Insights Brussels May 2015

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INSIGHTS BRUSSELS ls GHTS B SI

A regular alert se on key EU policy developments ruS Issue 25 | May 2015

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Contents

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1. Cross-border e-commerce

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Digital Agenda: Speeding up EU digital transformation

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2. Digital networks and platforms

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3. Data economy

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Energy: Towards a bolder EU energy policy

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1. Energy security

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2. Competitiveness

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3. Sustainability

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Financial Services: Towards a Capital Markets Union fostering market-based instruments

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1. Capital Markets Union

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2. Investment plan

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Taxation: Advancing efforts to combat tax avoidance

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1. Corporate taxation policy

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2. Review of tax agreements under EC competition rules

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Editorial “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.”

Robert Schuman The declaration of French foreign minister Robert Schuman, outlining on 9 May 1950 in Paris a new form of political cooperation that launched the beginning of the European Union project, is today more relevant than ever and should remain a source of inspiration for European policy makers.

The first six months of the Juncker Commission have been used to mark the shift in focus, governance and approach that will be deployed throughout the European Commission’s fiveyear mandate.

For the next six months, we should expect the delivery of operational initiatives that are likely to keep policy makers as well as stakeholders busy, as described in our brief. Although we have seen an unusual legislative pause during the past few months (mainly in terms of new regulatory proposals put forward), this should not overshadow the Commission’s ongoing activism and preparatory work to reshuffle policy direction and the regulatory environment for energy, financial services and industries affected by the digital revolution.

The Commission’s determination to act more boldly is evident in the context of high profile antitrust investigations, which have already provoked animated reactions outside of Europe from Russia and the US. Other examples are the sectorwide inquiries (also launched by Competition Commissioner Margrethe Vestager) into e-commerce, and on subsidies and aid provided by national governments to national power companies; or the establishment of the European Fund for Strategic Investments (promoted by EC Vice-President Jyrki Katainen) which is expected to become operational during the second half of the year.

Factors contributing to a more favourable economic environment include lower oil prices, the depreciation of the euro currency, the European Central Bank’s strong

Leonardo Sforza Managing Director MSLGROUP Brussels commitment to lowering interest rates and improving credit conditions, and rising private consumption. According to the recent European Commission economic forecast, the outlook for economic growth has improved, with real GDP in the EU expected to increase 1.8% in 2015 and 2.1% in 2016. However, internal economic growth remains uneven within the EU and the pace of reform conducive to sustainable growth and employment is still slow and patchy across countries. It will be interesting to see the tone and scope of the country-specific policy recommendations that the European Commission will release later in May, and the way in which national authorities decide to follow these up.

Meanwhile, nobody in Brussels is ignoring the uncertainty surrounding a number of impending compelling issues such as the economic and policy effects of the Greece case, the UK’s EU agenda following the impending election, geopolitical tension in Ukraine, the Middle East and Northern Africa, or the effect of monetary policy normalisation in the US. In this edition of our policy brief, we provide an update of some key regulatory and policy changes under way or anticipated in coming months in relation to the newly released digital agenda, to the on-going implementation of the energy strategy, to financial services, and to taxation.

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Digital Agenda

Speeding up EU digital transformation On May 6th, the European Commission unveiled its Digital Single Market Strategy outlining its approach to seizing the opportunities and addressing the challenges brought on by the digital revolution. The European Commission’s policy paper supports in particular the objectives of removing barriers to cross-border on-line activities, creating a favourable regulatory framework for investments in digital networks and capitalising on the economic opportunities raised by the increasing use of data mining. The European Commission is therefore focusing on three prioritised policy areas in which concrete action will be taken during the next two years: cross-border e-commerce, digital networks and platforms, and the “Data Economy”.

1. Cross-border e-commerce The first pillar of the Digital Single Market Strategy addresses the challenges related to a number of obstacles that prevent cross-border online activities. The European Commission identifies immediate actions to be taken to close regulatory loopholes and ensure better access to online goods and services for consumers and businesses.

Proposals to end geo-blocking (2015) The European Commission identifies geo-blocking as a significant cause of consumer frustration and internal market fragmentation. Geo-blocking refers to practices used for commercial reasons by online service providers that result in the denial of access to websites based in other Member States. The European Commission intends to initiate actions to put an end to geo-blocking, considering it as “discrimination against the consumer based on residence”. The Commission is not specific, however, as to how it will proceed with phasing-out geo-blocking, citing only the option of reviewing existing Directives or including “mandatory passive sales” in the upcoming reform of the Copyright Regime.

