, The Tax Foundation says that the G7, which includes four European countries, has the highest average at 30.21 percent. Despite falling corporate tax rates, Europe, and the EU specifically, still has a reputation for bureaucracy and regulatory inefficiency. But don't just take my word for it. The World Bank's Doing Business Index shows that the US outperforms the EU15 (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom) in seven of the ten Ease of Doing Business components. Frighteningly for the EU, given the large flaws in the US tax code, the "paying taxes" segment is the area where the EU15 performs worst of all. In some ways, it is unfair to place the blame for this competitiveness gap at the EU's door, as most of these things are the responsibility of member states. Still, the EU as an institution seems to have done little of substance to try and close the gap, which only looks set to grow. Perhaps this is why Hungary feels the need to take matters into its own hands.
    Source: http://www.tax-news.com/news/Moscovici_EU_Spearheading_Tax_Revolution____72769.html

  • Oct 31, 2016   European Union: eroding

    Still, with the UK seemingly intent on leaving the EU, at least it won't have to get its head around the common consolidated corporate tax base (CCCTB), proposals for which were released in repackaged form by the European Commission last week. The main difference between the "new" CCCTB plan and the old one is that it will be rolled out in two stages: the common tax base for companies first, and the consolidation bit later. However, this is a tacit acknowledgement by the Commission that the CCCTB will difficult, if not impossible, to deliver. This is because the legislation will need to be agreed by all member states, and, because of the way revenues are apportioned under the proposal, some of those member states, particularly the small ones, stand to lose out heavily. One of them is Ireland, which, according to a 2015 Chartered Accountants Ireland study, could see a 90 percent reduction in its corporate tax share under the CCCTB.
    Source: http://www.tax-news.com/news/EU_Relaunches_Common_Consolidated_Corporate_Tax_Base_Plan____72577.html

  • Jul 18, 2016   European Union: uncompetitive

    One country that has been forced to look to the long-term is, of course, the United Kingdom, as it contemplates life beyond the European Union. And, not before time, the country's leadership seems to have awoken from its post-referendum stupor to actually contemplate the daunting task of negotiating a withdrawal agreement acceptable to all sides – by which I mean all sides at home, and all 27 sides in the EU. IRS Chief John Koskinen might think he's got the impossible job, but the UK's negotiators might think it a cakewalk if their aim is to gain concessions from Juncker, Merkel, and an EU elite deeply wounded by the UK's decision to leave. And you know what they say about picking fights with an injured beast. However, before it strides into battle, the UK had better find some soldiers, and find them fast. Because the Government managed to let slip recently that it doesn't actually have any trade negotiators. This state of affairs is understandable. After all, the UK hasn't had to set its own trade policy for four decades. Nevertheless, to say the least, it is a state of affairs that is worrying. You could say that it's akin to entering a horse raise without a horse. Still, I have faith in the UK. Surely, enough clever people can be found from the fields of academia, business, and civil administration to quickly get to grips with the complex nuances of international trade negotiations. At the very least, with Boris Johnson now heading up the Foreign Office, things will be entertaining. It's difficult to predict how amenable or otherwise the EU will be in the impending Brexit negotiations. The Remain camp repeatedly warned that Europe would seek to "punish" the UK for voting out by playing hard ball, thus deterring any other member states with similar designs. The Leave campaign argued that this would not be in the EU's economic interests, given its high volume of trade with the UK. To do so would be tantamount to the EU cutting off its nose to spite its face. In or out of the EU, you could say that the EU has a vested interest in the success of the UK economy. Yet, I suspect the EU doesn't want the UK to flourish too much on the outside either, lest it show the way for other member states. And this was hinted at by the prickly response in Berlin and Paris to the suggestion by former Chancellor George Osborne that the UK could slash corporate tax to a rate approaching the Irish level. With Osborne having been banished to the back benches by newly installed Prime Minister Theresa May, UK fiscal policy is now likely to follow a more conservative course (with both a small and a large 'c'). Nevertheless, German Finance Minister Wolfgang Schäuble's suggestion that such a tax cut would be "unfair" does betray a certain amount of fear that the EU can't compete economically. Or, more to the point, perhaps it is simply unwilling to compete, especially on tax. Looking back at the various tax announcements from the European Commission and Council over the past few months, EU tax policy, if there is such a thing, seems almost solely focused on tax avoidance. This is laudable, and tax fraudsters deserve to be caught and punished. But when do you ever read about the EU wanting to make its tax system more competitive? Rarely, if ever. Yes, in theory, it is simplifying things by insisting on non-discriminatory tax rules and a level playing field, and by further harmonizing VAT rules. But so many EU tax initiatives seem to end up increasing the burden on taxpayers, especially on small businesses, rather than alleviating it. Perhaps Brexit will force the EU to do some soul-searching, to change a model which seems stuck in the latter half of the 20th century. Here's hoping, but I wouldn't hold my breath.
    Source: http://www.tax-news.com/news/European_Council_Adopts_New_Rules_On_Tax_Avoidance____71694.html

  • Mar 29, 2016   European Union: trying

    If Chinese politicians have a hard time conceptualizing democracy and multi-party political systems, what must they think of the European Union, which has 28 different democratic governments, each representing a country with a broad spectrum of political views? Not very much I would think, given the range of problems confronting the EU. After all, the perception of a major democratic deficit in the EU is a major reason why Britain might soon by saying auf Wiedersehen, au revoir, and adiós to it all. But perhaps it's the only way the thing can be run at least half-effectively. Anyway, I'm digressing somewhat from the topic I wish to highlight, which is far more mundane: value-added tax. Just like China is nominally a market economy, VAT is nominally a harmonized tax in the EU. However, if you happened to mention this to a small business owner who trades across multiple member states - let's call him John, who lives in London, and sells digital training materials - he would probably tell you, not very politely, to go somewhere else. This is because the numerous national derogations and reduced rates permitted under the EU VAT Directive makes VAT compliance something of a nightmare for John, who now has considerably less hair than when he started his business a couple of years ago, especially now that supplies of digital goods and services are taxable at the place where the consumer belongs. To ensure the correct taxation of these services, John has to determine whether his customer is a taxable or a non-taxable person, and the place where that customer belongs. Oh, and then there's just the simple matter of ensuring that the customer is charged VAT at the right rate. After all, there's only 70 different rates across the 28 member states. Easy, no? No! However, John will be pleased to hear that the EU is attempting to simplify things for him and thousands of traders like him, such as with the proposed new VAT portal, a central online interface for EU VAT information. It's just that things like this don't tend to move very fast in the EU, so John will probably lose a few more hairs before it is up and running. Regular readers will know that I'm not the greatest fan of the EU and the way it is run, and measures like the 2015 place of supply rule changes, which have made John's life such a misery, just reinforce my view. However, credit where credit's due. The EU has recognized that there's a huge problem with the VAT system, and it is at least trying to put things right. So it gets an encomium. There's a first time for everything!
    Source: http://www.tax-news.com/news/EU_Studying_Central_VAT_Portal____70756.html

