Europaudvalget 2017-18
KOM (2018) 0147 Bilag 4
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TITHE AN OIREACHTAIS
AN COMHCHOISTE UM AIRGEADAS, CAITEACHAS POIBLI AGUS ATHCHÓIRIÚ,
AGUS TAOISEACH
Tuairim Réasúnaithe
COM(2018)147 Togra le haghaidh Treoir ón gComhairle lena Leagtar Síos Rialacha
a Bhaineann le Cánachas Corparáide ar Láithreacht Dhigiteach Shuntasach
agus
COM(2018)148 Togra le haghaidh TREOIR ón gCOMHAIRLE maidir leis an
gComhchóras Cánach Seirbhísí Digiteacha ar Ioncaim a Thig as Seirbhísí
Digiteacha Áirithe a Sholáthar
Bealtaine 2018
-------------------------------------------------------
HOUSES OF THE OIREACHTAS
JOINT COMMITTEE ON FINANCE, PUBLIC EXPENDITURE AND REFORM AND
TAOISEACH
Reasoned Opinion on
COM(2018)147 Proposal for a Council Directive Laying Down Rules Relating to the
Corporate Taxation of a Significant Digital Presence
and
COM(2018)148 Proposal for a COUNCIL DIRECTIVE on the Common System of a
Digital Services Tax on Revenues Resulting from the Provision of Certain Digital
Services
May 2018
32-FPERT-012
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Joint Committee on Finance, Public Expenditure and Reform, and
Taoiseach
T
ABLE OF
C
ONTENTS
P
AGE
1. I
NTRODUCTION
2. S
CRUTINY BY THE
J
OINT
C
OMMITTEE
3. O
PINION OF THE
J
OINT
C
OMMITTEE
4. R
ECOMMENDATION OF THE
J
OINT
C
OMMITTEE
2
3
3
6
5. M
EMBERS OF THE
J
OINT
C
OMMITTEE ON
F
INANCE
, P
UBLIC
E
XPENDITURE AND
R
EFORM
,
AND
T
AOISEACH
7
6. T
RANSCRIPTS OF
J
OINT
C
OMMITTEE
M
EETINGS
7. O
RDERS OF
R
EFERENCE
8
9
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Joint Committee on Finance, Public Expenditure and Reform, and
Taoiseach
J
OINT
C
OMMITTEE ON
F
INANCE
, P
UBLIC
E
XPENDITURE AND
R
EFORM AND
T
AOISEACH
Report under Dáil Standing Order 114 and Seanad Standing Order 116 on
COM(2018)147 and COM(2018)148 - Proposal for a Council Directive laying
down rules relating to the corporate taxation of a significant digital presence
and
a Proposal for a Council Directive on the common system of a digital
services tax on revenues resulting from the provision of certain digital services.
1.
Introduction
1.1 The principle of subsidiarity is defined in Article 5(3) of the Treaty on European Union
(TEU) as follows:
“Under the principle
of subsidiarity, in areas which do not fall within its exclusive
competence, the Union shall act only if and insofar as the objectives of the
proposed action cannot be sufficiently achieved by the Member States, either at
central level or at regional and local level, but can rather, by reason of the scale
or effects of the proposed action, be better achieved at Union level”.
Article 5(3) also gives specific responsibility to national parliaments to ensure that EU
institutions apply the principle in accordance with Protocol 2 on the application of the
principles of subsidiarity and proportionality.
1.2 The test established by Article 5(3) TEU is, in effect, a “comparative efficiency”
exercise, involving a “necessity” test and a “greater
benefits”
test:
(i)
Necessity
- Is action by the EU necessary to achieve the objective of the
proposal? Can the objective of the proposal only be achieved, or achieved
to a sufficient extent, by EU action?
Greater Benefits
- Would the objective be better achieved at EU level
i.e.
would EU action provide greater benefits than action at Member States
level?