Proposal to reform copyright regime (autumn 2015) A wide-scale review of EU copyright legislation was announced last year. But a recently leaked European Commission document reveals that a deal is being sought by the creative industries to accept partial geo-blocking, in exchange for a more aggressive copyright enforcement policy. While the proposal is expected to be unveiled in autumn this year, the Strategy for the Digital Single Market has already stipulated that the Commission will propose measures aimed at allowing full portability of legally acquired content across the EU and facilitating access to legally paid cross-border services. The Commission will launch a parallel process to review civil enforcement of intellectual property rights to more effectively address unlawful activities of a commercial nature.

Proposal on cross-border rules for consumers and businesses (2015) After identifying issues concerning the fragmented regulatory framework for cross-border e-commerce, the European Commission has announced that it will present this year a legislative proposal

on cross-border rules to harmonise EU rules for online purchases of digital content. The proposal will include EU regulations for protection against defective content purchased online, as well as key mandatory EU contractual rights applicable to online sales of tangible goods. These will include a set of rights and obligations in sales contracts for buyers and sellers, rules on remedies for non-performance, and rules for the minimum legal guarantee period. Public consultations on this proposal will be launched in coming months.

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Digital Agenda

Revision of regulation on Consumer Protection Cooperation (2015) Apart from the new proposal on crossborder rules, the European Commission also announced that it will review the regulation on Consumer Protection Cooperation with a view to develop more efficient cooperation mechanisms.

The current Consumer Protection Cooperation (CPC) Network brings together public authorities in all EU Member States that are responsible for enforcing EU consumer protection laws. The European Commission wants to clarify and enhance these enforcement powers and support more efficient market surveillance and alert mechanisms.

Initiative on cross-border parcel delivery (2015) The European Commission aims to ensure that the cost and efficiency of parcel delivery is not an obstacle to cross-border e-commerce. Although it has not yet identified the legal nature of its proposal, the European Commission will prepare an initiative in the area of parcel delivery with a focus on price transparency and regulatory oversight.

Two years after this initiative is adopted, the Commission will reassess the need for additional and more stringent measures.

Proposal on VAT regimes for cross-border online trade (2015) The European Commission intends to put forward a legislative proposal to reduce the administrative burden on businesses arising from different VAT regimes and encourage cross-border online trade. This proposal may include: the option of extending the system of a single interaction point for businesses to include cross-border online sales of tangible goods; the introduction of a common EU-wide distance sales turnover threshold for VAT applicable to e-commerce suppliers; provision for a single audit of cross-border businesses for VAT purposes; and removal of VAT exemptions for the import of small consignments of goods purchased in non-EU countries.

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Digital Agenda 2. Digital networks and platforms The second general aim of the Strategy is to support the development of reliable, high-speed, affordable networks and services. The European Commission aims to ensure that the EU regulatory framework ensures a level playing field between traditional telecom companies and new internet players competing on the same markets.

Revision of telecom rules (2016) Taking into account the fragmentation of the telecom sector along national borders and the lack of regulatory consistency and predictability across the EU, and noting that the current Telecom Single Market package discussions are focused primarily on net neutrality and roaming due to the reluctance of Member States to adopt more ambitious provisions, the European Commission intends to prepare proposals to further reform the telecoms regulatory framework. The Commission will focus on radio spectrum management, harmonisation of rules, investment incentives in high-speed broadband and universal broadband availability.

Revision of Audiovisual Media Services Directive (2016) Some stakeholders in Brussels advocate that the scope of the Audiovisual Media Services Directive should be broadened to encompass services that fall outside the definition provided by the Directive – e.g., platforms with content over which no editorial control is exercised. The Commission has announced that it will review the Audiovisual Media Services Directive in 2016 and focus on issues related to on-demand platforms, levies, advertisement and protection of minors.

Comprehensive investigation of role of online platforms (2016) Being aware of the fact that the market power of some online platforms in the digital economy raises a number of issues (search engines, social media, app stores, sharing economy platforms), the Commission has announced that it will carry out a comprehensive investigation on the role of these platforms in terms of transparency, growth potential, remuneration of rightsholders and platform compatibility.

Proposal to combat illegal content online (2016) The Commission intends to prepare proposals to tackle illegal content on the internet, whether it be information that is contrary to public interest (such as terrorism or child pornography) or the property rights of others. The Commission is currently considering the option of harmonising procedures for removing illegal content across the EU.