  • Dec 07, 2015   European Union: political

    Well the plot just thickens, doesn't it? Last week we learned through the work of the European Commission and its investigations into "sweetheart deals" between national tax authorities and multinational companies that as a result of two tax rulings issued in 2009, fast food chain McDonalds was permitted by Luxembourg to not pay any corporate tax there at all. And on whose watch was this allowed to happen? Why, only Jean Claude Juncker's, the current President of the European Commission! In fact, not only was Juncker Prime Minister of Luxembourg at the time of the ruling, he also held the Finance Ministry and Treasury Ministry portfolios during 2009, albeit successively rather than concurrently. Still, in the language of law enforcement, you could say that Juncker's fingerprints were all over Luxembourg's economic and tax policy during the period in question. So why didn't he know anything about this and other rulings? And, if he did, why is he know suddenly diametrically opposed to these so-called comfort letters? Perhaps it's best not to try and ask the man himself. I suppose the answer has something to do with the fact that he is a senior politician. Being a Prime Minister or President is a demanding job (no, I'm not being sarcastic – I wouldn't want to do it!), and unless you plan to spend four or five years or more without sleep, there just aren't enough hours in the day to do everything yourself, which is why leaders delegate. But by delegating they often lose touch with what's happening on the ground, and sometimes when their subordinates screw up, they are the ones left with egg on their faces. So I can understand why Juncker would be largely in the dark about these tax rulings. And, no matter how principled one is, politics is almost the dictionary definition of compromise. As the Oxford English Dictionary defines it, "politic" is: "(Of an action) seeming sensible and judicious in the circumstances." The EU's approach to tax rulings, and indeed corporate tax in general, might not appear "sensible" and "judicious" to some of us, but Juncker is probably being a sensible and judicious politician for the role he now plays.
    Source: http://www.tax-news.com/news/ec_investigates_luxembourgs_tax_rulings_for_mcdonalds____69864.html

  • Nov 24, 2015   European Union: uneconomic

    Now, I'm two countries in, and two encomiums to the good — I need something to execrate. And when you need to dish out execrations, you can always trust the European Union to deliver the goods. So what have the mad Brussels bureaucrats gone and done now? Oh, they've only gone and decided to tax the crowdfunding sector! Well, to be precise, the EU's VAT Committee made the decision, not the Commission or the member states, as a result of a review of the tax treatment of crowdfunding activities. Nevertheless, it's worth pointing out that the Committee is comprised of representatives of the member states and the Commission, and its rulings, while not binding on tax authorities, do tend to be followed at national level. It's not a complete disaster for the rapidly growing crowdfunding sector though, as the decision was mostly concerned with the relatively niche, but increasingly popular, practice of "rewards crowdfunding" where the public can contribute funds in return for products or services, still to be developed by the fundraiser, such as films, software, and consumer products. I suppose if you're looking at this from a purely technical point of view, by the strict letter of EU VAT law, the VAT Committee is right, and it could be argued that allowing reward-based crowdfunding to go untaxed while other business models are subject to VAT is unfair. Nevertheless, this will be of cold comfort to the many crowdfunding projects already off the ground that may now have to register for VAT and may find themselves with unexpected tax liabilities. Indeed, as Richard Asquith, Vice President of Global Tax at tax compliance firm Avalara commented, the VAT Committee's conclusion could "make the economics [of crowdfunding] far less attractive." I expect that the fast-moving crowdfunding environment will adapt its business model in response to the decision. Still, with this act, the EU has only reinforced the opinion held by many that it is out of touch with the world of business, and, whether by accident or by design, it is still seen as the enemy of small businesses and entrepreneurs.
    Source: http://www.tax-news.com/news/EU_States_Agree_VAT_Rules_For_Crowdfunding____69706.html

  • Oct 26, 2015   European Union: doomed

    I rarely agree with Jean-Claude Juncker on anything, but on this occasion he's right: Europe, or more precisely the European Union, has had its day. In a remarkably downbeat assessment of the state of the European project, while delivering a speech in Madrid, Juncker chose biblical references in his description of the 2015 version of the EU. Juncker likened the EU to the "vale of tears," the place where Christians' earthly woes are left behind when they ascend to heaven. He went on to say that, compared with the optimism and vibrancy he sees when he visits other parts of the world, places like Brussels and Luxembourg feel like a"valle Lacrimarum" or valley of fears when he comes home. To some extent, there's not very much that the EU can do to turn this around because it is battling economic forces that are very hard to control. As Juncker observed, like most mature, developed economies, its population is aging, and it is producing less and less as a share of the world's economy, while the emerging nations are producing more and more. Indeed, the EU's share of global output will soon represent just 15 percent, he said. But many of the wounds are self-inflicted, aren't they; European governments chose to gorge themselves on debt and, in many cases, stifle investment with high taxes and uncompetitive regulations. And tax initiatives at EU level seem to have only exacerbated the problem. In its obsession with making sure everyone pays their "fair share" of tax (although nobody's been able to tell me what that is yet), the EU has taken its eye off the ball and legislated for some self-defeating measures. Take, for instance, the VAT place of supply rule changes for electronically provided services, which have driven many traders and small firms out of business since the beginning of this year. The latest own goal could turn out to be the decision to deem certain tax rulings made by the tax authorities in the Netherlands and Luxembourg illegal state aid. I suppose you can't blame the public for seeing such arrangements as cosy deals between big business and the taxman, especially when most people have little choice about how much tax they pay. But these rulings do serve an important purpose in that they provide certainty to multinationals about their tax affairs, allowing them to plan and execute investments, often over timeframes spanning several years. If this facility suddenly becomes unavailable, or is subject to uncertain outcomes, they may well take their investments elsewhere. As Heather Self, Partner at Pinsent Masons, said in reaction to the news, multinationals will be "particularly anxious" about the Starbucks case because the ruling process in the Netherlands is long-established and very well-respected internationally. "For competition authorities to challenge very technical tax rulings by competent authorities in this way is extremely destabilizing," she warned. The trouble is, the precedent has been set, and companies will be wondering how many other tax rulings issued by national tax authorities will be challenged in this way. The valle Lacrimarum just seems to get deeper and deeper.
    Source: http://www.tax-news.com/news/EU_Commission_Outlaws_Starbucks_Fiat_Rulings____69466.html

  • Sep 22, 2015   European Union: disingenuous

    To paraphrase Queen Gertrude in Hamlet, the longer and more vehemently a person denies something, the more the listener is inclined to disbelieve them, and methinks that the Tax Commissioner doth protest too much in his insistence that Brussels is not out to harmonize EU corporate tax. Of course, I don't just mean current incumbent Pierre Moscovici – he's only been in the job five minutes. A succession of Tax Commissioners, stretching back through the terms of Algirdas Semeta and Laszlo Kovacs, were frequently heard denying that tax harmonization was the Commission's goal. However, the denials are beginning to look more and more disingenuous in the wake of the revamped CCCTB proposal, which will be mandatory if the Commission gets its way, and the recent agreement by six key EU institutions for greater harmony of fiscal policy and more EU influence over national budgetary decisions. Indeed, Jean-Claude Juncker, President of the European Commission, has almost discarded the pretense that the EU supports national tax sovereignty, and in a recent meeting with members of the European Parliament he said the internal market was incomplete without corporate tax harmonization. The inconvenient – and rather amusing – truth here is that Juncker used to be finance minister of Luxembourg, a country that has become rich partly as a result of competing aggressively in the area of corporate taxation, and which is at the center of the multinational tax ruling storm. Indeed, the Commission President got rather prickly when MEPs kept referring to the "Lux Leaks" affair and suggested they be called "EUleaks" instead, since other member states are involved too. Given that many of these so-called sweetheart tax deals were dished out on Juncker's watch, some MEPs understandably wanted to know his involvement in the rulings. To which Juncker replied that while he met with large companies on several occasions, he didn't talk about tax with them. After all, why would a finance minister want to talk about tax?!
    Source: www.tax-news.com/news/Moscovici_Defends_ECs_Stance_On_Tax____69141.html

