EU Tax Policy Niamh Carmody Head of Sector Direct Tax Policy

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EU Tax PolicyNiamh CarmodyHead of
SectorDirect Tax Policy Cooperation
UnitDirectorate General for Taxation and the
Customs Union European Commission
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27 EU Member States 27 EU Member States
Inhabitants 500 m
Official languages 23
Area 4.234.000 km²
Members of the European Union
Candidate countries
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Organigramme of Directorate General for Taxation
and Customs Union (TAXUD)
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1. Tax policy - institutional framework

• The role of EU institutions in taxation
• European Commission
• European Parliament
• Council of the European Union
• Court of Justice
• Legal basis for tax proposals for legislation in
  the Treaty of the Functioning of the European
  Union
• Article 113 for turnover taxes, excise duties and
  other forms of indirect taxation provisions
  for harmonisation to ensure the functioning of
  the internal market to avoid distortion of
  competition
• No specific legal basis for direct taxation.
  Article 115 directives for the approximation
  of such laws as directly affect the establishment
  or functioning of the internal market
• The decision-making process
• Unanimous adoption of legislative proposals
• enhanced cooperation

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2. Political and economic context

• Political context
• unanimity
• sensitivity of fiscal sovereignty of Member
  States
• No harmonisation of direct tax but coordination
  to extent necessary to meet Internal Market
  objectives
• economic crisis has increased pressure for some
  tax coordination
• Economic/ legal context
• Internal Market no internal borders or customs
  duties 4 freedoms (goods, services, persons
  capital) obligations under EU law not to
  discriminate in tax rules or to give unjustified
  state aids
• Euro zone with 17 members
• EU with 27 different national tax systems, plus
  potentially 351 bilateral tax treaties

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3. EU direct taxation legislation

• Companies
• Parent Subsidiary Directive
• Mergers Directive
• Interest and Royalties Directive
• Individuals
• Directive to allow effective taxation of savings
  income in the form of interest payments
• Cooperation between tax authorities (in addition
  to savings tax)
• Directive on administrative cooperation in direct
  taxation field
• VAT administrative cooperation Regulation
• Regulation on administrative cooperation re
  excise duties
• Directive Mutual Assistance in Recovery of tax
  claims
• NB Info exchange also under bilateral double
  taxation treaties

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4. Other EU initiatives in direct taxation

• Soft law non-legally-binding instruments
  operating by peer pressure, providing guidance on
  EU law obligations, etc
• Code of conduct fight against harmful tax
  competition (gentlemens agreement)
• Communications anti-abuse, exit taxation,
  cross-border losses, coordinating tax systems,
  financial taxation, good governance, RD,
  pensions, dividends, cross-border tax obstacles
  for EU citizens, etc.
• Recommendations tax treatment of non-resident
  individuals, taxation of SMEs, withholding tax
  relief procedures
• Arbitration convention on the elimination of
  double taxation in connection with the adjustment
  of profits of associated enterprises follow-up
  work in the EU Joint Transfer Pricing Forum

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5. EU legislation and initiatives in indirect
taxation

• VAT Directive and amending proposals
• Excise Duty directives on alcohol and tobacco and
  energy
• Capital Duty Directive
• Current Initiatives
• Green paper on the future of VAT public
  consultation until 31.5.2011
• Proposal on car taxation
• Energy taxation
• Review of Capital Duty Directive

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6. Court of Justice case law

• 1986 Avoir Fiscal judgement EU freedoms
  applicable in the field of direct taxation
• Although direct taxation falls within their
  competence, the Member States must nonetheless
  exercise that competence consistently with EU
  law
• No overt or covert discrimination on grounds of
  nationality
• No unjustified restrictions to the exercise by
  nationals of other Member States of the four
  freedoms
• Limits to the Court of Justice case law slow,
  expensive, wider application unclear,
  unpredictable
• List of Court cases in taxation
• http//ec.europa.eu/taxation_customs/common/infrin
  gements/case_law/index_en.htm

No obligation under EU law to generally apply the
same rules to residents and non-residents, but
only when situations are comparable
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7. Ongoing and future direct tax initiatives

• FISCO/TRACE withholding tax relief procedures
• Follow-up re citizens communication of December
  2010 website/best practice/cooperation etc
• Double taxation
• Inheritance taxation
• Portfolio dividends public consultation open
  until 30 April 2011
• Financial taxation and double charging of bank
  levies
• Adoption of revised savings directive
• Common consolidated corporate tax base (CCCTB)
• Recast of Interest and Royalties Directive

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Questions?
Niamh.Carmody_at_ec.europa.eu http//ec.europa.eu/tax
ation_customs/index_en.htm