Revision of E-Privacy Directive (2016) As regards cybersecurity, the European Commission remarks that the scope of the e-Privacy Directive is limited to traditional telecom companies and not to newer internet-based service providers. The Commission wants to ensure that citizens and businesses have the best possible safeguards and legal certainty regarding their personal data in the digital world. It will therefore review the E-Privacy Directive once the new general EU rules on data protection are agreed.

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3. Data economy

4.0” (Internet of Things, cybersecurity, big data, cloud computing). As part of this, the Commission will also address several essential sectorial standards in the areas of health (telemedicine, e-health), transport (interoperable transport plan, e-freight) and mobile payments.

The third objective of the Strategy is to maximise the economic benefits of new technologies and exponential growth and availability of data to foster innovation, growth and jobs. The Commission has already launched a number of consultations to prepare new legislative and non-legislative proposals to develop a “European Digital Economy with Growth Potential”.

New business registers (2017) Today, business registers are required to make information and documents available to the general public in accordance with national law. From 2017, the European Commission wants to make the interconnection of business registers mandatory, to provide citizens and businesses with greater cross-border access a to data on European companies.

Initiatives on free data flow (2015) The European Commission aims to put forward a number of initiatives related to data flow. The Commission will launch work on a ‘Free Flow Data Initiative’ to prevent restrictions imposed by Member States on the free movement of data and unjustified data location restrictions for data storage or cloud computing. It will also explore the option of addressing the emerging issues of ownership and access to non-personal data in situations of business-to-business or machine-to-machine data. Specific measures for transport data may be also included to encourage better data services and new business solutions.

New e-government action plan (2016) The European Commission also intend to speed up the development of e-Government, and will present a new e-government action plan in 2016. This action plan will make mandatory the use of the “European interoperability framework” used by national administrations for efficient communication between themselves as well as with citizens and businesses. It will also work towards a “Single Digital Gateway” to create a seamless and user-friendly system for citizens and businesses and accelerate Member States’ transition towards full electronic procurement and e-signatures.

New standards for industrial internet (2015) The European Commission intends to improve its standardisation system to deliver standards that can be accepted internationally, particularly in terms of defining essential technological standards that are lacking for “Industry

Timeline 2015-2017 2016

Data Economy

Data Networks

Cross-Border E-commerce

2015 Proposal to end Geo-blocking

Inquiry into geo-blocking

Proposal on cross-border rules Initiative on Parcel Delivery

Commission Proposal Public consultation Publication of Industry report Public consultation

Proposal to reform the Telecom rules

Connected Continent Package adopted

Initiative for New Internet Standards

Internal negotiations

Commission Proposal

Inter-institutional negotiations

Implementation

Launch of Initiative on Data flow Launch of new standardization system for Industrial Internet

Implementation

Transposition & Implementation Inter-institutional negotiations

Self-regulation by industry

Public consultation Data Protection Package adopted

Inter-institutional negotiations

Internal negotiations

Commission Initiative

Proposal to reform the Audiovisual Media Services Directive

Initiatives on Free Data Flow

Internal negotiations

Assessment Report & Potential Commission Proposal

Commission Proposal

Proposal on VAT regimes for cross-border online trade

Proposal to reform the e-Privacy Directive

Commission Proposal

Results & Public Consultation

Proposal for a reform of Copyright Regime

2017

Internal negotiations

Public consultation

New Commission Proposal

Internal negotiations Internal negotiations

Commission Proposal Public consultation

Inter-institutional negotiations

New Commission Proposal

Implementation & Potential further initiatives Implementation & Potential further initiatives

Internal negotiations

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Energy

Towards a bolder EU energy policy During their March Summit in Brussels, EU Heads of State or Government backed the European Commission’s long-awaited “Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy”. The Strategy is based on the central premise of the interplay between pan-European principles and 28 national regulatory frameworks. It is aimed at “resetting the EU’s energy policy” by identifying legislative and non-legislative actions to be taken in relation to three specific objectives: security, competitiveness and sustainability.

1. Energy security The European Commission’s main goal is to put forward initiatives to prevent supply shortages or disruptions and reduce dependency on particular fuels, energy suppliers and routes. The belowmentioned proposals are likely to have significant short- to long-term impact on European energy companies’ business models.

Revision of Security of Gas Supply Regulation (20152016) The Commission aims to ensure stronger cooperation in responding to potential gas supply disruptions by introducing common crisis management tools and solidarity principles in the upcoming revision of the Security of Gas Supply Regulation. The Commission also intends to assess options for demand aggregation mechanisms for collective purchasing of gas. As the world’s biggest energy consumer, the European Union wants to explore ways to buy gas as a group. The debate among Member States and international partners promises to be intense, however, as the WTO and IEA have already warned the EU of the danger of forming a buyers’ cartel.