  • Apr 09, 2015   European Union: needs the money

    If overbearing tax and regulation are still somewhat alien to the American way of life, the same cannot be said for the European Union, where companies and individuals must by now be well used to governments taking what they think is a "fair" share of their income (i.e. over half of it in many instances), and generally interfering in the lives of taxpayers. And so it goes on. The European Commission's latest wheeze is its corporate tax plan, which it claims would be "a revolutionary step" towards international tax transparency and the fight against base erosion and profit shifting. The gruesome details of the Action Plan won't be published until summer, but we've been warned to expect the controversial plans for a common consolidated corporate tax base to rear their ugly head again. Essentially though, the corporate tax plan is the EU's version of the OECD BEPS project, with its focus on aligning taxation with economic substance. Although the OECD supports the EU's plans, they could be seen as yet another example of the project being undermined by unilateralism before the final recommendations have been published. Funnily enough, the logical inference of the Commission's immediate priority, the greater scrutiny of tax rulings issued by EU member states, is that governments and tax authorities themselves are as much to blame for tax base erosion as multinational companies, a point which seems to get lost in the ritual company-bashing that accompanies each new tax avoidance scandal. Still, I'm not really sure what Brussels hopes to achieve from its tax ruling information exchange proposals. In its press memo published when the Action Plan was announced, the Commission said that tax ruling information sharing "will better equip member states to protect their tax bases and counter-act aggressive tax planning" and "deter companies from using tax rulings as part of their aggressive tax planning, as they will be under closer scrutiny." Presumably this is meant to encourage member states to patch "loopholes" in their tax legislation – tax loopholes that are often there by design as much as by accident. But will this deter the tax authorities themselves from issuing contentious tax rulings? If it doesn't, what's the point? Given that the Commission expects to challenge more rulings in the years ahead, I suppose one thing this initiative will achieve is keeping the European Court of Justice's staff busy in the years ahead. But, ultimately, the member states in support of the idea, as OECD Secretary General Angel Gurria so presciently observed, "all need the money."
    Source: http://www.tax-news.com/news/OECD_Welcomes_EU_Commissions_Corporate_Tax_Plan____67702.html

  • Feb 26, 2015   European Union: what's fair?

    The distorted debate about tax avoidance and tax havens leads me conveniently on to the next subject, which is the European Commission's renewed mission to ensure companies pay their "fair share" of tax. You hear the phrase a lot nowadays, uttered by politicians of all colors – that everyone must pay their "fair share." But what exactly is a "fair share" of tax? No-one ever seems to say. And if anyone did, people would inevitably disagree. But we can safely assume that when politicians (or in this case Commission bureaucrats) say that someone should pay their "fair share" of tax, what they mean is "more" tax. That's fine, but what this discussion needs is a good dose of honesty. The tax-paying public, I believe, are not so much fed up with multinationals and wealthy individuals because they reduce their tax liabilities (often substantially through legitimate tax planning) but because they are unable to also cut their tax bills to the same extent. I think this is an indictment of the behavior of governments, as much as anything else. People are exasperated at watching something like a quarter to a half of their salaries taken by avaricious tax authorities with virtually no say about how the money's spent. However, for governments, the tax avoidance issue is a convenient smoke screen, allowing them to invoke the morality card, outstretch their hand for more tax, and forget about the need for their own spendthrift ways to be reformed. I dread to think what new ideas will be dreamed up by Brussels for its impending Tax Transparency Package, but you can almost guarantee it won't be in the EU's economic interests. I sometimes doubt the wisdom of the UK's euroskepticism. But perhaps, Britain, you're better off out of it.
    Source: www.tax-news.com/news/EU_Seeks_Transparency_On_Corporate_Tax____67320.html

  • Dec 18, 2014   European Union: no Robin Hood

    If there was an award for the silliest tax initiative dreamt up by the unelected Eurocrats in Brussels over the course of the last couple of decades, the savings tax directive and the CCCTB (that's the common consolidated corporate tax base, for the uninitiated) would be up there competing for the top prize. But surely the proposed financial transactions tax would win hands down. It's not that I feel sorry for the banks targeted by this tax. On the contrary; it is because of them that this idea has come about in the first place. I suppose you could say that even without the financial crisis, the Šemetas and Moscovicis of this world (Francois Hollande's former finance minister has now taken over from Šemeta as Tax Commissioner) would be pushing for a so-called Tobin tax, or Robin Hood tax, whatever you want to call it, anyway. But that's by the by. The point is that while Professor James Tobin's and Robin Hood's intentions were altruistic – granted, the latter's idea of redistribution relied on a fair amount of violence – it's not clear who stands to benefit from the EU FTT. And there could be plenty of losers, including the people it was initially intended to benefit. Back in October 2008, a report commissioned by the Ecosocial Forum Europe and presented to the European Council calculated that a 0.01 percent FTT throughout Europe would generate almost EUR83bn in revenues for development projects and other worthy philanthropic ventures in the developing world. However, in September 2011, the Commission's FTT proposal envisaged revenue of EUR57bn. Then a more conservative EUR35bn tax take was included in the draft FTT directive in January 2013. But, suddenly, these revenues were no longer going to help fight poverty. Nope, they would contribute to the EU's "own resources," which is Brussels-speak for the EU budget. But since only just over one-third of the 28 member states are taking part, and there is much uncertainty about where and when the FTT will become due, it is now almost impossible to say how much this tax will bring in. But, again, trying to pin down a revenue figure is ancillary to the central point, which is that the FTT is unworkable in the first place. Yes, it could be argued that the alarmist warnings from finance industry-commissioned reports about the economic fall-out from the FTT are inevitable, and overblown. But it's harder to dispute the tax's legal shortcomings, and there are plenty of those, as the European Council's own lawyers have pointed out (although its conclusions weren't supposed to be made public). Presumably, one of the reasons that the EU11 (or is it 10 now, after Slovenia seemingly came to its senses?) are still arguing over this tax is because most, if not all of them, want a piece of the action for their own "own resources," to fritter away as they wish. According to the Commission, as originally conceived, the FTT was supposed to represent "a fair price" for the financial sector to pay for cleaning up the crisis it helped to start. But what price common sense?
    Source: www.tax-news.com/news/EU_Financial_Transactions_Tax_In_2016_Unlikely____66652.html

  • Nov 20, 2014   European Union: Janus-faced

    European politicians must often undergo some kind of mental transmogrification in order to turn from being national freedom-fighters into members of the European Commission, and this is the only way I can explain Jean-Claude Juncker's position on the legitimacy or otherwise of advance tax rulings dished out to certain companies by certain EU tax authorities, including a certain Luxembourg. Either that or the poor fellow is suffering an attack of amnesia. Everyone knew when Juncker was nominated to lead the European Commission that he was an arch-federalist, and that while he is driving the Brussels machinery the odds against reform of the EU's broken system of governance are on a similar level to that of witnessing a blizzard in Alice Springs, much to the chagrin of the Euro-skeptic British. So it's not really a surprise that Juncker has picked up where the previous lot in Brussels left off. But let's not forget that he was in charge of Luxembourg for almost two decades, combining the role of Prime Minister and Finance Minister for a good stretch of it, during which time the national tax authority that he oversaw issued hundreds of "comfort letters," rubber stamping the sort of international corporate tax planning arrangements that he is now railing against. According to him though, Luxembourg was fully compliant with international tax rules when he was in charge, a period during which the country resisted all attempts to dilute banking secrecy laws. Well, even by its own shocking standards of Janus face-ism, the EU has really excelled itself this time. The hypocrisy of it all frankly beggars belief. It will be interesting to see if the UK's Lord Hill, the former Conservative leader of the House of Lords and surprising choice for the Financial Services Commissioner post, undergoes a similar transformation. A good indicator would be if he suddenly starts talking up the EU financial transactions tax or the CCCTB. I wouldn't bet my house against it.
    Source: http://www.tax-news.com/news/Juncker_Quizzed_On_Luxembourg_Tax_Rulings____66407.html

