The European Commission intends to ensure that the digital economy is taxed in a way which is fairer and more favourable to growth, particularly for European businesses.
Last week was a tense one as to the issue of European taxation of tech giants (all American). At the European summit in Tallinn (Estonia), France – with support from 19 countries – defended its plans for taxing turnover of the big four US tech giants (GAFA – Google, Amazon, Facebook and Apple). A measure which two member states, Luxembourg and Ireland, do not wish to hear about.
Yet the adoption of a common framework is crucial. The sustainability of member states' tax receipts is at stake, according to Valdis Dombrovskis, Vice-President for the Euro: "Our tax systems should evolve to take into account new business models, as well as being fair, efficient and future-proofed, as our traditional tax sources are under significant pressure."
The struggle at member state level has been fruitless, giving rise to the idea of a draft framework for fairer taxation of the digital economy, aimed at helping potential European rivals to GAFA to emerge. As Andrus Ansip, Vice-President in charge of the Digital Single Market, argues: "Modern tax regulations are crucial for drawing the maximum potential from the Union's digital single market and encouraging innovation and growth. The aim is to ensure fair competition for all businesses."
The report, published on 21 September, is available to view online. It forms the framework for a series of proposals which should be finalised by spring 2018.
Is this confined to the European level? Not at all. In a globalised digital context, the Commission is looking forward to the OECD report to the G20, planned for early 2018, which should propose pathways to a system of taxation for the digital economy on an international scale. The OECD has been working on this issue for several years without any real success. As evidence of this, this report back in 2014 prescribed measures to tackle the fiscal challenges of the digital economy:
"The development of the digital economy raises issues with regard to international taxation. The digital economy is becoming an economy in itself. Certain economic models and the main characteristics of the digital economy may exacerbate the risks of eroding the tax base and profit transfers."
Capital Markets Union: It’s Not About Us, It’s About You
How to harmonize capital markets and regulation across Europe? Petra De Deyne, Regulatory Affairs Manager for Global Markets at BNP Paribas, presents the new initiative of the European Commission to build a single market for all 28 Member States of the Union.
After the crisis of 2007-2008, financial stability was the key priority for the European Commission. In order to restore that stability, the resilience of banks needed to be strengthened and systemic risk in the markets needed to be contained, which had Brussels produce that famous “tsunami” of regulation. Today, most of the work to make banks and markets stable again is done and the respective legislation has been or will soon be implemented.
Growth as a priority
The next item on the European Commission’s to-do list is now to create growth. Therefore, corporates need to grow their businesses, invest and expand. Historically, corporates have been very much dependent on bank lending if they want to expand. However, on the back of capital and liquidity requirements imposed by bank regulation, some banks have found it more difficult to fulfil their role of traditional lender. Seeing their bank funding channels drying up, larger corporates turned to capital markets, but did not always meet favourable borrowing conditions and interested investors. For some of the smaller corporates, getting funding had become as good as impossible. A survey done by the ECB and the European Commission in 2014 on the access to finance of enterprises (SAFE) showed that 35% of SMEs did not get the full financing they asked their banks for in 2013.
Looking at the US, we notice that corporates get about three quarters of their funding directly from the capital markets, and rely only to a small extent on bank lending. In Europe the situation is the other way round. So Europe wondered if they could create a funding landscape that would resemble more the US situation. That would mean that those in need of financing would meet directly with those that have money to invest. It would reduce the dependency of the real economy on banks, which would again contribute to financial stability. However, what is needed in that case is a harmonized, well integrated capital market in Europe. And this is where comes in the initiative of the European Commission: build a Capital Markets Union.
So in short, this is what CMU is about: it is a plan to create a single market for all 28 Member States of the European Union, where, on the one hand, funding choices for corporates will be diversified beyond bank lending and where, on the other hand, investment opportunities and the investor base will be broadened.
So what’s the plan?
“The Plan”, which the European Commission published in October 2015, sets 4 clear objectives:
- Support job creation and growth
- Connect financing effectively to investment projects across the EU
- Make the financial system more stable
- Deepen financial integration and increase competition
“The Plan” also defines 5 priority areas for action, with over 30 different initiatives for reviews, assessments, reports, initiatives and legislative proposals, all to be taken between now and sometime in 2018.