(ii)
1.3 To assist national parliaments in their evaluation of subsidiarity compliance, Article 5
of Protocol 2 provides explicitly that
“Any
draft legislative act should contain a detailed statement making it possible
to appraise compliance with the principles of subsidiarity and proportionality. This
statement should contain some assessment of the proposal's financial impact
and, in the case of a directive, of its implications for the rules to be put in place
by Member States…”
1.4
Therefore, any new draft legislative act,
must be supported by a sufficiently ‘detailed statement’ to allow a judgment
to be made by national parliaments on its compliance with the principle of
subsidiarity
must clearly satisfy both the
necessity
and
greater benefit
tests
must, under the principle of conferral set down in Article 5(2) of the TEU,
show that the Union is acting ‘only
within the limits of the competences
conferred upon it by the Member States in the Treaties to attain the
objectives set out therein.’
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Joint Committee on Finance, Public Expenditure and Reform, and
Taoiseach
2. Scrutiny by the Joint Committee on Finance, Public Expenditure and Reform,
and Taoiseach
The Joint Committee (hereafter referred to as the “Committee”) has scrutinised these
proposals at three meetings on 26 April 2018, 1 May 2018 and 3 May 2018.
2.1
At its meeting of 1 May the Committee agreed that COM(2018)147 and
COM(2018)148 warranted further scrutiny and agreed to invite Irish MEPS,
officials from the Department of Finance and the Office of the Revenue
Commissioners to a meeting of the Committee to further discuss and to be
briefed on the technical aspects of the proposals. The Committee also agreed to
invite stakeholders/experts to discuss the wider implications of the proposals on
Ireland’s corporate tax structure.
2.2
Respective witnesses attended Committee meetings on 26 April 2018, 1 May
2018 and 3 May 2018.
Following the Committee’s consideration of these matters,
the Committee agreed a reasoned opinion on the proposal at its meeting on 10
May.
2.3
The Joint Committee wishes to thank the witnesses for their assistance in relation
to the Committee’s
work on these significant proposals.
Opinion of the Joint Committee
3.
The Committee has had specific regard to the Treaty provisions and is of the opinion that
these proposals do not comply with the principle of subsidiarity. The reasons are set out
in the following paragraphs:-
3.1
The digitalisation of the global economy is having a transformative impact and
this impact presents challenges in terms of the applicability of the existing global
tax framework.
The existing global taxation system requires modification to respond to challenges
posed by digitalisation of the economy.
The established corporate tax framework, which taxes profits based on where
value has been created has not evolved to match the digitalisation of global
business and that the current Permanent Establishment (PE) Test does not reflect
modern business models.
The Committee is cognisant of the long-standing role played by the OECD/G20 in
developing and publishing the Base Erosion and Profit Shifting [BEPS] initiative.
Furthermore, the Committee is aware that taxation of the digital economy
features prominently in the BEPS Action Plan published in 2015 and that on-going
reviews on the challenges posed by digitalisation are currently being examined
with a view to a global solution being identified and reported in 2020.
3.2
3.3
3.4
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Joint Committee on Finance, Public Expenditure and Reform, and
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3.5
However, the Committee notes that there is no single definition of what
constitutes the Digital Economy. The Committee refers to publications by both
the OECD and the IMF reflecting that there are no agreed definitions of the digital
sector, products or transactions. In that regard, the Committee notes the
difficulties involved in calculating the size of the digital economy and in ring-
fencing elements of the digital economy for taxation purposes.
The Committee is of the view that the EU proposals introduce a narrow solution
as regards the concept of digital permanent establishment for taxing profits from
the sale of digital services, when other goods and services can use many of the
same mechanisms to avoid tax and are not addressed by these proposals.
The Committee reiterates that taxation and the rights of Member States to
impose, administer and repeal taxes is a sovereign right enshrined in law and is
therefore a national competence.
The Committee is of the opinion that the implications of the proposals fall
generally within the area of tax policy and thus impinges on a national
competency.
