Review of European and Comparative Law, 2024, Vol. 58, No. 3

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https://hdl.handle.net/20.500.12153/8202

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    Polycrisis, Megatrends – Tax Policy Trends and Responses
    (Wydawnictwo KUL, 2024) Csürös, Gabriella
    The EU relies heavily on labor taxation including social security contributions (accounting for more than half of all EU-27 tax revenues), though it can discourage labor market participation. Besides, ageing, digitalization, global markets, new forms of work and increasing labor mobility question the residence-based principle of personal income tax. The sustainability of the social security system can be promoted by additional behavioral tax (linked, for example, to the consumption of unhealthy products or the use of risky services). In the former socialist countries analyzed in this study (Croatia, Bulgaria, Latvia, Estonia, Hungary, Poland and Romania), the share of consumption taxes in total tax revenue is above 38%, well above the EU average. In countries with high consumption tax rates and significant consumption tax revenues, both labor and capital income tax revenues are typically below the EU average. The share of environmental taxes in tax systems is low, both on average in the EU and in the examined countries (although most of them are at or above average). Nonetheless, in the former socialist countries, the share of property taxes is lower than the EU average (for historical reasons, property taxation is less accepted by their societies). According to a Commission study published in 2024 (see: “Growth-Friendly Taxation in a High-Inflation Environment,” European Commission, European Economy Economic Brief 079), strengthening property taxation would help to make the tax system fairer, although not in a time of high inflation and crisis. Harnessing the potential of digitalization contributes to efficient and effective tax administration and can also reduce administrative costs, thus facilitating compliance. Latvia, Hungary and Poland recorded an exceptionally large improvement in VAT compliance, with VAT gaps falling between 2013 and 2021 by over 15 pp, which turned them into the best performers in the EU (Romania still faces challenges in the field of tax avoidance, VAT compliance gap and inefficient tax auditing). Tax administrations in most of the analyzed countries are therefore well adapted to the challenges of digitalization. The future tax system must implement a desirable green tax reform shifting a part of the tax burden away from labor to tax bases linked to environment taxes and other behavioral taxes – regarding the sustainability of the tax system as the European and national budgets face significant financial pressure due to the polycrisis, megatrends and EU loans. In the studied former socialist countries (Croatia, Bulgaria, Latvia, Estonia, Hungary and Romania) the share of consumption taxes in total tax revenue is above 38%, well above the EU average. In countries with high consumption tax rates and significant consumption tax revenues, both labour and capital income tax revenues are typically below the EU average. The share of environmental taxes in tax systems is low, both on average in the EU and in the countries studied (although most of them are at or above average). Though, in the former socialist countries the share of property taxes is lower than the EU average (for historical reasons, property taxation is less accepted by their society). According to a Commission study in 2024, strengthening property taxation would help to make the tax system fairer, although not in a time of high inflation and crisis. Harnessing the potential of digitalisation contributes to efficient and effective tax administration and can also reduce administrative costs, thus facilitating compliance. Latvia, Hungary and Poland recorded an exceptionally large improvement in VAT compliance, with VAT gaps falling between 2013 and 2021 by over 15 pp and currently they belong to the best performers in the EU. Tax administrations in most of the studied countries are therefore well adapted to the challenges of digitalisation. The future tax system must implement a desirable green tax reform shifting a part of the tax burden away from labour on to tax bases linked to environment taxes and other behavioural taxes – regarding the sustainability of tax system as the European and national budgets faces significant financial pressure due to the the policrisis, megatrends and EU loans.
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    The Weakening of Taxpayer Rights in the Exchange of Information between Tax Authorities
    (Wydawnictwo KUL, 2024) Selicato, Gianluca
    Developments in international legislation and the growing digitalization of tax law support the development of global networks between tax authorities. We are witnessing an integration of databases that will lead to increasingly intense coordination of the fight against tax evasion at a supranational level. As in social networks and digital commerce, databases are increasingly enriched, contain increasingly precise information on the individual taxpayer and use common languages that allow for automated exchanges of information. While waiting for the creation of a global database – not conditioned by the constraints of reciprocity and abstractly usable by all authorized entities who need it – the first risks of limitation of the taxpayer’s rights are emerging. In fact, these phenomena have dark sides that are starting to emerge in use, at a national level and with respect to individual taxpayers, of interpolated databases. Moreover, a growing amount of information flows from heterogeneous and increasingly widespread sources, sometimes not protected by the requirements of professionalism, legality and public trust since data collection and entry can be delegated to economic entities, intermediaries and consultants. The absence of an authority responsible for the unitary management of global databases and for the resolution of their conflicts, the slow and timid affirmation (only in some national systems) of the taxpayer’s right of access to information concerning them, the difficult configuration of the faculty to request the correction of erroneous data and of the specular public power to remove the reported inaccuracies, weaken the system of protections gradually erected to protect the taxpayer’s position. In this way, the coordination of national systems that contemporary tax law creates is strongly unbalanced on the side of the protection of tax interests. International and European tax law should instead provide greater guarantees in favor of the taxpayers, defending their right to fair taxation.