  • Oct 09, 2014   European Union: selective

    Lately, the European Union has been execrated on a regular basis by this column. Some may think this a little unfair, betraying a natural bias against a continent-sized super-state that has done more to stifle innovation and growth in Europe than to promote it, as it was supposed to do. But it's hard not to dislike this institution when you see just how much European taxpayers' money is spent on maintaining a vast army of bureaucrats in Brussels, Luxembourg and Strasbourg. The Commission claims that the EUR8.6bn budgeted for administration in 2015 represents good value for money, because it is only about 6 percent of the EU's overall budget of almost EUR146bn, which itself is only about 1 percent of the GDP of the EU. This may be true, but perhaps this figure could be even lower if Commission officials and MEPs weren't allowed to claim such lavish expenses for staff, travel costs and all manner of other things to make their working lives more comfortable; like the Commission's 42,000-bottle wine cellar, with its 2,000 bottles of spirits. Think you'll be needing to drown your sorrows Jean-Claude? With vast swathes of the EU facing the sobering reality of years of grinding austerity, no wonder euro-skeptic parties made such ground in the 2014 European elections. And as you might expect, those at the top are among the most profligate. Apparently, outgoing European Commission President Manual Barroso spent almost EUR650,000 on travel in 2012 (none of it his own money of course), which, curiously, was well over twice as much as the Commission's globe-trotting foreign affairs chief Baroness Ashton.
    Source: www.tax-news.com/news/EU_Takes_Forward_Irish_Advance_Tax_Ruling_Probe____65980.html

  • Sep 18, 2014   European Union: bear baiting

    Not that you'd know by the lack of coverage of the event in the world's media, but the European Union and Ukraine should, by the time this blog is published, have ratified their controversial Association Agreement, giving Ukraine's exporters immediate and free access to the EU's market of 500m consumers once effective. Now, there are two ways of looking at this. One is that it is positive for Ukraine. It is said that Ukrainian businesses will save a total of EUR500m in customs duties and trade taxes as a result of the agreement, and that the resulting growth in trade volumes will add 1 percent to Ukraine's GDP every year. Ukrainian tariffs on EU imports will on the other hand be phased out to give the country's economy time to adapt. What's more, the EU will help to bring Ukrainian standards up to European levels. It's all good, right? Well, there's another way of looking at it. Bearing in mind that Ukraine's increasingly dangerous liaisons with the EU were one of the factors that sparked the conflict with Russia, the backlash that Kiev might face from Moscow could substantially outweigh the benefits accruing from increased trade with Europe. Last year, just under a quarter of Ukraine's total exports were made to Russia. Roughly another quarter went to the EU. What if Putin decided to punish Ukraine further by severing Russia's trade ties with its upstart southern neighbor? I'm not sure how feasible such a trade embargo would be, and presumably it's going to hurt Russia significantly too as Western sanctions begin to bite. The Association Agreement could prove to be a major step forward for Ukraine, which is in dire need of economic modernization. Then again, goading an already angry bear might turn out to be an unwise move.
    Source: www.tax-news.com/news/EU_Ukraine_Prepare_To_Ratify_Association_Agreement____65749.html

  • Jul 17, 2014   European Union: jobs for the boys

    Regular readers of this blog will be aware that I am not Tax Commissioner Algirdas Šemeta's greatest admirer, to use a bit of British understatement. Last week's column ripped into the EU Savings Tax Directive, and Šemeta's attempts to plug legislation that has more leaks than a piece of Swiss Emmental (or should that be Lithuanian Džiugas – and yes I did need to look that up, not being an expert on Baltic cheeses, although it turns out to be devoid of holes). However, the opportunity to put the boot into the Lithuanian statistician can't be resisted. Last week, Šemeta implored the new Italian Presidency of the EU to ensure that progress is made on a number of tax initiatives ranging from the not-so-sublime to the ridiculous. These include ongoing efforts to simplify the EU VAT regime, which sounds sensible enough except that it will probably lead to higher VAT rates, the common consolidated corporate tax base, controversial amendments to the Parent-Subsidiary Direct, a revised Energy Tax Directive and of course Šemeta's pet project, the financial transactions tax. I've never met him and I'm sure Mr Šemeta is a perfectly agreeable, hard-working sort. But one has to question his suitability for a job that affects the lives of hundreds of millions of individual and business taxpayers across Europe. Does a resume including eight years as the head of the Department of Statistics in Vilnius and three years as Lithuanian Finance Minister (in two stints) really stand you out as the ideal candidate for this role? Evidently so. Then how do you get a job as a European Commissioner and a salary of almost EUR20,000 a month (plus a residence allowance, an allowance for representation expenses, a resettlement allowance, travel expenses, a "transitional" allowance on leaving office, and a pension) paid for by EU taxpayers? You have to be nominated by the Government of your member state (presumably it helps to be a member of said Government), then the European Parliament gives you the once-over (but will only vote against your candidacy if it really really doesn't like you). And that seems to be it. The EP does have the ability to sack the entire Commission through a vote of no-confidence, although it has never used this power (the threat of it was enough to convince the Commission to resign en masse in 1999 amid corruption allegations). But once you are through the door you tend to stay there. No pesky voters to answer to. No real way to measure your performance. Not that Algirdas has under-performed as such. On the contrary; he's probably achieved exactly what was expected of him. But it does highlight an in-built democratic deficit that is turning people off the European project from Aberdeen to Athens, as the recent elections to the European Parliament showed.
    Source: www.tax-news.com/news/Press_Ahead_With_Tax_Plans_emeta_Urges_New_EU_Presidency____65205.html

