BRUSSELS | 26 NOVEMBER 2024
Revised EU Energy Taxation Directive: Presidency Progress
The Hungarian Presidency of the Council of the European Union has advanced negotiations on the revision of the Energy Taxation Directive (ETD), a key part of the EU’s Fit for 55 package aimed at reducing emissions by 55% by 2030 and achieving climate neutrality by 2050. Recent progress at working group level in Council includes provisions for new energy products and flexible transitional periods for sectors such as natural gas and combined heat and power generation. These adjustments are designed to ensure smooth implementation while accommodating the unique challenges faced by Member States.
One of the most contentious issues is the taxation of aviation and maritime navigation, with some Member States opposing mandatory exemptions. The Presidency has suggested maintaining the current provisions for these sectors, coupled with a review clause in 2035, to break the deadlock and allow progress on other elements of the directive. While some differences persist, recent progress reflects a compromise between environmental ambitions and national priorities, with the Presidency calling for flexibility to ensure consensus.
The revised directive proposed clearer rules for emerging technologies, such as hydrogen and fuel cells, and addressing discrepancies caused by volume-based taxation. It harmonises tax treatments across Member States, strengthens consistency with broader EU legislation, and aims to align energy taxation with environmental performance, such as switching to energy content taxation. The original Commission proposal dates July 2021 and the rules also aim to complement other initiatives in the EU’s July 2021 package.
European Parliament FISC International Tax Policy Hearing
The European Parliament Subcommittee on Tax Matters (FISC) held a hearing on Thursday with policymakers and experts to examine the current state and future direction of European and international tax policy. The meeting was attended by Benjamin Angel, Director of Direct Taxation, European Commission, and Sanya Gbonjubola and Liselott Kana, Co-Chairs of the UN Committee of Experts on International Cooperation in Tax Matters. Subcommittee Chair Pasquale Tridico opened the session by highlighting critical question as such the role of the UN in tax policy, how will UN cooperate with the OECD, what will be the role of the EU with regards to both fora et cetera. He emphasised the importance of understanding how UN and OECD initiatives intersect and their implications for the EU’s role in global tax policy.
The invited experts and officials outlined the current dynamics of tax policy at OECD and UN levels, emphasising the need for inclusive agreements that reflect diverse national interests and capacities. They suggested that pushing through agreements with simple majorities which would never be implemented is not the way forward. MEPs raised critical concerns about the potential impact of the US administration’s stance on implementing OECD Pillar II and advancing negotiations on Pillar I. They also stressed the administrative burdens created by the evolving tax landscape and called for solutions, such as safe harbours under OECD Pillar II. Additionally, Members of Parliament sought clarity on the EU’s position for negotiations under the proposed UN framework convention on international tax cooperation and best practices for regional tax agreements.
Some MEPs questioned the apparent absence of “tax justice” from the European Commission’s priorities, urging renewed focus on equitable taxation. Mr Angel called for enhanced global transparency, including comprehensive beneficial ownership and real estate registers and stressed the importance of taking preparatory steps to ensure effective implementation of any HNWI tax.
The next meeting of the FISC Subcommittee is scheduled on 3 December 2024.
- From 14:30 to 15:30 FISC Members will exchange views with Ms. Mariá José Garde, Chair of the Code of Conduct Group on Business Taxation.
- From 15:30 to 16:45, the Subcommittee will host a public hearing on ‘National Tax Measures to Support People with Disabilities in the EU’.
- From 16:45 to 18:00, Ms. Ildikó Gáll-Pelcz, Member of the European Court of Auditors, will present a special report on ‘Combatting Harmful Tax Regimes and Corporate Tax Avoidance’
European Parliament Approves Revised Council Proposal on FASTER
The European Parliament approved on 14 November the Council-agreed text of the FASTER Directive (Faster and Safer Relief of Excess Withholding Taxes – Directive 2023/0187), aimed at modernising withholding tax (WHT) procedures within the European Union. The European Parliament endorsed the previous directive in February 2024, followed by a vote in the Council of the European Union in May 2024. However, substantial amendments introduced by the Council necessitated a renewed consultation with the European Parliament, which occurred on 14 November. The revised directive was subsequently approved with 555 votes in favour out of 645.
The directive introduces several key measures to improve the speed, security, and efficiency of cross-border tax processes. One of the central elements is the introduction of a digital tax residence certificate (eTRC), which must be issued by Member States within 14 days of a request, replacing the slower paper-based systems. It also establishes a new category for banks, known as Certified Financial Intermediaries (CFIs), which will be responsible for conducting due diligence and reporting WHT payment information to national tax authorities. The directive allows Member States to choose between implementing relief-at-source systems or quick refund procedures to simplify the WHT process for investors.
The directive’s approval by the European Parliament now paves the way for it to be resubmitted to the Council of the European Union for final approval. Member States must transpose the directive by 31 December 2028, with implementation set for 1 January 2030. This will require financial institutions and investors to adapt to new due diligence and reporting processes, ensuring compliance with the revised withholding tax systems.
OECD Secretary-General G20 Report
The OECD Secretary-General Report to G20, published ahead of the Leaders’ Summit under the Brazilian G20 Presidency, sets out key developments in international tax policy, emphasising progress under the Two-Pillar Solution for addressing tax challenges from the digital economy. Key insights include the signing ceremony and implementation of the Subject to Tax Rule (STTR) and Global Anti-Base Erosion (GloBE) Rules under Pillar Two, which are aimed at achieving global minimum taxation and reducing tax competition.
The report elaborates the ongoing implementation of BEPS (Base Erosion and Profit Shifting) minimum standards, including
OECD Consumption Tax Trends Report
OECD has now published the Consumption Tax Trends 2024 Report, which offers a detailed analysis of VAT/GST and excise taxes in OECD countries, highlighting key trends and developments. The Report notes that consumption taxes accounted for 9.9% of GDP in 2022, maintaining stability from previous years, though their share of total tax revenues declined slightly to 29.6%. This reduction is largely due to a decrease in taxes on specific goods and services, such as excise duties. VAT remains the primary source of consumption tax revenue, contributing over 20% of total tax revenues on average, with slight increases observed in many countries.
According to the OECD, consumption tax-to-GDP ratios declined in 12 out of the 38 OECD countries between 2020 and 2022, increased in 22 countries while 4 countries saw no change. Consumption taxes produce more than 40% of total taxes in 5 OECD countries (Chile, Colombia, Hungary, Latvia, and Türkiye), and they account for less than 20% of total taxes in 3 OECD countries (Japan, Switzerland, and the United States).
The publication emphasises significant developments in VAT systems, including measures to combat fraud and ensure compliance. Many OECD countries have implemented digital reporting systems and electronic invoicing, reflecting ongoing efforts to adapt VAT regimes to the digital economy. By 2024, average VAT rates increased slightly to 19.3%, with several countries harmonising VAT rules for online trade in alignment with OECD recommendations. These measures have enhanced VAT efficiency and its role as a key revenue source. The report highlights the opportunities and challenges posed by digitalisation, environmental goals, and global trade. While digital tools have enhanced tax compliance and fraud prevention, maintaining VAT neutrality in international trade remains a priority.
The selection of the remitted material has been prepared by:
Aleksandar Ivanovski & Brodie McIntosh