The first priority is to provide more funding choices for Europe’s corporates and SMEs. Here we will see initiatives to support venture capital and innovative forms of financing, such as crowdfunding. The EU is also thinking about ways to provide necessary data on SMEs to investors, so that they can make well informed investment decisions.
Second, long term investment has to be promoted. An initiative here is to make sure that capital requirements for insurers are reviewed so that they see their investment needs more efficiently met. Measures will also be taken to promote investment in infrastructure projects.
Third, the range of investment choices both for retail and institutional investors has to broaden. In this area, we will see, amongst others, incentives to promote pensions savings and private placements.
The fourth priority is to enhance the capacity of the banks to step up lending. This may sound contradictory, as the idea of the CMU is to move away from traditional lending. However, for a lot of SMEs, banks will still remain the prime source of financing. So Europe wants to make sure that banks can offload more assets from their balance sheet so that they have extra space to lend.
And lastly, the EU wants to dismantle barriers that would hamper cross-border investment across the Member States. This is quite an ambitious area, where certain tax issues will be tackled, and where we will see a certain harmonization as far as national insolvency laws and securities laws are concerned.
Simultaneously with the publication of “The Plan”, the European Commission issued a couple of legislative proposals and 3 consultations, as a matter of launching the short term actions right away and getting the train out of the station.
The European Commission takes immediate action in the field of securitization. This may seem quite controversial as some will still consider this as the root of all evil. However, it is a critical tool to finance the economy and it sits high on the Commission’s agenda. In order to kick start the securitizations market, the EU has come up with a legislative proposal, the purpose of which is twofold:
- First, it aims at reinstalling confidence. Therefore, a quality label is introduced: “Simple, Transparent and Standardized” securitizations. That means that any “STS” securitisation will comply with over 20 different standards, thus helping investors to better understand these products and ensuring quality. Second, it incentivizes banks to restart the activity again by giving these STS securitizations a better capital treatment, compared to other forms of securitisation.
- Next to that, the EU has issued a proposal to adjust Solvency II rules for insurers, so that they would have to deploy less capital when investing in long term infrastructure projects or in European Long Term Investment Funds (ELTIFs).
Also note that the European Commission is looking into covered bonds. Currently there are 26 different covered bond frameworks in the EU, an area which could possibly benefit from a certain level of harmonization. While the idea is not to create a single framework for Europe, the Commission would look to promote best practices, step up transparency and remove barriers that would hamper cross-border investments. We also saw a consultation venture capital and a call for evidence on the cumulative impact of financial legislation.
In the medium term, a review of the Prospectus Directive is on the cards. This is a logical move, given that the EU would like to attract many more corporates directly onto the capital markets to issue debt. Making prospectuses cheaper and less burdensome for smaller issuers on the one hand and more user friendly for investors on the other hand, would be a welcome help in that respect.
Another initiative is a Green Paper (this is a first, general exchange of views between the EC and the industry to explore a certain topic) on Retail Financial Services. Here he European Commission is exploring ways to enhance competition and make sure that consumers have access to a broader range of services in order to get the best deal around, when it comes to mortgages, savings products, insurance, banks accounts etc.
In the long term, count 2017/2018, we can expect further steps to support SME growth markets and private placements, along with plans for a pan-European Pension Fund. As already mentioned earlier, matters regarding withholding tax and insolvency law will get attention as well.
Benefits for companies
All in all, CMU certainly has a fully packed and ambitious agenda. Now what’s in it for companies, really? Potentially a lot. However, we appreciate that the road to a real CMU may be a far longer one. 2019 seems awfully close for some of the changes to happen. Rebalancing financial intermediation for example will most probably be a gradual, organic process that will go hand in hand with political interests, FinTech developments etc., rather than a major shift on a particular point in time.
Also, it will need a change in mind-set and behaviour by all stakeholders involved. The effects of a CMU may be more pronounced for the corporate sectors of certain countries with relatively small capital markets. For these countries, some of the initiatives could be particularly beneficial. Their domestic capital markets may currently not be able to cater for their large corporates, pushing them away to international markets. CMU could bring them back home and expand their markets.
