A&G Newsletter Q2 2021

I. Council to go ahead with the country-by- country reporting directive

On February 25, the Portuguese Presidency of the Council of the European Union earned widespread support from member states to advance with the European public country-to-country reporting directive. The directive aims to require multinational corporations to publish their profits and taxes paid in each EU member state in which they operate.

Overall, the directive aims to construct a new oversight regime that identifies instances of corporate tax avoidance in Europe. While businesses do favor transparency, they are also concerned that making profits public would harm their competitiveness. In fact, many businesses feel that the EU decision to move ahead will not necessarily help assess tax liabilities properly. They argue that it would be a duplication of the work carried out by the tax authorities, which will harm the level playing field on top.

The directive is expected to enter the legislative process later this summer, with trilogue negotiations between the Commission, Council, and Parliament planned for June. While a portion of the directive has been agreed to, the Council and Parliament are still grappling over the intensity of the directive’s transparency rules and have considerable disagreements to reconcile.

Alber & Geiger can defend your interests during the legislative process.

II. Commission to present digital tax proposal

The Commission is expected to present its proposal establishing an EU-wide digital tax this coming June – a long anticipated centerpiece of the Commission’s digital and economic strategies. Following the recent change in US administrations, with the Biden administration signaling a favorable stance toward the issue, momentum for creating international standards on a digital levy has built steadily. The development is of particular significance for larger technology firms, as these entities would be most affected by an EU-wide digital tax.

While the Commission has expressed it preference for an agreement within the OECD to establish an international digital tax framework, this preference has not halted the Commission from coming forward with its own proposal. Executive Vice President of the Commission Margrethe Vestager recently noted that while the proposal aims to be tabled in June, a digital tax will not become operational until 2023.

However, a select grouping of Member States, as well as several multinational corporations and business associations, are poised to oppose the Commission’s effort, instead preferring such a framework be crafted within the OECD.

We can assist technology and telecommunications firms achieve their legislative and regulatory goals in the EU.

III. Commission to bolster promotion of EU agricultural products

Promoting EU agricultural products is a clear priority of the Commission’s annual work program. In 2021 alone, the Commission will spend €182.9 million to promote European agri-food products within the Single Market and abroad. Having launched a public consultation on the review of such policies, the Commission has created the opportunity for stakeholders to shape the way in which certain key goals take form. The consultation period is currently open and will remain so until June 23.

First and foremost, nearly half of the Commission’s budget in this policy area (€86 million) will be tethered to the objectives of the European Green Deal, supporting schemes for organic products, best practices in sustainable agriculture, and other aspects of reforming the agri-food industry to better fight climate change. Additionally, an important part of the consultation will concern defining safety standards of EU agri-food products, as well as a range of quality schemes.

With regard to external markets, the Commission has placed a clear priority on high-growth markets. In particular, Canada, Mexico, Japan, and South Korea have been viewed as targets for specific EU exports, namely those from Europe’s dairy, olive oil, and wine sectors.

Our experienced team can help influence opinions and agendas.

IV. Commission reviews key aspects of Banking Union

In launching its consultation on the review of bank crisis management and deposit insurance framework, the Commission aims to present a proposal for a regulation that establishes a set of policies for handling bank failures and better protects depositors. The consultation, open now until May 20, allows stakeholders to influence a critical institutional development in the landscape of the EU’s financial sector, as well as to shape the broader contours of debate on the Banking Union. Specifically, the consultation concerns three legislative texts: the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), and the Deposit Guarantee Schemes Directive (DGSD).

At its core, the forthcoming regulation is expected to shield public monies from bank failures, instead diverting the burden of institutional insolvencies to the shoulders of the broader banking industry. Thus, the consultation is of particular importance to credit institutions, investment first, electronic payment platforms, as well as relevant national financial bodies and agencies.

Alber & Geiger can get your message to the appropriate audience.

V. Suspension of Boeing-Airbus tariffs positions transatlantic trade talks to reopen

After years of punishing each other for subsidies granted to Airbus and Boeing, the EU and US agreed on March 5 to suspend their retaliatory tariffs for four months. The removal of these tariffs will affect billions of dollars in goods, ranging from tractors to wine to cheese.

Trade Commissioner Valdis Dombrovskis labeled the move as a “reset” for transatlantic relations meant to provide an opportunity to create a “comprehensive and long-lasting negotiated situation.” With transatlantic trade talks expected within this four-month timeframe, the EU agricultural sector will benefit heavily during the suspension period. To ensure retaliatory tariffs don’t reemerge after the suspension period, the agricultural industry should take serious interest in engaging in the negotiation process to ensure EU-US trade disputes on aircraft subsidies are settled.

Moreover, Europe’s aim for enhanced transatlantic cooperation can be seen in its proposal to establish a Trade and Technology Council comprised of US and EU officials.

Our trade team enjoys long-lasting relationships and understands the complexities to help shape decisions.

VI. Commission advocates for tougher, greener approach to trade

On February 18, the EU’s trade Commissioner Valdis Dombrovskis announced that Europe’s trade policy will regard the commitments delineated in the Paris Climate Accord’s as “essential elements” in all future trade deals. Additionally, the EU’s new trade approach will look to liberalize trade in green products and services while also brokering agreements to reduce third country subsidies of fossil fuels. Recent evidence of this trade approach can be observed in the Commission’s promise to delay ratifying the EU-Mercosur deal unless Brazil steps up its environmental commitments.

Furthermore, the Commission will look to develop a new mechanism to defend the EU from prospective coercive and distortive maneuvers from third countries. Potential mechanisms could include the establishment of an EU export credit facility, an office of a chief trade enforcement officer, and upgraded enforcement regulations.

Alber & Geiger can help third countries navigate the trade environment and advance their goals in Brussels.