The Committee notes that taxation of the Digital Economy will also have
implications as regards the allocation of profits and that the proposals do not
explicitly state the method of allocation. If the allocation method is based on an
apportionment formula similar to that proposed in the CCCTB proposal or
attributed to end users of online digital services, this approach will naturally
favour and advantage large member states with large population and customer
bases. Therefore, it is the view of the Committee, that in the absence of any
impact assessments for individual member states, it is probable that these
proposals will impact disproportionately and negatively on the finances of smaller
members states.
The Committee has particular concerns regarding the EU acting unilaterally in
proceeding to introduce proposals designed to tax the digital economy when
existing international reviews are as yet not completed. Specifically, the
Committee notes the on-going studies and analysis of the OECD Task Force on
the challenges arising from the digitalisation of the global economy. The
Committee deems that it is necessary that all parties work together towards a
durable and global based consensus approach and in this vein supports the fact
that all 113 countries in the OECD BEPS inclusive framework have agreed that a
global rules based system based on international agreement is critical.
3.6
3.7
3.8
3.9
3.10
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Joint Committee on Finance, Public Expenditure and Reform, and
Taoiseach
3.11
The Committee notes that concerns have been raised at an international level
with regard to unilateral action by the EU in this domain. The narrow application
of the interim tax focusing primarily on technological companies gives the
perception that these companies are being treated exceptionally. It could be
construed that the proposals are arbitrary and discriminatory in practice in
pinpointing a particular sector of the wider economy. This perception has the
potential to escalate global trade tensions that may impact adversely on the EU
economy.
The Committee has reservations that the EU acting unilaterally could increase the
administrative burden and costs and may lead to a position whereby Member
States will have to embark on renegotiating tax treaties with Third Countries.
The Committee is of the view that the Digital Services Tax (DST) or turnover tax
is a blunt and crude instrument
to be derived from gross revenue that takes no
account of whether a business is profitable or loss making.
The Digital Services Tax as designed poses a significant threat to the viability of
start-ups and small business enterprises (SMEs) and is contrary to the stated EU
objective of job creation and wider economic growth.
The Committee has concerns as to the legality of the mandatory application of a
3% annual levy where Member States have no discretion in either increasing or
decreasing the tax rate. The set rate of 3% determined at a centralised level
raises issues concerning the legality of the proposal and whether it is in violation
of the principle of tax sovereignty.
The Commission estimates that
€5billion in additional revenue will accrue on an
annual basis from the imposition of the Digital Services Tax. However, the
underlying data used in calculating this figure is not published. The Committee
considers it difficult to verify or conduct a robust assessment of the impact of the
proposal in the absence of such data.
The Committee expresses reservations that the proposal introducing a Digital
Services Tax does not contain or provides for
a “sunset clause”. The Committee
notes that temporary levies or taxes can become permanent and that Member
States can become dependent on such revenue streams. The Committee deems
this problematic in view of the fact that such a mechanism has the potential to
create economic uncertainty for businesses.
The Digital Services tax has the potential to lead to some form of Double
Taxation. As the DST is not creditable against corporation tax paid, the scope for
some form of double taxation occurring is increased.
The Committee recognises the ongoing work and studies in relation to what
constitutes “added value” in the Digital Economy and Digital Services realm. The
Committee notes that the concept of “added value” requires careful analysis and
that no specific definition or recognised label/standard currently exists. In the
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
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Joint Committee on Finance, Public Expenditure and Reform, and
Taoiseach
absence of clarification and a recognised standard, the Committee deems it
premature to devise a taxing model in the absence of defined concept criteria.
3.20
The Committee notes that the timeframes for both the publication of the
OECD/G20 Report on the Taxation challenges posed by the Digital Economy and
the implementation/enactment of the EU proposals coincide. The Committee has
concerns about the development of two divergent and incompatible taxation
models which have the potential to engender a two-tier system adding greater
uncertainty and fragmentation.
In that regard, the Committee deems that the OECD should be fully supported in
completing its analysis and review of taxation and the digital economy with the
ultimate objective of global consensus and alignment achieved on the
implementation of a new global taxation framework that has international
acceptance. The Committee believes this approach offers the best way forward in
formulating a global response to the global issue that is taxation of the digital
economy.