Revision of Security of Electricity Supply Directive (2015-2016) The Commission has announced its intention to re-open discussions on the revision of the Security of Electricity Supply Directive. The revision will establish a range of acceptable risk levels for supply interruptions and take into account progress in cross-border flows, variable renewable production, demand response and storage possibilities. The Commission is also

considering carrying out stress tests on the EU’s electricity system in 2016, similar to those carried out in 2014 for the gas network. The Commission has also taken a step forward in the discussion on capacity markets, and will propose a new European electricity market design in 2015 which will be followed by legislative proposals in 2016. Heated debates in energy circles on the use of capacity markets are also anticipated.

Adoption of a new European LNG strategy The Commission is considering the potential of liquefied natural gas as a back-up in crisis situations. The Commission will work on the preparation of a comprehensive LNG strategy to better link LNG access points within the internal market, address cost issues and remove obstacles to LNG imports, particularly from the United States.

Revitalisation of European energy diplomacy With the aim of carrying more weight on the global scene, the Commission has proposed the establishment or renewal of energy partnerships with major producers and transit countries.

Particular objectives: to make significant progress on a Mediterranean Gas hub; to adopt a Strategic Energy Partnership with Algeria, a Strategic Alliance with Turkey, and a Strategic Energy Relationship with Ukraine; to renew the Strategic Alliance with the Energy Community (Non-EU, Central and Eastern European Countries); and renew partnerships with Norway, United States and Canada.

In addition to these energy partnerships, the European Commission is pursuing its trilateral rounds of negotiations with Russia and Ukraine with a view to

achieving balanced energy agreements on gas supplies. These rounds of negotiations are of utmost importance for EU energy imports, Ukraine being a key transit country with over 50% of Russian gas supplies to the EU transmitted through Ukrainian pipelines

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2. Competitiveness The European Commission acknowledges the underperformance of the EU energy system in terms of investment, competition and regulatory fragmentation. The following initiatives, of utmost importance to the energy business community, are proposed to address such a gap.

Full implementation of Third Energy Package (2015-2016) The Commission will ensure stricter enforcement of existing energy legislation, in particular the 3rd Energy Package. In practice, this means the European Commission may exercise its power to launch infringement procedures against Member States that have not fully implemented EU energy rules. Over the last few years, the Commission has noticed that Member States have been particularly reluctant to implement the “unbundling rules” separating energy production and supply entities.

Acceleration of funding for trans-European infrastructure projects (2015) The Commission has noted that ongoing calls for projects are being funded by the European Investment Bank, the Connecting Europe Facility and smart financing under the European Structural Investment Funds. For projects not covered by these funds, the Strategic Investment Plan will further facilitate access to EU funding this year. The Commission has also announced the creation of a dedicated Infrastructure Forum in 2015 to gather efforts from Member States, regional initiatives and EU institutions.

Phase-out of regulated end-users tariffs (2016) The European Commission deems that insufficient progress has been made to guarantee greater consumer choice of supplier. The Commission stresses the need to pass on recent decreases in oil prices to citizens, by lowering prices. The Commission proposes to further support Member States’ initiatives to roll-out smart metres and grant consumers better access to information about switching suppliers. The Commission also intends to phase out regulated end-users tariffs by 2016, as it considers them detrimental to the wellfunctioning of the internal market.

Reform of institutional set-up (2015- 2016) The European Commission intends to significantly reinforce the supervisory powers of the Agency for Cooperation of Energy Regulators (ACER) and the European Networks of Transmission System Operators for Electricity and Gas (ENSTO-E/G). ACER currently only takes decisions at the request of national regulators and acts through non-binding recommendations. The Commission wants to empower the European agency to take more binding decisions. The

Commission also plans to prepare an ambitious legislative proposal to redesign the electricity market, including provisions on intraday markets, super-grids and storage technologies.

Update of Strategic Energy Technology Plan (2016) As regards research and innovation, the Strategy for the Energy Union has announced the future creation of a multidisciplinary scientific committee to best prepare for deep decarbonisation pathways. The Commission will also update its Strategic Energy Technology Plan to better identify and integrate key enabling technologies, focusing on carbon capture and storage (CCS) technologies.