The benefits of CMU will be different for the different types of companies:
- Start-ups will get special attention, as their innovation and entrepreneurial spirit are key to Europe’s growth potential. At this moment start-ups can turn to crowdfunding, but this is only developing and there is already some investment by business angels. However, these funding channels remain small and local and will not always provide the necessary funding at critical moments in their expansion. The initiatives to step up venture capital for example may be particular beneficial in that respect.
- Small companies that are struggling to get bank funding, especially in those countries that have been hit the hardest by the crisis, may unlock more funding via securitization. SMEs in particular could be positively impacted, as the intended side effect would be that securitisation allows banks to step up the lending capacity, knowing that bank lending for this type of corporates may remain a very important source of funding. Next to that, the European Commission also wants to work closely together with the SME growth markets, a new market sub-category created under MiFID II to facilitate access to capital for SMEs, to ensure that the regulatory environment for these markets delivers the expected results.
- Medium and large-sized companies, which may already have access to capital markets, should also feel the effects as CMU will support investors who wish to place larger amounts of capital in the market. The initiative to promote private placements, building on successful experiences such as the one in Germany and through supporting market-led initiatives such as the one by ICMA on the use of standardized documentation could be quite helpful. Tackling tax issues could come in helpful as well.
What is important too is that the European Commission is also planning to review the functioning of the European corporate bond market and to see how market liquidity can be improved. A well-functioning secondary market will be crucial for the success of the primary debt markets.
So all in all, the Capital Markets Union is an ambitious, yet challenging plan of the European Commission. Ambitious because it intends to reengineer Europe’s traditional funding channels. Challenging because of the wide range of issues that need to be tackled to get there and the tight deadline. The outcome should be that corporates meet with investors in an efficient market place, thus broadening the scope of options for both parties to contribute to economic growth.
(Source: Focus Magazine CIB)
Digital transformation: your action plan
33% of IT decision-makers don't have a clearly defined strategy for digital transformation, a survey reveals. Why is this and how can this situation be rectified effectively?
In the fast-moving consumer goods market, technology is now radically reshaping competitive dynamics in the marketplace, for both consumers and distributors. This has irrevocably changed how people buy things. In the results of its "Fast-Moving Consumer Goods" survey, Progress reveals the current paradox: digital transformation is crucial, but implementation is slower than desired.
"60% [of IT decision-makers] admit that their organization is still largely in denial about the need to transform digitally."
Where exactly does the problem lie?
More than half of IT decision-makers see this process as something daunting that will take a long time. 66% feel that their marketing and IT teams are not in alignment to deliver on the project. 64% find it difficult to keep up with the ever-changing digital landscape. When it comes down to it, two departments clash on the distribution of tasks and budgets: IT versus Marketing. The good news? 96% of companies have plans to act within the year.
The key elements of your action plan
1. Begin with an inventory
Achieving digital transformation involves customer satisfaction, the ability to alter the focus of the business and rollout of a flexible platform, but you shouldn't throw out the baby with the bathwater. The transformation should be initiated after taking stock of the company's assets, in the form of an inventory.
Then you should visualize possibilities for change to consider the future of your business, no longer as a traditional firm, but as an ambitious digital hub.
2. Inspiration to think big
The founders of Google say that they have always sought to reject a traditional management approach by adopting two basic principles, which apply perfectly to digital transformation: focus on satisfying users and hire "smart creatives". This can be achieved through the LEAN method.
3. The will and the time
The company has to recognize that digital change is permanent in order to be relevant. It requires the creation of new experiences and the definition of new paradigms that can overthrow traditional models but are ultimately beneficial: 41% of CIOs notice an increase in market share post-transformation, with 37% of employees becoming more motivated as a corollary.
4. The vision and the tools
In order to improve and optimize the customer experience, you have to work on the speed, responsiveness, security and standardization of distribution channels. Mobile devices are widely favoured (62% according to the survey) for analytics, data connectivity, e-commerce, content and the Cloud.
A full copy of the report can be downloaded for free from the publisher's website.
Kilometervergoeding voor elektrische fiets niet altijd fiscaal vrijgesteld
Werknemers die met de fiets naar het werk rijden, kunnen een fietsvergoeding krijgen tot 22 eurocent per kilometer. De regeling geldt in principe ook voor elektrische fietsen. Sommige modellen zoals de speed pedelec, vallen echter uit de boot.