  • May 08, 2014   European Union: loses it

    So the European Court of Justice, supposedly the guardian of the sacred freedoms of the European Union, has chickened out of one of most important issues currently confronting the EU, at exactly the moment when it should have taken centre stage and erected or reaffirmed some principles for the Union to follow. In recusing itself from any involvement in the structural legislative processes of the Union over the question of the Financial Transactions Tax, the Court has diminished itself and the Union, sending a message that administrative convenience is a more important principle than judicial rectitude. It will be many a long day before it recovers from this piece of egregious cowardice, if it ever does. There are multiple theories to explain the court's behaviour (I hereby deprive it of its capital letter – it no longer deserves it), but the most seductive is that it has indeed been seduced by the Commission. The signs of its subservience to the administrative convenience of the rue de la Loi have been on the wall for some time, not least over its repeated failure to ban national electronic gaming regimes that flagrantly defy the principles of the single market, but after this disgraceful espisode the reality of the situation is no longer in doubt. It is no secret that I am against the whole idea of a Tobin tax, but that is not the question at issue: the court was asked fair and square to say whether the process of establishing a variable geometry group of nations could be allowed when the consequences would be deleterious for excluded member states. It is irrelevant, whether this particular eleven-legged beast (which indeed doesn't yet exist) is itself legitimate or would offend against the EU's principles. That wasn't the question. All the court had to do was to consider whether and to what extent a variable geometry grouping could be allowed to damage the interests of other Member States. It seems fairly obvious that the answer has to be that no, it can't. So why couldn't the court say so? It's a no-brainer that the Commission has lobbied it heavily to step sideways, while continuing with its mad-cap plan to destroy Europe's financial sector. So much for transparency and probity in Brussels and Luxembourg. A plague on both their houses! While the "authorities" stand supinely aside, business interests in the two countries leading this coup de folie, France and Germany, make their opposition to the proposed tax very plain. We continue to hope and believe that Europe's leaders will avoid this piece of self-destructive craziness, but: "those who do not learn from history are condemned to repeat it." Not clear whether it was Edmund Burke, George Santayana or Winston Churchill who orginated the exact saying; but it certainly applies in spades to the current occupants of the economic thrones in Europe.
    Source: www.tax-news.com/news/ECJ_Rejects_UK_Challenge_To_EU_FTT____64564.html

  • May 01, 2014   European Union: a bit less bust

    A fall in average deficits in the Eurozone and the European Union in 2013 sounds like good news, but lift the hood and the picture is not so pretty. Total debt in the Eurozone (17 countries) increased to 92.6 percent of gross domestic product from 90.7 percent in 2012, ever further above the European Union's Maastricht limit of 60 percent. For the whole EU, debt increased from 85.2 percent of GDP to 87.1 percent. The fall in deficits is not to any significant extent the result of lower public spending: overall EU public spending fell only marginally to just less than 50 percent. The improvement in deficits merely testifies to a concomitant increase in tax revenues which ate into the gap between incomings and outgoings. At a time when politicians across Europe are making great play of an oncoming revival, these figures are scary indeed, and are matched by figures for unemployment, which show EU jobless down barely perceptibly from 12 percent to 11.9 percent in the last 12 months. Such marginal falls in key economic indicators are on the level of rounding errors, while the significant increase in tax revenues of nearly one percent has got more to do with increased efforts on the part of Finance Ministers to pull in extra revenue with new taxes and improved compliance than to the consequences of any overall economic advance. What is to be done? National governments in Europe are palpably failing to deal with the crisis, with possibly the partial exception of the UK, although its 5.4 percent deficit and increasing public debt are hardly the stuff of miracles. Otherwise, the only countries in which real change is taking place are those where the feared Troika is imposing harsh measures, being primarily Greece and Cyprus, with Ireland and Portugal further on into their much milder purgatorial regimes, which may or may not have done enough to bring about any permanent improvement to their overall fiscal landscapes. You can argue over whether the creation of the euro has been to blame for the current dire situation, or whether the errant countries brought on their own nemeses by trying to save their banks, or whether it has been a straightforward demonstration of populism by insouciant politicians, but it seems inescapable that democratic government as it has been practised lately in Europe has failed its populations. Now that the damage has been done, people are simply not going to vote for their own impoverishment, even if that is in reality the only path left to them in a situation of overwhelming indebtedness. A non-democratic solution is required, and the Troika, as a benevolent despot, fits the role. It may or may not be successful in saving its patients, but one has to accept that its existence with such Draconian powers is a denial of democracy. No-one dares to face this new paradigm squarely. There is a comfortable belief that it will all blow over, and we will soon be back to the days of surpluses, growth, wine and roses. Well it ain't so. I don't suppose that there will be a return to fascism, as happened in the 1920s and 1930s, the last time that the status quo broke down irretrievably, only because the population of Europe, including its central bankers, economists and administrators is now far better educated and considerably less economically illiterate than was the case 100 years ago. But as to what will replace the broken model of statist bread and circuses, I have no guesses. Long-term, genteel decline seems the least horrible of the possibilities.
    Source: www.tax-news.com/news/EU_Fiscal_Deficits_Fall_To_33_Percent____64470.html

  • Apr 17, 2014   European Union: true to form

    Well I'm not quite sure if that ended up being a bouquet for China, which was the intention. Certainly Japan, the USA and France didn't come up smelling of roses. So let's try harder to find a piece of praiseworthy national behaviour, if that isn't a contradiction in terms. "EU Tackles Single Market Obstacles." Hmmm. That sounds encouraging as long as it doesn't mean that the single market is an obstacle (what Francois Hollande thinks, at any rate). It's not too clear what is intended, and we will have to wait for a year while an Expert Group swans around Europe, business class and 5-star hotels no doubt (believe me, I have been there, done that), before delivering its obiter dicta in 2015, if we are lucky. Or unlucky, because it turns out that they are going to study inefficiences in the taxation structure for people who work across borders. More deconstruction will allow us to interpret "possibility of double taxation" which makes it sound nice and friendly, as "It is essential that everyone is tax compliant" which were the actual words of Tax Commissar Algirdas Šemeta. We have not given him an easy time in this column, even though we have studiously ensured that his name is always correctly accented (it makes him seem more deadly), and as he now approaches the end of his term we can afford to ease up a bit, even if it remains clear that he and his Commission are the obstacle, rather than national borders or the Single Market. He belongs in the OECD, perhaps, if not in the IMF, but the OECD is over-stuffed already and I think he is a bit too dry-as-dust for Christiane Lagarde. A very sincere and honorable man, I foresee a United Nations role for him, where he can preach to his heart's content without affecting anything in the real world. His monument in our world will be the tombstone of the Tobin tax: "here lies an old stallion whose time never came."
    Source: www.tax-news.com/news/EU_Tackles_Single_Market_Tax_Obstacles____64352.html

  • Apr 03, 2014   European Union: more pro-trade than against it

    One swallow doesn't make a summer, but two are a bit more promising, and that's what we are seeing in the EU/China tradasphere, with harmony breaking out on the oenophile and polysilicon fronts. In a parallel WTO case, over China's rare earth export policies, the country is left looking rather battered after an investigation, and said mildly only that it "regretted" the decision against it. The US, on the other hand, continues to present a hard front towards China over its trading policies for solar energy exports. What's really going on here is a battle between pro-trade and protectionist factions in the various regions involved. Any given short description of the batteground is going to be over-simplistic, but with that in mind, let's try to disentangle some of the threads of these ongoing trade wars. In each of the three countries (we'll allow the EU to be a country for today) there is a governmental organization which is responsible for the conduct of international trade affairs. The situation is simplest in China, where the Ministry of Commerce has the conduct of trade spats, and fairly and squarely represents the interests of China's business sector. In China there is very little in the way of producer-capture, because there is apparently little if any divergence of interest between political and business bosses. This may have unfortunate conequences in terms of corruption, but at least as regards trade it has the beneficial result that there is an identity of interest between the two factions, ensuring that the government behaves in a pragmatic way towards its international trading partners. Next least complicated, perhaps, is the EU, where responsibility for international trade negotiations is vested with the European Commission's Trade Commissioner, Karel de Grucht. As it chances, he seems to be in favor of trade (it wouldn't necessarily have been so - imagine if he had been French) and he can directly control and influence international discussions in the context of WTO trade spats. He has achieved a number of successful resolutions by brokering direct discussions between EU and Chinese producers; and agreements of this type seem to bypass neatly both the EU Council (Heads of Government) and the EU Parliament (Heads Of Doctrinal Economic Insanity).
    Source: www.usa-tax-news.com/story/China_Opposes_US_Solar_Reinvestigation_____63753.html

