FISC Subcommittee debates draft report on simplified tax rules and EU competitiveness
On 24 April 2025, the European Parliament's Subcommittee on Tax Matters (FISC) held a discussion on the draft report titled The Role of Simple Tax Rules and Tax Fragmentation in European Competitiveness, presented by Rapporteur Michalis Hadjipantela. The report addresses the growing complexity of tax systems across the EU, which are seen as obstacles to the competitiveness of European businesses, particularly when it comes to cross-border investment and the efficient functioning of the single market. Hadjipantela emphasized the importance of tax simplification, transparency, and predictability as key elements for fostering growth, encouraging investment, and improving tax compliance. The report highlights the administrative burdens and complexities imposed by the current tax framework, particularly on small and medium-sized enterprises (SMEs). He proposed simplifying tax procedures and reducing compliance costs, especially for businesses that are key to innovation and growth. Additionally, the use of digital tools, such as artificial intelligence, was recommended to modernize tax systems and improve transparency. A significant part of the report focuses on the OECD's Pillar 2 tax rules, which are intended to address tax avoidance. The report stresses the need for the EU to align with international standards, particularly with the ongoing developments in the US tax landscape. It also calls for measures to reduce tax fragmentation within the EU, making cross-border investments and labor mobility easier and more efficient, and preventing double taxation. Although the overall response from MEPs was positive, there were differing views on how far tax harmonization should go at the EU level. There was also a discussion around balancing tax simplification with the need to combat tax evasion and aggressive tax planning. In conclusion, while the draft report is seen as a strong foundation for future work, several MEPs proposed amendments to further strengthen specific areas, including digital taxation and addressing tax evasion. A final vote in the FISC Committee is planned for July, followed by a plenary vote in September 2025. The debate highlighted the challenges in balancing simplification with respect for national tax competences, as well as the ongoing need for tax cooperation at the EU level to ensure competitiveness and fairness.
FISC Subcommittee holds public hearing on the role of taxation in the green transition
On 24 April 2025, the European Parliament’s Subcommittee on Tax Matters (EP FISC) convened a public hearing to explore the role of taxation in facilitating the green transition while maintaining competitiveness. One key point discussed was the complexity involved in designing effective green taxes. Experts agreed that while taxation can be a useful tool in driving environmental goals, it must be carefully crafted to avoid inefficiencies. The general consensus was that taxation should not be seen in isolation but rather as part of a broader policy mix, which also includes regulations, subsidies, and investments in infrastructure. The transport sector, particularly road and air transport, was a focal point of the discussion. DHL, represented by Mitra Qurban, emphasized the need for targeted fiscal incentives to support decarbonisation. Kurt Van Dender, Head of the Tax Policy and Statistics Division at the OECD, pointed out that while taxation remains a cost-effective means to drive change, it should focus on performance rather than specific technologies. He noted that tax incentives should be carefully designed to target the right goals without causing administrative overload or unintended market distortions. From the perspective of Business Europe, Lúcio Vinhas de Souza highlighted the need for a competitive tax framework to encourage green investment. He called for broad, market-based tax incentives that support the green transition while ensuring that businesses in the EU remain competitive globally. There was a strong emphasis on the importance of coherence in EU tax policy, avoiding fragmentation between member states. Angela Köppl from the Austrian Institute of Economic Research (WIFO) discussed the environmental and economic effectiveness of green taxes. While acknowledging the potential positive impact on emissions reduction and innovation, she also cautioned that market failures could limit their effectiveness. The overall message from the hearing was: While taxation is an important tool in the green transition, it must be carefully aligned with broader policy goals. A coordinated approach is needed, combining tax measures with regulatory frameworks, to ensure that green taxes drive meaningful change without compromising economic competitiveness.
Tax Policy and Fair Competition in the EU: Key insights from the 2024 ECON Annual Competition Policy Report
The European Parliament ECON’s 2024 Annual Competition Policy Report discusses a broad range of issues related to maintaining fair competition within the EU’s internal market. A significant focus is placed on the intersection of tax policy and competition, highlighting how certain tax practices can distort markets and undermine fair competition. One of the central concerns raised in the report is aggressive tax planning and the existence of harmful tax regimes, which allow certain companies to minimize their tax burdens in ways not accessible to smaller firms. These practices can lead to an uneven playing field, where some companies gain competitive advantages not through innovation or efficiency, but through strategic exploitation of tax loopholes. The report calls for stronger EU-wide coordination to combat such practices and for member states to align their tax systems more closely to prevent regulatory arbitrage. Another key point is the scrutiny of state aid in the form of favorable tax rulings. The report emphasizes the need for the European Commission to rigorously assess tax-related state aid cases to ensure that national tax decisions do not confer unfair competitive benefits on specific companies. Transparency in tax rulings is viewed as essential to ensuring public trust and maintaining the integrity of the single market. The digital economy is also a prominent theme, with the report underscoring the challenges it poses to traditional tax systems. Many large digital companies operate across borders and often pay relatively little tax in the countries where they generate significant revenue. The Parliament supports efforts to develop fair taxation models that can more effectively capture value creation in the digital sphere, including ongoing international negotiations under the OECD/G20 framework. Finally, the report stresses the importance of global cooperation to tackle tax avoidance and evasion. It endorses initiatives that promote tax justice and seeks to ensure that all companies, regardless of their size or international reach, contribute fairly to public finances. By advocating for greater transparency, better coordination, and a more equitable tax framework, the report aligns tax policy with the broader goals of fair competition and economic justice in the EU.
OECD publishes report on R&D tax incentives
The OECD’s latest report highlights that tax incentives continue to be the dominant form of government support for business R&D across most member countries. In 2024, 34 of 38 OECD nations provided tax relief for R&D spending, with Estonia introducing such incentives for the first time. On average, SMEs benefit more than large firms—profitable SMEs receive a 19% tax subsidy on R&D expenses, compared to 16% for larger firms. The report emphasizes that tax incentives have become more significant than direct funding: in 2023, 23 OECD countries offered more R&D support through tax relief than direct measures. Overall, about 55% of total government R&D support in the OECD came via tax incentives, rising to 85% in China. Portugal, Iceland, and the UK led in R&D tax support relative to GDP. Despite some rollback of COVID-era measures, R&D tax subsidy rates increased again in 2024, continuing the long-term upward trend. The report also notes stark differences in national approaches, with countries like China aggressively expanding R&D tax benefits to stimulate innovation.