De elektrische fiets wint terrein: ruim één op vier verkochte tweewielers is een elektrisch exemplaar. Steeds meer mensen gebruiken hun fiets ook om te pendelen. Werkgevers kunnen hun fietsende medewerkers een fietsvergoeding uitbetalen. Tot 0,22 EUR per kilometer is die vergoeding fiscaal onbelast. Het moet dan wel gaan om een “klassieke” elektrische fiets:
- met een maximumsnelheid van 25 km/u;
- met een motor van maximum 250 watt;
- met trapondersteuning, wat betekent dat de fietser ook moet trappen, er mag dus geen sprake zijn van een autonome motor.
Niet voor speed-pedelecs
Die voordelige regeling geldt dus niet voor speed pedelecs, zeg maar de Formule 1-versie van de elektrische fiets. Speed pedelecs kunnen snelheden tot 45 km/u halen. Sinds 1 oktober moeten bestuurders daarom een helm, rijbewijs en verzekering hebben.
Voor alle duidelijkheid: pendelaars die gebruik maken van een speed pedelec kunnen wel degelijk een kilometervergoeding krijgen van hun baas. Maar die uitkering wordt dan wel beschouwd als een belastbaar inkomen. De werknemer zal dus zowel RSZ als bedrijfsvoorheffing moeten betalen. Op die regel bestaat één uitzondering: medewerkers die kiezen voor een forfaitaire aftrek van hun beroepskosten. Zij hebben recht op een fiscale vrijstelling van maximum 380 EUR.
Wat met bedrijfsfietsen?
Werkgevers kunnen hun medewerkers een fiets ook ter beschikking stellen. Alle kosten die daaruit voortvloeien, onder andere het onderhoud, zijn vrijgesteld van belastingen. Voorwaarde is dat de medewerker de fiets daadwerkelijk gebruikt voor zijn woon-werkverkeer, al zijn zuivere privé-verplaatsingen ook toegestaan. Deze regeling geldt alleen voor de klassieke elektrische fietsen. Speed pedelecs vallen (opnieuw) niet onder deze fiscale vrijstelling.
Big data: six questions to ask yourself before getting started
Big data is a new class of assets that companies must embrace, develop, protect and make work for them during their transformation into a digital enterprise. We have put together some points to help guide your strategy.
Is there a course in big data?
Most universities around the world have come to understand the importance of big data. More and more, they are using analysis, both in research and to improve the lives of students on campus and help guide them; however, there is little in terms of training on this topic. Nevertheless, some establishments have recently started to offer their own diplomas and programmes to train the next generation of data scientists.
Do I need to provide training for my staff?
Yes. However, it's difficult to send your IT teams back to the school room in order to train or bring them up to speed. Nevertheless, various training courses have been organised around the country by specialist service providers. A two-day training course already teaches its students about the specific issues surrounding big data and the potential technical solutions.
Do I need to hire a data scientist?
Not necessarily. Some figures: last year, there were 4.4 million jobs in this sector, of which only 40% were filled. Not everyone has the budget for a data scientist. You can instead call on an independent consultant to pave the way and get your company up and running with big data.
What main techniques are required?
Techniques such as machine learning and data mining are essential for those working with big data. They help you tackle tasks that are difficult or even impossible to complete using more classic algorithms. The art of Data Visualisation enables you to communicate discoveries from data analysis.
What keyword should I take away?
Hadoop! In the same way as Microsoft Office is known for productivity and Apache is synonymous with the internet, apps are the key in the world of Big Data. Hadoop should be the cornerstone of your strategy. Without such expertise, it is impossible to master big data. This open-source software framework is designed for distributed data storage. It is highly scalable and resistant to failures. Its role is to process and analyse new and old data silos to extract significant knowledge from them that can be used in a company's strategy. Your experts will have to become familiar with its components: ‘Spark’, ‘Hive’, ‘Pig’, ‘MapReduce’ and ‘HBase’.
Is big data relevant for SMEs?
Certainly, in particular for marketing: big data enables companies to sort data in order to gain a clear profile of its customers. Segmentation can be used to optimise campaigns. Analysis also allows you to really observe how customers behave. SMEs don't have the same budget as a large group, and so they must primarily focus on data which is both crucial and can be exploited to reap the greatest reward: creating a stronger link with their customers.