EU Tax News | 09.01.2018

MEP’s back new anti-dumping rules

The Members of the European Parliament (MEPs) have backed in support of new rules on dumping and subsidised goods from outside the European Union (EU).

Dumping ensues when goods are sold into a foreign market at below the usual market rate in the exporter’s domestic market. Countries can retort by imposing taxes on imports to avoid one-sided competition for their domestic producers, known as ‘anti-dumping duties’. To offset unfair subsidies, countries may also present countervailing duties.

EU jobs and firms have real difficulty in competing with cut-price imports from third countries that have excess production capacity and subsidised economies. The new rules will enable the EU to respond to such unfair trade practices by targeting imports where prices are not market-based, due to state interference

, said a statement from the European Parliament.

In October, 2017 the Parliament sanctioned an informal agreement on the new rules, reached by MEPs and European Council negotiators.

Using a single procedure for calculating dumping margins for imports from third countries, in the case of significant market distortions or evidence of state influence on the economy. The European Union will use the same anti-dumping procedure for all WTO members.

There will be several conditions considered in determining distortions, including state policies and influence, the widespread presence of state-owned enterprises, discrimination in favour of domestic companies, and a lack of independence in the financial sector. Respect of international labour and environmental standards in the manufacture of products will also be taken into account.

The EC will monitor circumstance in exporting countries, and EU firms may rely upon the Commission’s reports when lodging complaints. There will be no further liability of proof on EU companies in anti-dumping cases, on top of the current procedure, and SMEs will be given help when dealing with the necessary procedures.

We have made our trade defence stronger and ensured that for the first time worldwide trade defence legislation takes account of respect for labour and environmental standards. We've given our industries a future-proof system to effectively protect themselves from unfair practices

, said Mr Bernd Lange, the International Trade Committee Chair.

These new rules will enter into force once they have been officially approved by the EC.

The EU’s trade defence instruments are also being negotiated by MEPs planning to update, with a view to raising tariffs against dumped or subsidised imports from countries that do not interfere extensively in the economy.

EU 2021 VAT reforms – Finland also has concerns

Finland has united with Germany in raising concerns about the European Commission’s plan to create a single VAT area.

The alterations contain moving to a destination-based VAT regime for cross-border sales, whereby VAT is charged in the country of the consumer rather than the vendor. The EC has proposed vendors charging foreign VAT, but reporting and paying it to its own national tax authorities – who would then forward it to the country of the customer. This is an extension of the 2015 ‘Mini One-Stop-Shop’ (MOSS) reforms on B2C digital services.

EU e-Commerce VAT reform delayed by Germany

Germany has already delayed the reforms at this month’s meeting of EU Finance Ministers (ECOFIN), because of fears around yielding its tax collection rights to fellow EU Member States.

Although Finland support the general objectives of the reforms – together with targeting €50 billion in EU VAT fraud and simplifying the EU VAT compliance burden – it has questioned the administrative costs for B2B transactions, and open questions around the proposed model.

EU Competition Commissioner urges OECD to hurry up on ‘Digital Taxation’

The EU Competition Commissioner Margrethe Vestager has said that if the OECD has not drawn up new rules for the taxation of the digital economy by the Spring, the EU will publish its own proposals.

Vestager said in Paris, “become clear that our tax systems aren’t well designed for modern ways of doing business”. She also explained: “Tax systems that are based on a company’s physical assets can’t easily deal with digital companies. And in fact, domestic digital businesses pay less than half the effective tax rate of their offline equivalents”.

According to Vestager, reform of both national and international tax rules is necessary if they hope to ‘fix’ the issue. She stressed that “we have a responsibility to work together to find the right answer”.

Back in October, 2017, the Commission launched a consultation on possible policy solutions to the difficulties related with taxing the ‘digital economy’. The Commission’s goals include fairer and more effective taxation, assisting public revenue, and safeguarding a level playing field across businesses.

Vestager said that the results of the consultation will help the Commission to work with its partners in the OECD, “to find solutions that will work all over the world”.

Nevertheless, she did highlight that “if there’s no international answer to this issue by spring next year, we’ll produce our own proposal for new EU rules to make sure digital companies are taxed fairly”.

OECD reports on 2017 tax trends

Revenues from personal income taxes have improved as a percentage of total revenues in OECD countries, while social security contributions and consumption tax receipts have decreased, according to a new report.

The OECD’s Revenue Statistics 2017 shows that the average share of personal income tax as a percentage of total revenue increased slightly from 2014 to 2015, from 24.1% to 24.4%. For the time being, the respective shares of social security contributions and taxes on goods and services, including value-added tax, fell somewhat.

The data also discloses that revenues from corporate income taxes have yet to recuperate from the financial crisis, falling from 11.2% of total revenues in 2007 to a low of 8.8% in 2010, and remaining at a similar level (8.9%) in 2015.

However, the average OECD tax burden carries on growing, with the average tax-to-GDP ratio growing from 34% in 2014 to 34.4% in 2015. Of the 33 countries that delivered preliminary data from 2016, higher tax-to-GDP ratios were seen in 20, and lower ratios observed in 13.

In 2016, the largest rises in tax-to-GDP ratios were seen in Greece (2.2%) and in the Netherlands (1.5%). The largest declines were seen in Austria and New Zealand (1% each).

The highest tax-to-GDP ratios last year were verified in Denmark (45.9%), France (45.3%), and Belgium (44.2%) and the lowest in Mexico (17.2%), Chile (20.4%), and Ireland (23%). All but 5 countries (Canada, Estonia, Ireland, Luxembourg and Norway) have increased their tax-to-GDP ratio since 2009, the post-financial crisis low-point for tax revenues in the OECD. The pre-crisis high point has been reached or surpassed in 18 countries.

On average, the OECD tax-to-GDP ratio is now higher than at any point since 1965, together with prior peaks in 2000 and in 2007.

In 2015, the share of sub-national tax revenues has continued comparatively stable relative to 2014 in both federal and unitary countries, according to the report. In federal countries, an average of 24.6% of revenues is credited to sub-national governments, with roughly one-third attributed to local governments and the remainder to state governments. In unitary countries, an average of 11.8% of revenues is attributed to local governments. Government-owned social security funds account for 21.1% and 24.4% in federal and unitary countries, respectively.

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