The Committee is satisfied that the above points, taken together, clearly
demonstrate that the proposed Directives breach the principle of subsidiarity.
3.21
3.22
4.
Recommendation of the Joint Committee
The Committee agreed this Report under Dáil Standing Order 114 and Seanad Standing
Order 116 on 10 May 2018.
The Committee, pursuant to Standing Orders recommends the reasoned opinion
contained in Section 3 above for agreement by Dáil and Seanad Éireann.
_____________________
John McGuinness T.D,
Chairman,
10 May 2018
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Joint Committee on Finance, Public Expenditure and Reform, and
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Appendix 1
Membership of the Joint Committee on Finance, Public
Expenditure and Reform and Taoiseach
Deputies:
John McGuinness TD (FF) (Chairman)
Peter Burke TD (FG)
Joan Burton TD (Lab)
John Deasy TD (FG)
Pearse Doherty TD (SF)
Michael McGrath TD (FF)
Paul Murphy TD (IND)
Senators:
Gerry Horkan (FF) (Vice-Chairman)
Paddy Burke (FG)
Rose Conway-Walsh (SF)
Kieran O’Donnell (FG)
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Joint Committee on Finance, Public Expenditure and Reform, and
Taoiseach
Appendix 2
Transcripts of Joint Committee Meetings
The Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach met with
Irish MEPs, officials from the Department of Finance and the Office of the Revenue
Commissioners and representatives of the Irish Tax Institute and Irish Christian Aid in
public session to discuss the proposals COMs(2018)147 and 148. Details of the meetings
with a link to the meeting transcripts, is set out below.
26 April 2018
1 May 2018
3 May 2018
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Joint Committee on Finance, Public Expenditure and Reform, and
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Appendix 3
Orders of Reference
a. Functions of the Committee
derived from Standing Orders [DSO 84A; SSO 70A]
(1) The Select Committee shall consider and report to the Dáil on—
(a) such aspects of the expenditure, administration and policy of a
Government Department or Departments and associated public
bodies as the Committee may select, and
(b) European Union matters within the remit of the relevant Department or
Departments.
(2) The Select Committee appointed pursuant to this Standing Order may be
joined with a Select Committee appointed by Seanad Éireann for the
purposes of the functions set out in this Standing Order, other than at
paragraph (3), and to report thereon to both Houses of the Oireachtas.
(3) Without prejudice to the generality of paragraph (1), the Select Committee
appointed pursuant to this Standing Order shall consider, in respect of the
relevant Department or Departments, such—
(a) Bills,
(b) proposals contained in any motion, including any motion within the
meaning of Standing Order 187,
(c) Estimates for Public Services, and
(d) other matters
as shall be referred to the Select Committee by the Dáil, and
(e) Annual Output Statements including performance, efficiency and
effectiveness in the use of public monies, and
(f) such Value for Money and Policy Reviews as the Select Committee may
select.
(4) The Joint Committee may consider the following matters in respect of the
relevant Department or Departments and associated public bodies:
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Joint Committee on Finance, Public Expenditure and Reform, and
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(a) matters of policy and governance for which the Minister is officially
responsible,
(b) public affairs administered by the Department,
(c) policy issues arising from Value for Money and Policy Reviews
conducted or commissioned by the Department,
(d) Government policy and governance in respect of bodies under the
aegis of the Department,
(e) policy and governance issues concerning bodies which are partly or
wholly funded by the State or which are established or appointed by a
member of the Government or the Oireachtas,
(f) the general scheme or draft heads of any Bill,
(g) any post-enactment report laid before either House or both Houses by
a member of the Government or Minister of State on any Bill enacted
by the Houses of the Oireachtas,
(h) statutory instruments, including those laid or laid in draft before either
House or both Houses and those made under the European
Communities Acts 1972 to 2009,
(i) strategy statements laid before either or both Houses of the Oireachtas
pursuant to the Public Service Management Act 1997,
(j) annual reports or annual reports and accounts, required by law, and
laid before either or both Houses of the Oireachtas, of the
Department or bodies referred to in subparagraphs (d) and (e) and
the overall performance and operational results, statements of
strategy and corporate plans of such bodies, and
(k) such other matters as may be referred to it by the Dáil from time to
time.