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    Value Added Tax on Financial Services in the EU: The Complete Story
    (Wydawnictwo KUL, 2024) Antonov, Lyubomir
    The paper provides an extensive overview of the VAT exemption of financial services in the EU. The topic is surrounded by conceptual and practical challenges. The main issues are presented in a retrospective plan. They have been clearly defined and discussed since the very inception of the EU VAT system. The difficulties this tax regime is faced with today reveal the logical sequence that can be traced as far back as the 1970s. In its first part, the paper looks at the topic from a historical perspective, exploring the inclusion of financial services within the scope of the first VAT rules. Further insight is subsequently provided on the application of the VAT exemption over the past decades until the present-day rules. At its core, the text relies mostly upon the CJEU case law. Capital issues for VAT fiscal neutrality are also given careful consideration. This is the major concern inspiring the Commission’s attempts and proposals for VAT reforms. After a concise examination of the efforts to revise the legislation, the paper focuses on the most recent developments in the financial industry, which is a major stakeholder concerned by the recent aspirations of Brussels.
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    Goals, Effects and Challenges of the Financial Transaction Tax: A Comparative Law Study in France, Italy and Spain
    (Wydawnictwo KUL, 2024) Gallego López, Juan Benito
    The Preamble of the Spanish Financial Transactions Tax Law establishes that “[t]he shaping of the tax follows the line taken by our neighbouring countries, including France and Italy, thus contributing to greater coordination of these taxes across Europe.” In this sense, the Spanish tax shows important similarities with those established in France and Italy in relation to the levy on the acquisition of certain shares and securities representing the capital of a company for consideration. Nevertheless, both the French and the Italian taxes apply to other types of transactions, not covered by the Spanish Law, which is why it is necessary to carry out the corresponding comparative study. Furthermore, the effects that have arisen from the application of this kind of taxes to financial transactions merited a proper analysis in order to determine if the main goals pursued by these taxes have been achieved in an efficient way. In any case, there are emerging tax challenges in financial markets connected, on the one hand, to the use of crypto-assets and distributed ledger technology, and, on the other hand, to the implementation of artificial intelligence and machine learning and the fair taxation of these operations. In this sense, the Spanish tax presents important similarities with those established in France and Italy in relation to the levy of acquisition for consideration of certain shares and securities representing the capital of a company. Nevertheless, both the French and the Italian taxes subject other types of transactions, out of scope of the Spanish Law, which is why it is necessary to carry out the corresponding comparative study. Furthermore, the effects that have arisen from the application of this kind of taxes on financial transactions merited a proper analysis in order to determine if the main goals persuaded by theses taxes have been achieved in an efficient way. In any case, there are emerging tax challenges in financial markets connected, by the one hand, to the use of crypto-assets and distributed ledger technology; by the other one, to the implementation of artificial intelligence and machine-learning and the fair taxation of these operations.
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    Tax Challenges Arising from Digitalization: Evaluating the Taxation Models Proposed by the European Commission and the OECD
    (Wydawnictwo KUL, 2024) Čerka, Paulius; Grigienė, Jurgita; Venslovaitytė, Karolina
    The world has entered a period of deep transition with rapid and phenomenal development of innovations. The rise of the digital economy has dramatically changed the global business environment, creating new challenges for the tax system. Newspapers and magazines are being replaced by the Internet, and trade in material goods – by digital services. The digital economy eliminates the barriers of time, space and distance. The server where the transaction is processed, the location from which the goods or services are supplied and the place of supply of such goods or services are in different jurisdictions, therefore, the question “Where should the transaction be taxed?” is raised. Meanwhile, the digital economy opens up unprecedented opportunities to avoid taxes with the international tax rules which are still “stuck” in 20th-century business concepts, because the companies operating in the digital space do not need factories, stores or other permanent residences to develop their activities. This article aims to evaluate the efforts of the European Union and international standard-setting entities to find a solution for fair taxation of the digital economy. The first part of the article delves into the concept of the digital economy and its essential features with a special emphasis on the role of the digital service user which is unique and more complex than the role usually played by the customer. This part also analyses the differences between digital and traditional business. The second part of the study emphasizes the reasons that will lead to the necessity of taxation of the digital economy, discusses the digital services tax applied in certain countries of the European Union and highlights the weakness of the concept of digital establishment in double taxation agreements concluded by the countries. The final part explores the proposals submitted by the European Commission regarding the introduction of a common consolidated corporate tax base and the inclusion of the concept of virtual permanent establishment in the tax system in the context of the digital economy taxation model proposed by international organizations.