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EU Tax Working Group To Discuss Digital Tax, MNE Tax Issues

by Ulrika Lomas,, Brussels

17 April 2018

The EU's High Level Working Party (Taxation) will discuss international tax reform at its meeting on April 18.

According to its agenda, released ahead of the meeting, the working party will discuss the outcome of meetings of the OECD Task Force on the Digital Economy and the G20 meeting of finance ministers, which took place in March, and the OECD Forum of Harmful Tax Practices, which met for three days ending April 6, 2018.

Specifically, it will discuss proposals recently put forward by the EU Commission and the OECD for an interim digital tax measure – a tax on revenues from the digital economy that would otherwise go untaxed, where companies derive revenue from online users' data or activities – and their longer-term proposal for a new digital permanent establishment rule.

Next, it will discuss the EU's common corporate tax base proposal, including evaluating its potential impact on national tax revenues. This project is intended to harmonize EU member states' corporate tax regimes to enable taxation of multinational groups under a formulary apportionment approach, under which tax would be levied, and the revenues allocated to member states, based upon objective factors, such as sales and employment levels in each state. The EU Presidency is to present a progress update.

It will also discuss the state of play on the financial transaction tax, which appears to have been a non-starter for the EU. Under the proposed FTT directive drafted by the Commission in 2011, the tax would be imposed on all transactions in financial instruments, with the exchange of shares and bonds taxed at a rate of 0.1 percent and derivative contracts at a rate of 0.01 percent.

However, the participating member states (originally just 11 of the member states) have found it very difficult to arrive at a consensus on the technical details of the new directive, particularly around the issues of how the tax will apply to derivative trades, and to transactions made by pensions funds.

The Working Party is expected to also hold a "strategic discussion" on taxation of the financial sector, including with regards to value-added tax.

Finally, it will discuss tax reform options and proposals for future discussion.

TAGS: compliance | tax | pensions | value added tax (VAT) | tax compliance | tax avoidance | transfer pricing | G20 | tax reform | trade | European Union (EU) | Europe | Work | Economy | Tax | BEPS

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