3. Sustainability The Commission considers that more should be done on the energy efficiency front to moderate energy consumption, on decarbonisation (due to be the main objective of EU climate policy), and to ensure that research and innovation play a more central role.

Adoption of 2030 climate and energy framework (2015-2016) At the October European Council last year, the EU informally agreed on a 2030 climate and energy framework with specific targets for energy savings and share of renewable energies. The Commission will articulate later in 2015 a 2030 climate and energy package to translate these objectives into legislation. In this package, the Commission will present proposals to reform the EU Emissions Trading System (ETS), with the expected adoption of a Market Stability Reserve, and will include measures to incorporate the land and forestry sector in the system.

Adoption of new Renewable Energy Package (2016-2017) The European Commission will propose a new Renewable Energy Package in 2016-2017, building on the agreed target of 27% renewable energy in the EU energy mix by 2030.

New rules are expected to progressively harmonise national support schemes for renewables, with a view to addressing market distortions, improving cost-effectiveness, avoiding overcompensation and ensuring investor confidence. The Commission also intends to include in the upcoming package a specific section on sustainable biomass and biofuels. It is expected that this section will take more consideration of biofuels’ impact on the environment, land-use and food production.

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Revision of all relevant energy efficiency legislation (2015-2016)

Adoption of new strategy on heating and cooling The European Commission has noted that huge efficiency gains can be made with respect to district heating and cooling.

It therefore intends to propose a strategy on heating and cooling to simplify access to existing financing and offer “offthe-shelf” financing templates to interested stakeholders.

The Commission has announced the review of all relevant energy efficiency legislation during the next two years. Focus will be on revision of the Eco-design and Energy Labelling Directive, the Energy Performance of Buildings Directive, and the Energy Efficiency Directive. In doing so, the Commission intends to improve synergies between energy efficiency policies.

Proposition of “Smart Financing for Smart Buildings” initiative

Adoption of Road Transport Package (2016)

Considering the great potential for energy efficiency gains in buildings, the Strategy for the Energy Union has announced the upcoming creation of a new financing tool to leverage major investments in renovating buildings.

The Commission’s plan also includes tackling the issue of fuel savings in the transport sector. The Commission intends to propose a comprehensive road transport package promoting greater efficiency in infrastructure pricing, enhancing energy efficiency and creating the right market conditions for an increased deployment of alternative fuels. The Commission has already clarified its intention of basing this package on polluter-pays and user-pays principles.

Timeline 2015-2017 2016

Sustainibility

Competitiveness

Security of Supply

2015 Security of Electricity Supply Directive

European electricity market design

Liquiefied Natural Gas (LNG) Strategy

Study on LNG as a shipping fuel

Implementation of 3rd Energy Package

National Implementation

Implementation of Infrastruture Package

Call for Projects

Strategic Energy Technology Plan

2030 Climate & Energy Package Renewable Energy Package Energy Efficiency Directives

Commission Proposal

Electricity Stress Tests

EU study on joint gas purchases

Security of Gas

2017

Public consultation

Internal negotiations

Commission Proposal Publication of Strategy

Inter-institutional negotiations Internal negotiations

Follow-up Initiatives & EU Funding

Potential opening of Infringement Proceedings EU Selection Process

Public consultation

Pre-Agreement on objectives

EU Funding

Progress report on implementation of existing legislation Public consultations

Call for Projects

Potential Case rullings EU Selection Process

Publication of Strategy

21COP Paris Conference

Commission Proposals

Inter-institutional negotiations

EU Funding

Call for Projects

EU Selection Process

EU Funding

Follow-up Initiatives & EU Funding

Commission Formal Proposal Public consultation Internal negotiations

Inter-institutional negotiations Commission Proposal

Implementation

Internal negotiations Inter-institutional negotiations

Financial services

Towards a Capital Markets Union fostering market-based instruments Investment in companies and infrastructures, notably in SMEs, remains lower than during the pre-crisis period and continues to rely heavily on bank funding. The Commission therefore deems that the recent “Banking Union” proposal needs to be complemented with initiatives aimed at reducing this dependence on banks by fostering other market-based credit options.

Two recent Commission initiatives reflect this commitment, the most important one being the Commission´s ambition to create a true and fully integrated Capital Markets Union that will unlock funding for European businesses and boost growth in the European Union. The Commission’s second complementary flagship project, the “Investment Plan for Europe” aims to make available a new type of collective investment fund targeting investment in long-term projects.

1. Capital Markets Union

Adoption of proposal to set new standards for financial benchmarks (2015)

The Capital Markets Union (CMU) is one of the Commission´s top priorities.

