Ways of reducing fraud under withholding tax systems was discussed on Wednesday, together with the presentation of a draft report on the same matter.
During the meeting, held in the subcommittee on tax matters, MEPs discussed with experts about the best ways of reforming withholding tax systems in Europe and the way tax authorities work on this matter. Just after the hearing, MEP Pedro Marques (S&D, PT) presented his draft report on establishing a European withholding tax framework.
MEPs and participants all expressed the need for improving the current system. The rapporteur, Mr Marques said that despite free movement of capital having had beneficial results, it had also favoured aggressive tax planning with tax revenue losses of up to EUR 190 billion per year in the EU. The subcommittee’s chair, Paul Tang (S&D, NL), pointed out that the Cum-Ex revelations coming out last week showed once again the huge negative impact on national budgets of fraudulent schemes seeking and obtaining multiple refunds of withholding taxes.
MEPs and participants sought to strike a balance between tackling fraudulent practices which lead to non-taxation and even illegitimate tax refunds and, on the other hand, reducing double taxation which unduly penalises enterprises and investments.
During the meeting, much of the discussion revolved around the way that technology, particularly blockchain, can step in to help cut out fraud possibilities. Opinions differed among the experts however as to whether administrations were ready and able to adopt such technology quickly.
MEPs and experts also underlined the crucial importance for national tax authorities to cooperate more closely together. The point at which tax relief should be granted was also quite widely discussed.
Proposals in draft report
After the hearing, Mr Marques set out his first ideas which feature in the draft own initiative report. They include:
- setting up a system to ensure that all dividend, interest and royalties payments flowing out the EU are taxed at a minimum effective tax rate
- adopting an effective minimum tax rate for dividend payments to shareholders in the EU
- including an effective minimum tax rate for royalties and interest in the Interest and Royalties directive
- a harmonised EU procedure for withholding tax refunds for all Member States to address concerns about regulatory discrepancies
You can watch the meeting again here. The programme of the hearing, included the invited experts is here.