(5) Without prejudice to the generality of paragraph (1), the Joint Committee
appointed pursuant to this Standing Order shall consider, in respect of the
relevant Department or Departments—
(a) EU draft legislative acts standing referred to the Select Committee
under Standing Order 114, including the compliance of such acts with
the principle of subsidiarity,
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Joint Committee on Finance, Public Expenditure and Reform, and
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(b) other proposals for EU legislation and related policy issues, including
programmes and guidelines prepared by the European Commission
as a basis of possible legislative action,
(c) non-legislative documents published by any EU institution in relation to
EU policy matters, and
(d) matters listed for consideration on the agenda for meetings of the
relevant EU Council of Ministers and the outcome of such meetings.
(6) Where a Select Committee appointed pursuant to this Standing Order has
been joined with a Select Committee appointed by Seanad Éireann, the
Chairman of the Dáil Select Committee shall also be the Chairman of the
Joint Committee.
(7) The following may attend meetings of the Select or Joint Committee
appointed pursuant to this Standing Order, for the purposes of the functions
set out in paragraph (5) and may take part in proceedings without having a
right to vote or to move motions and amendments:
(a) Members of the European Parliament elected from constituencies in
Ireland, including Northern Ireland,
(b) Members of the Irish delegation to the Parliamentary Assembly of the
Council of Europe, and
(c) at the invitation of the Committee, other Members of the European
Parliament.
(8) A Select Committee appointed pursuant to this Standing Order may, in
respect of any Ombudsman charged with oversight of public services within
the policy remit of the relevant Department or Departments, consider—
(a) such motions relating to the appointment of an Ombudsman as may
be referred to the Committee, and
(b) such Ombudsman reports laid before either or both Houses of the
Oireachtas as the Committee may select.
b. Scope and Context of Activities of Committees (as derived from Standing
Orders) [DSO 84; SSO 70]
(1)
The Joint Committee may only consider such matters, engage in such
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Joint Committee on Finance, Public Expenditure and Reform, and
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activities, exercise such powers and discharge such functions as are
specifically authorised under its orders of reference and under Standing
Orders; and
(2)
Such matters, activities, powers and functions shall be relevant to, and
shall arise only in the context of, the preparation of a report to the Dáil
and/or Seanad.
The Joint Committee shall not consider any matter which is being
considered, or of which notice has been given of a proposal to consider,
by the Committee of Public Accounts pursuant to Standing Order 186
and/or the Comptroller and Auditor General (Amendment) Act 1993; and
any matter which is being considered, or of which notice has been given
of a proposal to consider, by the Joint Committee on Public Petitions in
the exercise of its functions under Standing Orders [DSO 111A and SSO
104A].
The Joint Committee shall refrain from inquiring into in public session or
publishing confidential information regarding any matter if so requested,
for stated reasons given in writing, by—
(a)
(b)
a member of the Government or a Minister of State, or
the principal office-holder of a body under the aegis of a
Department or which is partly or wholly funded by the State or
established or appointed by a member of the Government or by
the Oireachtas:
(3)
(4)
(5)
Provided that the Chairman may appeal any such request made to the
Ceann Comhairle / Cathaoirleach whose decision shall be final.
(6)
It shall be an instruction to all Select Committees to which Bills are
referred that they shall ensure that not more than two Select
Committees shall meet to consider a Bill on any given day, unless the
Dáil, after due notice given by the Chairman of the Select Committee,
waives this instruction on motion made by the Taoiseach pursuant to
Dáil Standing Order 28. The Chairmen of Select Committees shall have
responsibility for compliance with this instruction.
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