The CMU will comprise an action plan for improving financing of the economy through more efficient market-based instruments intended to complement traditional European banking tools.

On 13 February 2015, as part of its old regulatory reform agenda, the Council lent its support to the European Commission´s proposal for a regulation to combat the manipulation of financial benchmarks.

Consultations for upcoming Capital Markets Union action plan (2015) On 18 February 2015, the Commission launched a public consultation addressing the concrete hurdles to be removed for achieving a Capital Markets Union. The Commission simultaneously launched two distinct consultations: the first relates to high-quality securitisation while the second concerns review of the Prospectus Directive (the EU-wide regime for capital markets prospectuses required when a public offer of securities is made or when a company is seeking admission to a regulated market).

Interested parties have until 15 May 2015 to respond to the consultation and present their views and concerns to the Commission.

Based on the inputs provided during the consultation, the Commission is due to unveil during the third quarter of 2015 an action plan of operational proposals to be pursued.

The broad position of EU finance ministers is expected to be adopted at the ECOFIN Council next June.

In the aftermath of investigations into manipulation of the LIBOR and EURIBOR benchmarks that undermined public trust in financial benchmarks, the Commission proposed new standards in September 2013 to strengthen the reliability of benchmarks used in financial instruments (e.g., bonds, shares, futures and swaps) and financial contracts (e.g., mortgages and consumer contracts).

This proposal of regulation is aimed at restoring market confidence in indices used as benchmarks for financial products and services, while implementing the same principles as those agreed at the international level by the International Organisation of Securities Commissions (ISCO) in 2012 and 2013. A benchmark is an index or indicator, calculated from a representative set of data or information, which is used to price a financial instrument or financial contract or to measure the performance of an investment fund.

These new standards are expected to do more to improve the accuracy and integrity of these benchmarks in three ways. First of all, contributors to benchmarks will be subject to prior authorisation and on-going supervision, depending on benchmark type (e.g.,

commodity or interest-rate benchmarks).

Secondly, these new rules will improve the governance of benchmarks (e.g., conflict of interest management) and add further requirements in terms of how a benchmark is produced.

Finally, the rules are meant to ensure appropriate supervision of “critical benchmarks” (e.g., Euribor and Libor), the failure of which may pose risks to many market participants and to the functioning and integrity of financial stable markets.

The European Parliament is still in the process of finalising its opinion on the Commission’s proposal. The EP’s opinion is not expected to be issued before June 2015, after which the EP will begin negotiations with the Council to reach a final agreement.

2. Investment plan On 10 March 2015, the European Parliament agreed to support the Commission´s proposal to create a new investment fund framework aimed at facilitating long-term investment. The proposal was endorsed by the Council in April and will soon enter into force following its publication in the EC official journal.

Setting up European long-term investment funds (ELTIFs) (2015-2016) The recently agreed European longterm investment funds (ELTIFs) are designed to increase the amount of nonbank financing available to companies investing in the EU´s real economy.

Currently, existing long-term investment funds are only to raise money in one

12 Member State, which leads to fragmentation of the single capital market and limits the funds’ growth.

In addition, these funds may only be proposed by a manager authorised under the Alternative Investment Managers Directive (AIFMD) and thus subject to AIFMD rules, including the obligation to have a depositary. Investors would not normally be entitled to have their funds returned to them for a specific period of time (e.g., at least ten years after their initial investment), thereby allowing for long-term investments in illiquid assets. This restriction, however, would need to be disclosed up front. In exchange for their patience, investors would be rewarded with a regular income stream and an appropriate return for committing their money.

This new type of collective investment framework aims to boost financing available to companies in search of longterm capital for projects related to energy, transport or even social housing, schools and hospitals. The intention is that investment fund managers will be able to offer longterm investment opportunities to both institutional and private investors. Accordingly, the ELTIFs would constitute an important part of the Capital Markets Union (CMU) and complement the €315bn Junker´s landmark investment plan for Europe.

In order to benefit from this cross-border passport, these new fund vehicles would need to comply with strict rules aimed at protecting investors and the companies they invest in.

To qualify as an ELTIF, funds would need to invest at least 70% of their money within five years in specific projects, including: unlisted companies or certain listed SMEs in need of long-term capital, real assets for which development is dependent on long-term capital, intellectual property, and other intangible assets. The 30% buffer, however, may be held as UCITS-eligible assets.