  • Mar 20, 2014   European Union: all at sea

    Which brings us to the Ukraine. The EU might wish to call Poland's scheme State Aid (aka "how to abolish competition in one easy lesson") but it won't dare in the context of the ongoing drama over the Crimea. So far, however, the EU's response to the unexpected events which have caused the Ukraine to fall into its lap is distinctly underwhelming. The trade deal being offered, that's to say if it is offered after 28 countries and the deadly European Parliament have crawled all over it, is already festooned with protectionist caveats. The 28 different sets of national priorities in the EU make for paralysis on any important issue, so that a coherent response to Russia's aggression is not to be hoped for. And that of course is Russia's precise calculation, largely based on its energy stranglehold over Western Europe. What the EU ought to do (ought to have done, from at least 2009 when Russia suspended gas deliveries through the Ukraine) is to liberalize and incentivize oil and gas production to the greatest extent possible. But it doesn't have a coherent energy policy, and has no power to control the behaviour of such a major producer as the UK, which therefore taxes hydrocarbon production to the hilt. Absent an effective economic threat to Russia, and it's hard to see how one can be assembled, it will get what it wants, which is the effective annexation of the Crimea and large chunks of Eastern Ukraine. EU policy should now be devoted to securing the annexation of Western Ukraine to the EU. Huffing and puffing over a lost cause will achieve less than nothing. Make the whole place a free trade zone for the next 20 years would be my recommendation; that's what China is doing. But of course Italian and French farmers will have none of it: their soil isn't the equal of Ukraine's, and they are hopelessly uncompetitive after 50 years of molly-coddling under the CAP.
    Source: www.tax-news.com/news/EU_To_Cut_Tariffs_On_Ukrainian_Exports____64020.html

  • Feb 13, 2014   European Union: brazens it out

    On a par with the Indian Finance Minister's protestations last week that his country "offers a stable and non-adversarial tax regime besides a fair and just dispute redressal mechanism" must be European Commissioner Algirdas Šemeta's claim this week that the EU's planned Financial Transaction Tax (FTT) is "a highly popular initiative, which Europeans believe in." Well OK, perhaps about three of them. Obviously both eminent gentlemen have been busy practising before breakfast in front of their mirrors. It's true that Mrs Merkel's Grand Coalition, amongst its other unfortunate betises, set out its belief in the FTT last month, but as far as I know that's the only minor support it has received, amid a torrent of negative publicity. Commissioner Šemeta calls it an "avalanche of lobby-driven criticisms." At least the man knows when he is buried!
    Source: www.tax-news.com/news/Semeta_Calls_For_Progress_On_FTT_Project____63623.html

  • Jan 30, 2014   European Union: on the wrong side of history

    One of the millstones that China does not labor under is called the European Parliament, but it does hang heavily around the collective neck of the EU's Member States. I feel ashamed of myself that I am coming out against a "democratic" institution (OK, came out, a long time ago), when there is a serious democratic deficit in the EU, but the Parliament has done nothing but disgrace itself, year after year and stupidity after stupidity. We would be better off without it: when it is not decorating the Commission's proposals with unworkable, anti-business regulatory baubles, it is indulging in wishful, unrealistic rhetoric, often spun for the benefit of domestic electors. Its latest wheeze is to attack the UK's proposed shale oil and gas regime. Now it may be true that Whitehall's offer to allow municipalities to keep tax revenue from shale operations amounts to bribery, but on that basis, all subventions from central to local governments should be classified as bribery (all "pork" is bribery, of course), and that would include the outrageous Common Agricultural Policy and the EU's regional funds. MEPs' time would be better spent attacking those monstrous schemes, which on the contrary they keep close to their hearts. Well, European voters are about to have the chance to express their views on MEPs, who are all up for re-election in May. The general opinion of voters has been displayed in falling turnouts in every successive election since the first one in 1979, when 62 percent voted. Last time it was down to 43 percent, and everyone expects it to be even lower this time around. The European powers that be are scared however that there will be a heavy turnout of euroskeptics. Bring it on, I say, not because I am euroskeptic (I am) but because the EU, not to mention the Parliament, badly needs shaking up, and a strong contingent of doubters might just be what the doctor ordered. Even more intriguingly, this will be the first occasion on which the President of the EU will be directly elected alongside MEPs. Imagine if a euroskeptic landed the top job! Unfortunately "they" will probably make that impossible by offering only the usual stale, old candidates, but let's keep hoping that a ringer will slip through. It's almost enough to make me go to the polls myself.
    Source: www.tax-news.com/news/MEPs_Attack_UK_Shale_Tax_Plans____63432.html

  • Nov 28, 2013   European Union: flogging a dead horse

    The EU's ECOFIN (Finance Ministers of the 28 Member States) had another futile discussion on the Savings Tax Directive last week. Futile not because the target of universal information exchange is unachievable - after recent events, most countries have already accepted it, at least at the level of individual taxation - but because the planned expansion of the Directive to cover companies, trusts and other "personnes morales" is something that the EU will be unable to impose on the third party jurisdictions which were browbeaten into operating the original Directive. And imposition on the third parties is something that would be self-defeating even if it were feasible, because it would only cover those jurisdictions such as Jersey and Guernsey over which EU Member States have some control, and there are plenty of options for wealth-owners in other parts of the world, including notably Hong Kong, Singapore and Dubai, which will never in a million years agree to anything resembling the Savings Tax Directive. In fact, those Member States which have thriving "finance centers" such as Luxembourg, Austria, Ireland and the Netherlands will only accept the expansion of the Directive if it applies evenly over the current set of participants, which includes Switzerland, Liechtenstein, the Bahamas, the UK's offshore dependencies, Monaco, Andorra, the Cayman Islands and the British Virgin Islands among others. That is something which is very hard to imagine. Switzerland, for instance, in order to appease the EU, has already gone quite far towards weakening its attractions for the wealthy, but it is unlikely to commit suicide by throwing its corporate citizens and wealthy investors to the EU wolves. For such jurisdictions as Jersey and Guernsey, having to disclose the beneficial ownership of trusts along with information about their disbursements would comprehensively wreck their business models: what wealthy Chinese would put her money in a totally transparent Jersey trust when Hong Kong and Singapore are on her doorstep?
    Source: www.tax-news.com/news/ECOFIN_Discusses_Savings_Tax_Directive____62740.html

  • Nov 21, 2013   European Union: being grown-up

    I'm going to give an award to the European Union for its refusal to rise to Spain's allegations against Gibraltar's low tax regime, alongside the measured acceptance by an EU delegation of new Spanish border controls, which everyone realizes are a tit-for-tat response to Gibraltar's dumping of concrete blocks into its harbour, for some obscure purpose which may possibly have something to do with fishing. The EU is the only party to this imbroglio that has shown a modicum of grown-up common sense. Gibraltar, encouraged by the UK, and Spain, seem incapable of rational behaviour on the subject of Gibraltar's sovereignty. What meaning can be attached to the idea of European unity when this 400-year-old squabble is allowed to smoulder on by two of the EU's largest member states? Spain's tax complaint was curious, given that Gibraltar's tax regime has already been crawled over to exhaustion by the EU Commission and the European Court of Justice. Haven't they got any better ideas? For instance, how about starting an autonomous zone around Gibraltar with zero tax; it would attract business like iron filings to a magnet. Of course, the EU will scream blue murder, but if "autonomous" really meant autonomous – how about calling it Spangaltar – it could apply for separate membership of the EU, just as Scotland will when it separates from the UK. Gibraltar would soon sue for peace!
    Source: www.lowtax.net/news/Gibraltar-Clears-EC-Probe-Of-Tax-Regime-62641.html

