The European Commission’s stance on tax-advantaged state aid has had some vindication.
The EU’s General Court decided on Wednesday, September 20, that a Belgian scheme that exempts certain excess profits of member companies of multinational groups from tax is a breach of the bloc’s state aid rules.
The scheme works by allowing relevant entities to obtain an advance ruling from the Belgian tax administration, in particular if they centralise activities, create employment or make investments in Belgium.
“In that context, ‘excess’ profits, that is, profits exceeding the profit that would have been made by comparable standalone entities operating in similar circumstances, are exempted from corporate income tax,” according to the Commission.
The case opened in 2016 when the Commission ruled that the scheme “was unlawful and incompatible with the internal market” and told Belgium to recover the aid it had granted to 55 companies.
Belgium and some of these companies appealed to the General Court, which annulled the Commission’s decision in 2019, but the Court of Justice of the EU upheld the Commission’s appeal of this verdict in 2021, ordering the General Court to consider the case again.
Tax talks on the cards at UN
It was the briefest of nods, but it may be a sign of things to come.
Government leaders gathered in New York this week for the UN General Assembly committed to negotiations about the future of the international tax system.
“We look forward to the beginning of inter-governmental discussions in New York at United Nations headquarters on ways to strengthen the inclusiveness and effectiveness of international tax cooperation,” the leaders said in the political declaration that resulted from the High-level Political Forum on Sustainable Development, which reviewed the progress towards achieving the UN’s Strategic Development Goals by 2030 and what was needed to speed up their implementation.
This comes in the wake of UN Secretary-General Antonio Guterres’s draft report on international tax in August, which set out three options for expanding the organisation’s role in international tax policy.
New partner strengthens tax credit syndication at Holland & Knight
Liz Young has joined Holland & Knight’s tax credit syndication group in Washington DC as a partner from Nixon Peabody.
Young specialises in the structuring of complex community development transactions and projects across the US involving the federal low-income housing tax credit, new markets tax credit, historic rehabilitation tax credits and renewable energy tax credits.
She also represents clients on state and federal tax matters, such as corporate and pass-through entity structuring, family-owned business structuring and transactional tax planning, including real estate transactions and tax controversy.
"She is a well-known and respected attorney in the tax credit community, and her versatility will help us to deepen our institutional client relationships while attracting new clients as well," said Ted Hickey, practice group leader of the tax credit syndication group at Young’s new firm.
Trial of German cum-ex banker opens
Years after investigative journalists uncovered the cum-ex tax rebate scandal, more alleged perpetrators are facing justice.
The most senior German banker to be implicated went on trial in Bonn on Monday, September 18.
Christian Olearius, the former CEO and chair of the Hamburg-based bank MM Warburg, has previously denied he did anything wrong. He was not required to make a statement on the first day of the litigation.
A prosecutor told the court that the profit Germany is alleging the bank made from the scheme was "based on the fraudulent obtaining of taxpayers' money". Germany is claiming damages of nearly €280 million ($298 million).
Before countries scrambled to close the loophole, cum-ex trading, which took place around dividend payout day to deliberately obscure true share ownership, enabled banks and investors to claim a tax rebate multiple times for the same shares when only one was allowed. The scandal is estimated to have cost governments €10 billion in lost tax revenue.
Strengthened tax policy could raise more money for emerging and developing markets: IMF
Better tax design and stronger public institutions could help emerging markets and developing economies raise some of the estimated €3 trillion they need annually between now and 2030 to finance their sustainable government goals and climate transition, according to research from three IMF officials.
This could increase the tax-to-GDP ratios in many countries by as much as nine percentage points. To get there, the research found, if countries realised their tax potential – the maximum a country can collect given its economic structure and institutions – they could improve this ratio by 6.7 percentage points on average, with the balance of 2.3 percentage points coming from improving public institutions by, for example, reducing corruption.
Many emerging markets and developing countries hope that negotiations on new international tax rules for the digitalised economy will yield a large amount of revenue. However, previous IMF research found that it is only likely to bring in a small fraction of what they need.
Next week in ITR
ITR will continue to follow all the major market developments, including more analysis on the OECD’s consultation on amount B of pillar one, the results of which were announced on Wednesday, September 20.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.
