CFE’s Tax Top 5 – 8 April 2024

BRUSSELS | 8 APRIL 2024

“EU – US AI Research Alliance & Report on “AI For Public Good”

The EU and US reaffirmed their common commitment to a risk-based approach to artificial intelligence (AI) and support for reliable AI technology in the framework of the EU-US Trade and Technology Council (TTC) meeting held in Leuven, Belgium. As a key forum for transatlantic cooperation on trade and technology, the sixth meeting in such format was attended by Commissioners Margrethe Vestager, Valdis Dombrovskis and Thierry Breton representing the EU, and US Secretary of State Antony Blinken, US Secretary of Commerce Gina Raimondo and US Trade Representative Katherine Tai. 

The overview document entitled AI for the Public Good sets out the basic principles in the partnership between the European Union and the United States on collaboration in the area of Artificial Intelligence (AI), aiming to align allied interests and values in harnessing emerging digital technologies to tackle global challenges. The paper notes that “through this groundbreaking initiative, EU-U.S. scientific cooperation in AI is channelled to foster innovative research that can set the groundwork to advance societal well-being.” The EU and US will also continue to work together on transparency and risk mitigation in AI and implement the Joint Roadmap for Trustworthy AI and Risk Management.   

US President Joe Biden and European Commission President Ursula von der Leyen launched the EU-US Trade and Technology Council at the EU-US Summit in Brussels on 15 June 2021.

EU Opens Investigations Into Tech Companies Under DMA

The European Commission opened investigation against the companies Apple, Google (Alphabet) and Facebook/ Instagram/ WhatsApp (Meta) for non-compliance with EU’s Digital Markets Act (DMA). Under the EU’s DMA, Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft were the six gatekeepers designated by the Commission in September 2023, with a deadline to comply with their EU obligations by 7 March 2024. The DMA is the first regulatory tool to regulate the largest digital companies which serve as key conduit between businesses and consumers and whose dominant position could grant them the power to create bottlenecks in the digital economy. The DMA allows the Commission to impose fines of up to 10 percent of their global annual turnover if they are found to be in breach of these new rules, which complement existing obligations under EU’s antitrust/ competition laws. 

The European Commission has said that the model of Facebook and Instagram known as “pay or consent”, which offers a choice of subscription fee to avoid ad tracking, may not provide a real alternative in case users do not consent. The Commission also expressed doubts that the consent is really free when one is confronted with a “binary choice” of either paying or not paying for the service. Commenting on these developments, Thierry Breton, EU’s Internal Market Commissioner said: “The Digital Markets Act became applicable on 7 March. We have been in discussions with gatekeepers for months to help them adapt, and we can already see changes happening on the market. But we are not convinced that the solutions by Alphabet, Apple and Meta respect their obligations for a fairer and more open digital space for European citizens and businesses. Should our investigation conclude that there is lack of full compliance with the DMA, gatekeepers could face heavy fines.” 

The Commission intends to complete these investigations within 12 months. 

OECD Publishes 6th Peer Review Report on Prevention of Treaty Shopping

The OECD published the 6th peer review report on OECD BEPS Action 6, on the Prevention of Tax Treaty Shopping, monitoring anti-abuse measures of countries to prevent tax tax shopping. The reviews are carried out as part of the implementation of Action 6 of the OECD/G20 Base Erosion and Profit Shifting Project: 

As one of the four minimum standards, BEPS Action 6 identified treaty abuse, and in particular treaty shopping, as one of the principal sources of BEPS concerns. Treaty shopping typically involves the attempt by a person to access indirectly the benefits of a tax agreement between two jurisdictions without being a resident of one of those jurisdictions. To address this issue, all members of the Inclusive Framework have committed to implementing the Action 6 minimum standard and participate in a periodic peer review process to monitor its accurate implementation.

The report sets out that most agreements concluded between the members of the Inclusive Framework are either already compliant with the Action 6 minimum standard or will shortly come into compliance and confirms that the majority of the jurisdictions use the BEPS MLI as the tool for implementation of the standard. The BEPS MLI covers 102 jurisdictions and over 1900 bilateral treaties.

The report can be accessed here.

CFE Forum | 18 April 2024 | Brussels : Sharing the Tax Pie

The CFE Tax Advisers Europe will hold its 2024 Forum on 18 April 2024 in Brussels on the topic of “Sharing the Tax Pie: Revisiting the Role of the UN, EU & OECD in Tax Policy; and Taxable Presence Threshold (Fixed Establishment) in Indirect Taxation”. The Forum will bring together two excellent panels of speakers to discuss the allocation of tax base from a direct and indirect tax perspective.

Speakers on the direct tax panel will include: Mr. Benjamin Angel Director, European Commission DG TAXUD; Professor Philip Baker, KC, OBE, Barrister and Professor of Law at Oxford University; Ms. Olivia Long, Head of Tax Policy at Matheson LLP (Ireland); Mr. Pascal Saint-Amans, Partner at Brunswick and previous Director of the OECD Centre for Tax Policy and Administration OECD Tax (CTPA); and Professor Irma Mosquera Valderrama, Professor of Tax Governance at University of Leiden Law School. The panel discussion will be moderated by Mr. Bruno Gouthière, Partner at CMS Francis Lefebvre Avocats and Chair of CFE Tax Advisers Europe Fiscal Committee.

The indirect tax panel will feature: Ms. Trudy Perié, Counsel, Loyens & Loeff, Netherlands; Mr. Erik Stessens, Senior Vice President Tax, Mastercard; Dr. Marie Lamensch, Professor of Taxation, Louvain School of Management, UCLouvain; and, Ms. Charlène Herbain from the European Commission. The panel will be moderated by Mr. Jeremy Woolf, Barrister, Pump Court Tax Chambers, United Kingdom, and Chair of the CFE Indirect Taxes Subcommittee.

Further details and registration is available here.

EU Commission to Examine Austria’s Complaint Against Hungary’s Retail Tax 

The European Commission is set to examine a complaint filed by Austria and the company Spar against Hungary, alleging discriminatory tax treatment of foreign retailers. In the letters addressed to EU’s Competition Commissioner Margrethe Vestager, Internal Market Commissioner Thierry Breton, and Economy Commissioner Paolo Gentiloni, Spar Austria, supported by the Austrian Government, alleges the Hungarian retail tax 4.5% of revenue discriminates against foreign retailers in Hungary, in breach of EU law.

The letter claims that “foreign-owned retailers, including Spar Hungary, face the highest tax bracket of the special tax. In contrast, Hungarian competitors operating in franchise chains consistently benefit from lower tax rates (0-1%). The tax forces foreign retailers to operate at a loss because profit margins in the retail sector are lower than 4.5%.” The European Commission stated that “the Commission services have received a complaint concerning the Hungarian retail tax and will analyse it and ensure appropriate follow-up.”

The selection of the remitted material has been prepared by:
Dr Aleksandar Ivanovski & Brodie McIntosh