At a meeting of the EU Parliament’s FISC subcommittee on 30 November 2021, the EU Commissioner responsible for economic and tax issues outlined the European Commission’s tax plans for 2022 and was questioned on the plans by members of the subcommittee.

The FISC subcommittee was established to assist the European Parliament’s ECON Committee on issues related to taxation. It looks at possible measures to combat tax fraud, tax evasion and tax avoidance and investigates ways to improve financial transparency in the context of taxation. The subcommittee operates by holding hearings with experts, exchanging views with Ministers and parliamentarians and engaging in fact-finding projects.

Pillar Two of OECD agreement

The MEPs requested more detail on how the European Commission would draft the legislative proposals to implement the OECD agreement on an effective minimum global corporate tax rate of 15%. The Commissioner explained that the proposals would strictly adhere to the agreement reached by the OECD, without the addition of further rules. The proposal for the directive is expected to be issued by the end of 2021.

Pillar One of OECD agreement

In relation to the rules under Pillar One, the EU is waiting for the planned multilateral convention before taking any further measures. The convention to implement the provisions of Pillar One is expected to be ratified in 2022.

Digital Levy

Earlier in 2021 the European Commission announced a proposal for a digital levy that could be introduced if there was a delay in the OECD process on taxation of the digital economy. This proposal has now been put on hold.

Shell companies

The Commission plans to introduce proposals on the use of shell companies. The approach to dealing with zero tax jurisdictions in the context of the EU list of non-cooperative jurisdictions will be strengthened.

Administrative Cooperation

The European Commission is to put forward a proposed revision of the directive on administrative cooperation. This will increase the scope for exchanges of account information involving crypto-assets and e-money, and will increase the effectiveness of the existing exchanges under DAC8.

Debt Equity Bias Reduction Account

During the first half of 2022 the Commission will put forward a proposal for a debt-equity bias reduction allowance (DEBRA). The DEBRA proposal would encourage companies to finance investment through equity contributions rather than debt financing, to reduce the risk of over-indebtedness. An allowance would be introduced for equity-financed new investment, to mitigate the effects of debt bias. The scheme would include anti-tax avoidance rules to ensure fairness.

Code of Conduct Group

The code of conduct group is the EU’s informal body whose responsibilities include establishing and updating the EU’s list of tax havens. The MEPs questioned the Commissioner on the obstacles to reform of the group.

Other

Other issues discussed at the meeting included the financial transaction tax, tax competition and the possibility of a minimum tax rate for royalties, dividends and interest.

The MEPs also asked how the Commission can balance the need for an ambitious tax policy with the need to facilitate economic growth.