  • Nov 07, 2013   European Union: has a good week

    Jam tomorrow for the Portuguese, facing another year of austerity under the country's 2014 budget, but at least corporation tax is being cut, if only by two percent, to 23 percent. It's billed as a step on the way towards a target rate of 19 percent by 2018; but the situation is worse than that for bigger companies, which pay up to five percent more in surtax, plus a local supplement of up to 1.5 percent, making a total of 29.5 percent, which suddenly doesn't sound so attractive. The Spanish headline rate is stuck at 30 percent, so maybe there's an element of local competition in Portuguese thinking. Portugal is still under an EU bailout program worth EUR68bn, but does seem to be struggling free of the worst of its crisis, with a return to growth in the second half of this year and a small fall in unemployment. It reckons to return to the bond markets on its own account early in 2014, if not before the end of this year. Portugal may therefore be the second country after Ireland to return to stability, but it doesn't have Ireland's advantages: in 2012 Ireland pulled in USD29bn in FDI, whereas Portugal managed only USD9bn despite having more than double the population, meaning that Ireland's FDI per head was more than six times greater than Portugal's. It's no coincidence of course that Ireland's corporation tax rate is a minimal 12.5 percent.
    Source: www.lowtax.net/asp/story/front/Commission_VP_Talks_EUUS_Free_Trade____62555.html

  • Aug 15, 2013   European Union: doesn't get it

    I suppose that the EU thinks it should be congratulated in having escaped from a major trade confrontation with China over its anti-dumping and countervailing measures in the solar panel sector. But this was a disaster of its own making, and the game is not over yet. The mad jumble of EU trade policy is also demonstrated this week by the UK pottery affair, in which, as with the solar panel dispute, a small coterie of inefficient producers has "captured" the naive arbiters of trade at the Commission and bullied them into applying penal duties to competing products. Excellently, the Chairman of the (British) company being hurt by the pottery duties said that one "can't sit at home being a little European hiding behind tariffs and duties." Of course that's exactly what the protectionist complainants are doing. The rules underlying the protective actions that are taken by the Commission are mind-bendingly complex. You can prove anything with statistics, indeed, and in its rush to appear responsive to the supposed imminent demise of European producers (a frenzy calculatedly whipped up by the lobbyists who line the rue de la Loi – hah! – in Brussels) the Commission simply reaches for the nearest instrument to hand. It's the amazingly high level of the protective duties that really gets to me: 36 percent in the case of the pottery, and up to 60 percent in the case of the panels. In a modern world, with out-sourcing available for virtually every step in the manufacturing process, how can it possibly be true that a Chinese producer can sell goods for less than half of what it costs a European producer to make the self-same objects? Why isn't the European producer using a Chinese supplier, as was the British pottery producer? Nonetheless, in their dream-world in Brussels the bureaucrats shake the statistical kaleidoscope and come up with nonsense.
    Source: www.lowtax.net/asp/story/front/EUChina_Solar_Dispute_Continues____61663.html

  • Aug 01, 2013   European Union: adrift without a compass

    Needless to say, the EU's top brass lost no time in clambering aboard the G20's BEPS cavalcade. Messrs Van Rompuy and Barroso, Presidents of the European Council and Commission wrote to all the 28 European Union (EU) heads of state and government (there goes another tree) to "fully support" the work begun by the OECD to develop a multilateral standard of automatic information exchange, something they believe "should build on existing automatic exchange systems in order to maximize efficiency." The Presidents also make clear that they back the OECD's recently released Action Plan on base erosion and profit shifting (BEPS). According to the letter, this is "the right approach to curbing corporate tax avoidance worldwide," and "fully supports our common objective to ensure that everyone pays a fair share of tax…and that taxation reflects where economic activity takes place." Van Rompuy and Barroso are keen to ensure "consistency and coordination between EU and OECD efforts and develop internationally agreed standards for the prevention of BEPS in a constantly changing environment." And of course they take a swipe at what's left of "offshore" while they're at it. The Presidents urge the G20 "to remain committed to ensuring that non-cooperative jurisdictions adhere to [international] standards in the areas of tax, anti-money laundering/combating the financing of terrorism, and prudential standards." Now there are two (only two?) things wrong with this. One is that as regards corporate tax, they are shooting (like the OECD) at the wrong target. "Fairness" has got really nothing to do with corporate tax. There are laws, treaties and Codes of Conduct, forests of them, which minutely dictate how and where companies should pay tax, and as has been widely observed, if these are operating in a way which their framers (host countries) don't like, they can be changed. Corporates are passive in this. But it's unlikely that countries will want to change them: while the UK has been mounting its BEPS charger, lance at the ready, it has also been burnishing its 10 percent IP regime, to Germany's tartly expressed dismay. How likely is it that the UK will be prepared to abandon its 10 percent regime unless all of the other "patent box" countries in Europe do the same? Then it's a question of transfer pricing, for which plentiful rules exist: if a German company (say Volkswagen or Bayer) locates its IP in the UK, presumably accompanied by a large research department, the licensing price that UK Bayer can charge its operating subsidiary in Poland is dictated by economic realities. That's what the G20 wants, isn't it? If the IP economic activity (research) takes place in the UK, then it is being correctly taxed. It's just impossible to see what changes can be made that won't simply add bureaucracy and reduce European competitivity. And that's the second thing that's wrong: the EU is doing nothing to enhance the continent's competitivity. On the contrary, it was worked itself into an introspective frenzy of regulation in banking, insurance, fund investment and other sectors which will drive out enterprise. Its efforts to address the very real problem of youth unemployment are simply footling. There are two problems in Europe which the Commission could and should be addressing: debt and cost, with the two interacting in a vicious circle which is destroying economic capacity. Governments owe too much money and they spend too much money, with the result that taxes are too high and choke off "animal spirits." Even in the UK, which almost alone among EU governments has made an effort to reduce costs, debt is continuing to rise. The conventional wisdom is that, oh it's OK because once the economic cycle turns the money will come flooding back in. But what if it doesn't turn? The EU is in total denial on this score; there is a serious failure of leadership. People like Van Rompuy and Barroso should be leading the charge against excessive government cost, instead of which they spend their time tormenting business.
    Source: www.lowtax.net/asp/story/front/EU_Chiefs_Advise_On_Tax_Avoidance____61521.html

