The EU Council has approved conclusions on encouraging better information security in tax administrative cooperation and information sharing, and on tobacco excise duties. The council is also close to adopting a directive on delaying DAC6 filing deadlines.
In council conclusions approved May 29 and released June 2, the council said the European Commission should evaluate developments on the directive on administrative cooperation in taxation and update the directive to strengthen information sharing.
The European Commission is set to propose on July 15 a new amendment to the directive (Directive 2011/16/EU) to require digital platform providers to collect and report user transaction data to EU tax authorities and allow those authorities to exchange those data with their counterparts in other member states.
The council conclusions say the update to the administrative cooperation directive should address distortion, build on international consensus led by the OECD, and improve data and information security in information exchanges.
The council urged the commission to submit a legislative proposal to the council as soon as possible and invited it “to address the most urgent issues as a priority, such as challenges arising from digital platform economy, and, for that purpose consider phasing in the legislative proposals in order to facilitate legislative progress."
The council also wants some filing deadlines of DAC6 (Council Directive (EU) 2018/822), which amended the administrative cooperation directive to introduce new mandatory tax reporting rules for some cross-border arrangements, to be deferred because of the COVID-19 pandemic while preserving information exchange requirements. A draft council directive amending Directive 2011/16/EU to delay the deadlines has been agreed to at the EU ambassador level and is expected to be formally adopted within days.
The May 28 draft directive, obtained by Tax Notes, states that because of the “severe disruption” to the activities of financial institutions, member states, and persons liable for reporting caused by the COVID-19 pandemic, member states will be allowed to defer for up to three months the deadlines for filing and exchanging information on cross-border arrangements and for exchanging information on financial accounts when the beneficiaries are tax residents in another member state.
For reportable cross-border arrangements made between June 25, 2018 (when DAC6 entered into force), and June 30, 2020, the deadline to file would be extended to February 28, 2021.
Information on these arrangements should be communicated by intermediaries to member states’ tax administrations by April 30, 2021, the draft directive says. The 30-day filing period would begin January 1, 2021, in cases when reportable cross-border arrangements were implemented or ready to be implemented between July 1 and December 31, 2020.
The draft directive cautions that deferral “should not disrupt the established structure and functioning of Directive 2011/16/EU,” and that it should be limited and reflective of the practical difficulties caused by meeting deadlines to file and exchange information during the COVID-19 pandemic.
“Any deferral of the time limits should not affect the essential elements of the obligation to report and exchange information under this Directive and should ensure that no such information which becomes reportable during the period of deferral remains unreported or unexchanged,” the draft directive says.
The application date of DAC6 will still be July 1, meaning reportable cross-border arrangements made during the deferral period will have to be reported after that period. The commission began considering delaying these reporting deadlines after receiving feedback from financial intermediaries.
In line with a May 8 commission proposal, the draft directive says the deadline deferral could be extended another three months by a unanimous council vote on a commission proposal, which should be held one month before the relevant reporting deadlines expire.
Excise Tax on Tobacco
Any excise tax on tobacco should address “next-generation” tobacco products, including liquids for e-cigarettes and heated tobacco products, according to EU Council conclusions approved June 1 and released June 2.
In amending Directive 2011/64/EU, which provides the structure and rates of the manufactured tobacco excise duty, the commission should harmonize definitions and tax treatment of next-generation tobacco products, and tobacco substitute products, to better face challenges in the functioning of the internal market, the council said.
The conclusions suggest adding new product categories for tobacco and a definition of raw tobacco to Directive 2011/64/EU.
While illicit trade of tobacco products is a public health concern for the EU, the council conclusions say the EU needs to bolster a system to “control the movement of raw tobacco” and combat the risks of its diversion to the illegal circuit. One way to do so, the conclusions say, is to “explore tax induced substitution across products and related illicit trade” while improving definitions of such products to address tax control, revenue collection, and health protection.
Member states vary widely in their taxation and pricing of tobacco products, the conclusions say, and this may encourage illegal cross-border trade of cheaper tobacco products. Therefore, the council said, more uniformity is needed in excise duty rates across the EU to deter these cross-border tobacco product flows.
The council also recommends bringing back minimum excise duty rates and increasing those minimums to reduce tobacco product consumption. Any increase should happen gradually and in proportion to member states’ revenue and public health goals, the council said.
“When revising the system of excise duty rates in the EU, better functioning of the internal market needs to be ensured together with the objectives of revenue, public health and public security, and a number of diverse factors that play a role need to be considered in the overall balance,” the council said. Those factors include differences in product characteristics, economic burden of social tobacco use, the total tax burden, including VAT, the purchasing-power parities, and the economic situation and geographical position of member states.
The council asked that that the commission — after conducting technical analyses, public consultations, and impact assessments — present it with a legislative proposal aiming to resolve the concerns laid out by the council.