At the meeting of 6 December 2016 the Council is expected to adopt a directive on access to information on the beneficial ownership of companies. It will be called on to agree on a proposal addressing hybrid mismatches between tax systems, and will take stock of progress on a proposed financial transaction tax.
Corporate taxation - Hybrid mismatches
The Council will be called on to agree on a draft directive aimed at closing down 'hybrid mismatches' with the tax systems of third countries. Several member states still have reservations. The main outstanding issue concerns rules that would allow member states to apply limited exemptions. The draft directive seeks to prevent corporate taxpayers from exploiting disparities between two or more tax jurisdictions in order to reduce their overall tax liability. Such arrangements are widespread and result in a substantial erosion of the taxable bases of corporate taxpayers in the EU.
The proposal addresses hybrid mismatches with regard to non-EU countries, given that intra-EU disparities are covered by a directive adopted in July 2016 ('anti-tax-avoidance directive'). It amends that directive accordingly, setting the same deadlines for implementation. When the Council adopted the first directive, it set a deadline for agreeing rules on hybrid mismatches with third countries by the end of 2016.
The proposal also draws upon the OECD's 2015 recommendations addressing corporate base erosion and profit shifting. It is part of a package of corporate taxation proposals presented by the Commission in October 2016.
The directive will be adopted once the European Parliament has given its opinion. The member states will have until 31 December 2018 to transpose it into national laws and regulations. It requires unanimity for adoption by the Council, after consulting the Parliament. (Legal basis: article 115 of the Treaty on the Functioning of the European Union.)
Financial transaction tax
The Council will take note of progress on a proposal aimed at introducing a financial transaction tax (FTT) in 10 member states. It will hold an exchange of views.
Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are planning to introduce an FTT by 'enhanced cooperation', an EU procedure that enables a group of member states to cooperate without the others being involved.
The proposal is aimed at:
- ensuring that the financial sector pays its fair share of tax;
- discouraging transactions that do not enhance the efficiency of financial markets.
The proposed directive would enable harmonised implementation of the tax in the participating member states.
No overall agreement is yet within reach and – despite progress – a number of issues remain unresolved.
At a participants' meeting in October 2016, an agreement in principle was reached on some of the main elements of the tax. Work has also been undertaken on possible models for collection of the tax. However, the October agreement has yet to be transposed into a legal text, which may take several months because of the complex technical nature of the issues at hand. Further discussion will be necessary at both political and technical level.
In the light of this, the Council's discussion will enable the participating member states to indicate progress and the further steps they intend to take. Ministers of non-participating member states may also express their views.
Enhanced cooperation on an FTT was authorised in January 2013 by Council decision 2013/52/EU after a September 2011 proposal for an EU-wide FTT had failed to obtain unanimous support. It was initially authorised for 11 member states, but Estonia withdrew in March 2016.
In May 2014, the participants agreed to work on a progressive implementation of the FTT, focusing initially on the taxation of shares and some derivatives. This would enable the economic impact of the tax to be assessed before broadening its scope. In December 2015, they agreed a statement identifying the main features of the FTT and setting a June 2016 deadline for deciding on open issues. That deadline was missed.
The directive requires unanimous agreement of the participating countries, after consulting the European Parliament. All member states can participate in discussions on the proposal, though only participating countries can vote. (Legal basis: article 113 and articles 326 to 334 of the Treaty on the Functioning of the European Union.)
At least 9 member states are needed to conduct enhanced cooperation.
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