ELTIFs differ markedly from UCITS, which must offer investors the chance to exit at least twice a month. However, as per specific and stringent requirements, ELTIF managers would be allowed to offer investors the option of withdrawing a proportion of their invested funds early, although only after five years. To avoid speculative use, ELTIFs may only use derivatives to manage currency risks in relation to the assets they hold, while the borrowable amount would be limited.

In addition, funds offered to investors such as pension funds would be required to provide additional safeguards, including a limitation on the amount that can be invested (up to 10% of assets under management).

Timeline 2015-2017 2016

Financial services

Capital Markets Union

2015

2017

Proposal on Credit information of SMEs

Public consultation

Results and Action Plan

Commission’s proposal

Internal negotiations

Inter-institutional negotiations

Proposal on high-quality securisatiom

Public consultation

Results and Action Plan

Commission’s proposal

Internal negotiations

Inter-institutional negotiations

Proposal to review the Propsectus Directive

Public consultation

Results and Action Plan

Commission’s proposal

Internal negotiations

Inter-institutional negotiations

Commission’s proposal

Internal negotiations

Inter-institutional negotiations

Proposal on EU long-term investment funds (ELTIFS)

Inter-institutional negociations

Proposal on European private placement markets

Public consultation

Proposal on financial benchmarks Investment plan for Europe Proposal to review IORPs

Implementation

Results and Action Plan

Inter-institutional negotiations

Internal negotiations Commission Proposal

Inter-institutional negotiations

Internal negotiations Consultation for «29 Regime »

Entry into operation

First Funding

Implementation

Progress review Inter-institutional negotiations

Transposition and implementation

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Taxation

Advancing efforts to combat tax avoidance The European Council stressed in December last year the urgent need to advance efforts to combat tax avoidance and aggressive tax planning. Heads of State or Government are expected to assess progress made at the next EU Summit, in June. On the European Parliament’s side, MEPs decided to set up a special committee (“TAXE”) tasked with investigating the extent to which special tax deals designed by some EU Member States distort tax competition. This special committee is expected to present its conclusions after the summer.

Facing heavy pressure from both institutions to take appropriate measures to effectively combat tax dumping, the European Commission reacted promptly by setting out an ambitious agenda to tackle corporate tax avoidance and harmful tax competition in the EU. The Commission is acting simultaneously on two fronts: using its power more effectively to put forward legislative proposals in the area of corporate taxation policy, and launching investigations under EU competition law into recent Member States’ tax decisions.

1. Corporate taxation policy Adoption of Directive on automatic exchange of tax rulings (2015-2016) In its 2015 work program, the Commission highlighted its determination to combat tax avoidance by putting in place an automatic exchange of information on tax rulings.

In line with this ambition, the Commission unveiled on 18 March 2015 its Tax Transparency Package aimed at efficiently combatting corporate tax avoidance. The key feature of this package is a proposal of directive introducing an automatic exchange of information between Member States on their tax rulings. Until now, it was at the Member States´ discretion to decide whether a tax ruling was relevant to another Member State. This proposal is designed to ensure that Member States are given the information they need to protect their tax bases and efficiently target companies that try to avoid paying their fair share of taxes.

The terms of this proposal will subject Member States to a strict timeline: every three months, national tax authorities will be required to issue a brief report to all other Member States covering all cross-border tax rulings issued during that time period. The information provided will include the names of the taxpayer and group, a description of the issues addressed in the tax ruling, and details on the criteria used to determine

an advance pricing arrangement. The report will also identify the Member States(s) and other taxpayers most likely to be affected. Member States will then be able to ask for further detailed information on a particular ruling if need be. However, notwithstanding criticism, the new plan does not require official publication of tax rulings.

This system of automatic exchange of information is aimed at enabling Member States to detect abusive tax practices used by companies early on and to take necessary action. The overall spirit of the proposal is to foster ´peerto-peer´ pressure amongst Member States to promote a healthier tax competition regime.

As it relates to tax harmonisation, the Council is to adopt the proposal of directive by unanimity after due consultation of the European Parliament.

The European Commission has set an ambitious timeline. It expects the Council to adopt its proposal by the end of 2015 and wants the new measures to enter into force as of 1 January 2016.

Initiative on new transparency requirements for multinational companies (2015-2016) Another initiative included in the Tax Transparency Package relates to new transparency requirements for multinational companies in all sectors, and a review of the Code of Conduct on Business Taxation aiming to ensuring fairer and more transparent tax

competition within the EU and a more reliable assessment of the level of tax evasion and avoidance in the EU. The Commission is expected to present an action plan on corporate taxation before the summer.