  • Jul 25, 2013   European Union: all sweetness and light

    So my bouquets this week will have to go to the UE and the US for managing to have a first TTIP negotiation without the French walking out sulkily over their "exception culturelle," or the US motor industry attacking State Aid for Renault, Fiat or Volkswagen. Pascal Lamy, about to leave the WTO after two terms as Director-General, reflected a little sourly over the number of bilateral or trilateral or quadrilateral trade deals taking place while the Doha Round continues to shuffle sideways. Nobody but nobody has done more for world trade in the last ten years, so you can empathize with him without necessarily agreeing. People talk about the WTO having been diminished by the "failure" of the Doha Round, but I don't see it that way. Various countries have been accused of standing in the way of a Doha accord, but more likely it isn't the fault of any one country or group of countries; probably the Round was too ambitious in the first place. What the seemingly endless negotiations will have achieved is to show individual groupings what is in fact possible, and they have gone off and done it through the plethora of FTAs that have been and are being signed. These in turn act as a spur to competition for trading partners that get left out, and by now there is a dizzying array of FTAs of all shapes and sizes. Quite often these separate agreements do make use of WTO dispute resolution procedures and treaty fine print, so that all the time, the sum total of unresolved trading territory becomes smaller and smaller. The gap between what exists and what the framers of Doha originally wanted is now far smaller than it was ten years ago, and it becomes correspondingly more likely that Doha will, in time, come into being.
    Source: www.lowtax.net/asp/story/front/EU_US_Complete_First_Round_Of_TTIP_Talks____61422.html

  • Jun 13, 2013   European Union: puff, puff

    "Starring Algirdas Šemeta," we should put on the marquee for today's column, because here he comes again with second prize for nuttiness after the Philippines, in a renewed bid to recapture EUR10bn of annual taxes "lost" through tobacco smuggling. There's so much to talk about here it's like a bowl of especially delectable honey cakes, but before starting I will just note that the EU has a special interest in excise taxes and VAT, since it gets a lot of its "own funding" from them. Let's begin with "lost" taxes. Finance Ministers and tax officials are very fond of talking about them: EUR10bn here, USD34bn there (try searching congressional records for Bermuda or the Cayman Islands), GBP5bn there (stamp duty on contracts for differences). But the money isn't "lost" – it was never there in the first place. The reason you can't collect it, dear Finance Minister, is because people don't like being robbed, and if you put your hand too deep into their pockets they will just sew them up. Smuggling is of course one of the best ways of sewing up your pockets, and cigarettes are so highly taxed (up to 95 percent of the purchase price) that they are a particularly tempting target. Just as far more people smoke than you would ever guess from the disinformation put about by do-gooding pressure groups, so also far more people smuggle than Finance Ministers want to accept. I have a UK acquaintance who orders her cigarettes over the Internet from a foreign sales outlet; they are actually manufactured in Birmingham (England) or somewhere like that, and make a 28,000 mile round-trip before being delivered back to the UK at less than one third of the regular UK price. Don't ask me how it is that the Customs don't intercept the shipments, which are made through the regular mail, but it's a fact that so far there have been no losses to official theft! I don't smoke myself, but on regular trips to Russia I used to bring back my allowance of Marlboro Lights for smoker friends: USD100 of profit ("loss," that is) each time; that was in the 1990s, by now it would be more than twice as much but I don't go to Russia any more.
    Source: www.lowtax.net/asp/story/front/EU_Plans_Stop_To_Illicit_Tobacco_Trade____61004.html

  • Jun 06, 2013   European Union: goodbye Professor Tobin

    We can't give the EU Commission any brownie points for abandoning the financial transactions tax in its current form – given the barrage of opposition from politicians, the financial sector in general, several unincluded member states, and even from some of the prospective members of the "variable geometry" eleven, it had no choice. In fact we'll give it a black mark for leaking the information via Reuters rather than announcing it. Too shameful, presumably, after it had staked so much on the tax. Heads would roll, if the EU was a properly transparent political space, but it isn't, and there will be a long process of face-saving before the tired old animal is finally led to the knacker's yard. In this column we have been strongly against the tax from the very beginning.
    Source: www.lowtax.net/asp/story/front/FTT_ScaleBack_On_The_Cards____60936.html

  • May 30, 2013   European Union: under attack

    If Italy's travails may make the death of the Euro noticeably more likely, the week's major event in Europe was a non-event – the failure of the European Council to discuss the Financial Transactions Tax. Or perhaps they did discuss it and found it so prickly that they decided to pretend they hadn't. The week had begun with Luxembourg nailing its colors to the anti-FTT mast, and as good as saying that it would follow the UK in protesting the scheme to the ECJ. Instead of addressing what is plainly a major existential threat to the functioning of the European economy (not that there aren't others, of course) what they did do was to enjoy themselves chuntering on about tax evasion and affordable, sustainable energy. They are simply in denial. Or rather, perhaps they understand that there is nothing they can to save a hopelessly uncompetitive continent, so they divert attention by riding current band-waggons for all they are worth. It doesn't amount to a hill of beans.
    Source: www.lowtax.net/asp/story/front/Luxembourg_May_Take_Legal_Action_Over_FTT____60818.html

  • May 23, 2013   European Union: being anti-Chinese, again

    For the second week running, I have to attack the European Commission for its anti-trade behaviour. Last week it was anti-dumping duties on imports of Chinese solar panels; this week it's anti-dumping duties on mobile telecoms network equipment, and the Commission hasn't even waited to be asked by a European manufacturer. There are no big numbers involved here; imports total just EUR1bn – but that's not the point. This is a typical example of the sort of protectionist behaviour which is to the disadvantage of consumers and will achieve nothing other than to discourage EU manufacturers from innovating and competing. It is also a demonstration of why the UK is right to seek major changes to the EU treaties, or, failing that, to leave. Historically the UK was a free-trading manufacturing hub; those days are gone, but the country's instincts are still on the liberal side, while the "dirigiste" beliefs of the continental economies are manifesting themselves in ever more repressive networks of regulation which have a suffocating effect on enterprise and economic growth. Europe's rulers want to believe that their flat-lining economies are simply responding to the debt crisis, and that growth will return of its own accord. Well it won't. The continent has become uncompetitive: industry after industry will shrink as the BRICs and their fellows out-compete them. And the only response that Europe has got is to be protectionist, which will turn into a vicious cycle of trade warfare. The latest industry to receive the Brussels cobwebbing treatment is financial services; this is particularly serious for the UK. Unfortunately it is difficult to see how David Cameron or any other UK leader is going to be able to make the significant changes that are needed, to make a bonfire of the odious regulations that are choking the life out of businesses. It has been left too late, and the choice now is between genteel decay inside the Union or a Brexit, which would give some hope for the future.
    Source: www.lowtax.net/asp/story/front/EU_Mulls_AntiDumping_For_Chinese_Mobile_Telecoms____60788.html

  • May 16, 2013   European Union: against the consumer

    Well, if it's hard to find countries to compliment, it's all too easy to find some to criticize, and we'll start with the appallingly protectionist European Union attack on China's solar energy industry. Let's remember that the EU is supposed to be about consumers, not producers, and ask why the Commission should find it necessary to impose up to 60% duties on Chinese imports, thus doubling the cost to EU consumers of alternative energy, which is one of the EU's most important goals, as they are constantly telling us. The lobbying organization which has fronted this campaign to defraud you and me says disgracefully that its members choose to remain anonymous for fear that the Chinese will punish them for their role in excluding cheap Chinese goods from the EU market. The argument brought by companies that request "anti-dumping" or "countervailing" measures is that the offending country – China in this case – means to damage or destroy the home company concerned, and will then raise its monopolistic prices having driven competitors out of the market. It's possible that such an argument might have had force 200 years ago when there were just two or three competing countries in a market; to adduce it today is economically illiterate, and for the Commission to believe it is nothing short of egregious. Down with the EU, if this is the best it can do!
    Source: www.lowtax.net/asp/story/front/EU_Warned_Over_Punitive_Duties_On_Chinese_Solar_Imports____60710.html


« Back to Country Rankings