Anti-Tax Avoidance Package
Tuesday: The European Parliament held a lively debate on the long awaited Anti-Tax Avoidance Package (ATAP) that the European Commission presented last week. The package, the Commission’s response to the range of multinational tax avoidance scandals, implements – among other things – the OECD’s BEPS (Base Erosion and Profit Shifting) action plan at EU level, and paves the way for a common consolidated corporate tax base later this year. Furthermore, it requires the reporting of tax information by large multinationals to tax administrations (country-by-country tax reporting) as well as a proposal for an EU wide list of tax havens.
EU Commissioner for Economic Affairs & Taxation, Pierre Moscovici, emphasised that the EU’s tax strategy should be built on four pillars, namely (1) effective taxation (2) transparency (3) fair and healthy competition between companies (multinationals vs. SMEs) and Member States (tax regimes) and (4) a globally aligned approach. The reactions from the hemicycle were generally positive, with MEPs from the centre-right and left side welcoming the package. Aside from a few Euroskeptics who were dismissive of EU’s intervention and some right wing MEPs who called for vigilance, MEPs applauded the EU’s effort to follow up and implement the OECD’s work.
Despite the general positive atmosphere, a range of MEPs called for even more ambitious actions in particular regarding transparency and the public reporting of tax declarations. Others feared that too much public information would undermine the competiveness of Europe’s economy. Commissioner Moscovici was not surprised by this call, which the Parliament already adopted in its own-initiative reports. He repeatedly stated that he backs the Parliament’s position but the Commission needs to be pragmatic. By this he meant that the package as such will already be difficult enough to get through the Council that will have to adopt it unanimously. And this is where the difficulty lies. The ball is now in the court of the Member States, who gave a clear signal by not being present at the debate. “The sinners are dodging the debate”, one MEP said. Moscovici stressed that he will champion the case in the Council and he called on the EP to keep the political momentum alive. But again, the ultimate responsibility lies with the 28 Member States collectively, who will protect their own national interests which will make compromises very difficult.
China: Market Economy Status
The number one trade topic of 2016 is also increasingly making its appearance on the European stage. The question whether to grant China Market Economy Status (MES) needs to be decided by the end of 2016 and what started out as a legalistic issue is becoming very much political. On Monday, Trade Commissioner Cecilia Malmström explained why the Commission is between a rock and a hard place with this issue. Either the EU risks trade retaliation by China if it does not grant MES or it risks the further job losses and shrinking of the EU economy. MEPs emphasised that it is not protectionist to have measures in place to deter unfair competition, but nonetheless, the EU has to be conscientious of its obligations at the World Trade Organization. The current focus of this debate in Europe has honed in on the steel industry. However, German Green MEP Reinhard Bütikofer warned that the focus would shift to other issues as well and that as many as three million EU jobs were threatened. The Commission’s announcement to carry out a thorough impact assessment satisfied MEPs for the time being but the issue promises to heat up over the year.
MEPs also debated the Trade in Services Agreement (TiSA) the same evening, demonstrating two days later when voting in favour of the resolution that free trade still can gain strong support in the European Parliament if the EU is to benefit and public services and standards are protected.
Diesel car emission limits
Another subject anxiously awaiting resolution during February’s Strasbourg plenary was the European Parliament’s vote on the Commission’s proposal on diesel cars emission levels and time for car manufacturers to comply with. Industry Commissioner Bieńkowska reassured that adequate measures have been proposed by the Commission and subsequently accepted by the Member States. The run-up to the vote was tense and emotional but in the end MEPs tightly failed on Wednesday to collectively showcase their concern. National raison d’etat triumphed over party discipline across several political groups, which on the one hand could backfire on the EP’s respectability, but also add yet another difficult dossier to the Dutch Presidency’s portfolio. Regardless, the sigh of relief among the car industry, that would have had trouble to comply with the stricter standards, could be heard in Strasbourg.
Goodnight “Safe Harbour”, good morning “EU-US Privacy Shield”
The announcement by the European Commission at a press conference in Strasbourg that the EU has reached an agreement with the US on the “EU-US Privacy Shield”, replacing the “Safe Harbour” agreement, was one of the main issues discussed in the corridors. Many MEPs and data protection advocates, including Austrian law student Max Schrems whose law suit brought down Safe Harbour in the first place, quickly stated that the new agreement is insufficient to uphold EU data protection standards. Industry will follow nervously how this agreement will stand up to legal scrutiny. If you want to read more, our ICT team published a comprehensive overview of the issue.
Arne Koeppel is Head of Research and Robrecht Vandormael is Director at FTI Consulting Brussels