Action plan on a common consolidated corporate tax base (2015-2016) During an exchange of views with the European Parliament´s special committee on tax rulings on 30 March 2015, Commissioner Moscovici announced that the Commission was considering taking further action regarding the initial proposal on a common consolidated corporate tax base. The first EC proposal in this area dates back to March 2011, when the Commission initiated a proposal for a common consolidated corporate tax base (CCCTB), aimed at providing companies with a single set of rules for an EU-wide calculation of their tax liabilities.

To be enacted as law, any decision in this area requires the unanimous backing of all 28 Member States in the Council.

Given the divergence of opinion among Member States on this issue, this is unlikely to be translated into a common decision any time soon. The issue will be included in the Commission´s action plan on corporate taxation due to be released before next summer.

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2. Review of tax agreements under EC competition rules In June 2014, the Commission opened three in-depth investigations into whether tax agreements concluded

by Ireland, the Netherlands and Luxembourg, respectively, with Apple, Amazon, Fiat and Starbucks constituted illegal state aid that distorted competition. The Commission is expected to issue its decision on the findings of these investigations after this summer. In February 2015, the Commission also opened another in-depth investigation into Belgium´s “excess profit” rulings.

In the event the subsidies awarded to the above-referenced corporations are deemed illegal state aid, the Commission is authorised to order that the subsidies be returned to the country from which they were paid. The initiation of an in-depth inquiry provides interested third parties and concerned Member States with an opportunity to submit their comments, but does prejudice the inquiry’s outcome.

The Commission´s preliminary enquiries have shown that the quality and consistency of tax authority scrutiny differ substantially across the Member States.

Investigations of tax authority decisions in the Netherlands (2015)

Investigations of tax authority decisions in Ireland (20152016)

It appears from the Commission´s assessment that the Netherlands generally proceeds with thorough assessment of comprehensive information provided by taxpayers and that, accordingly, the Commission does not expect to find systematic irregularities in Dutch tax rulings.

The Commission has similar concerns regarding the tax ruling granted by Ireland to Apple. Indeed, despite a tightening of the transfer pricing rules over the years, the Commission is worried that the significant degree of discretion the tax administration had in the past may have been used to grant a selective advantage to the US technology multinational, thereby reducing its tax burden below the level it should have paid based on the correct application of the tax rules.

Investigations of tax authority decisions in Luxembourg (2015-2016) Conversely, at this stage of the procedure, the Commission is concerned that the tax ruling granted to Starbucks

by Luxembourg provides a selective advantage to the US coffeehouse chain.

After labour unions and a charitable organisation accused McDonald’s of avoiding taxes in Luxembourg in a report released in February 2015, the Commission also sent a letter to the Luxembourgish tax authorities requiring more information on their tax rulings involving the US fast-food chain. The report stresses that McDonald´s would have benefited from a generous tax regime that allows companies to benefit from a low tax rate on income generated from intellectual property.

Investigations of tax authority decisions in Belgium (20152016) In February 2015, the Commission launched an in-depth investigation into a Belgian corporate tax scheme (the “excess profit” rulings). These rulings have been issued by Belgium in an attempt to attract foreign companies to the country. According to Margrethe Vestager, Commissioner for Competition, they may allow companies to lower their tax bill by up to 90 per cent. These tax rulings allow multinational companies to exclude profits from their tax bills that allegedly stem from the advantage of being part of a multinational group.

Such profits include research and development funds, economies of scale, and intangible assets such as reputation.

Timeline 2015-2017 2016

Competition investigations

Corporate taxation

2015 Proposal on automatic exchange of tax rulings

Commission Proposal

Proposal on further transparency requirements

Transparency Package

Proposal of CCCTB

Council negotiations Parliament opinion Action Plan Action Plan

Commission proposal Potential Commission revised proposal

2017 Potential Council Approval

Transposition & Implementation

Potential Council Approval

Transposition & Implementation

Potential Council Approval

Transposition & Implementation

Ireland

Ongoing investigations

Investigations outcome

Change of national practice/law or legal proceedings

Potential ECJ’s ruling

Luxembourg

Ongoing investigations

Investigations outcome

Change of national practice/law or legal proceedings

Potential ECJ’s ruling

Netherlands

Ongoing investigations

Investigations outcome

Change of national practice/law or legal proceedings

Potential ECJ’s ruling

Belgium

Ongoing investigations

Investigations outcome

Potential legal proceedings

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