Working Party on Tax Questions examines Cypriot Presidency tobacco tax compromise
The Council’s Working Party on Tax Questions (Indirect Taxation) met on 21 January 2026 under the Cypriot Presidency to examine the Presidency compromise text on the proposal for a recast Council Directive on the structure and rates of excise duty applied to tobacco and related products, together with the proposal amending Directive (EU) 2020/262 on general excise arrangements. Before the meeting, the Cypriot Presidency reportedly shared draft texts suggesting lower EU minimum excise rates, transitional periods for traditional tobacco, revised rules for heated tobacco, a single volumetric rate for e-cigarette liquids and related changes to the horizontal excise Directive, though no official Council or Commission texts are yet published. The agenda foresees political agreement at the ECOFIN Council meeting on 12 June on the directive concerning tobacco excise structure and rates.
Outcomes of the ECOFIN Council meeting on 20 January
On 20 January 2026, the EU Finance Ministers held their first meeting of the year. The Council discussed the Cyprus Presidency’s programme on economic and financial affairs and approved conclusions on the Commission’s 2026 alert mechanism report, published on 25 November as part of the European Semester autumn package. It also opened an excessive deficit procedure and adopted a recommendation defining the net expenditure path and timeline to correct it. Ministers adopted implementing decisions approving Member States’ amendments to recovery and resilience plans. In taxation, the Council reviewed the Presidency’s priorities, including combating tax evasion, aggressive tax planning and harmful competition, advancing tax simplification, administrative cooperation, VAT files, the Carbon Border Adjustment Mechanism (CBAM) and the Customs Reform Package.
UN advances work on framework convention for international tax cooperation
As of January 2026, negotiations continue under the Intergovernmental Negotiating Committee (INC) on a United Nations Framework Convention on International Tax Cooperation established by the UN General Assembly. On 22 January, the co-leads of Workstream I released a draft framework convention template outlining proposed objectives and principles, including fair allocation of taxing rights, enhanced cooperation against tax avoidance, evasion and illicit financial flows, and stronger administrative assistance, with further provisions to be developed during the 2025–2027 negotiating period. In parallel, Workstream II issued a draft options paper on taxation of cross-border services, reflecting differing Member State views on nexus rules, physical presence and gross- or net-basis taxation. The drafts will inform discussions at the upcoming fourth session of the INC in New York on 2–3 and 5–13 February 2026, as work advances towards submission of a draft convention and two early protocols to the General Assembly in 2027. The provisional programme foresees initial discussions on the draft convention, then on protocols covering cross-border services and tax dispute prevention and resolution. A multi-stakeholder dialogue will precede the session online on 29 January (16:00–17:00 CET), with registration required for access.
European Parliament adopts resolution with recommendations on the 28th Regime
On 20 January 2026, following a plenary session held on 19 January, the European Parliament adopted a resolution with recommendations to the European Commission on the planned “28th Regime”, an optional EU-wide legal framework for companies aimed at reducing internal market fragmentation through uniform company law rules operating alongside national regimes. Parliament suggested designating the corporate form as Societas Europaea Unificata (S.EU) and, while focusing on company law, invited the Commission to explore a coherent framework addressing taxation-related aspects, such as employee financial participation and its tax treatment, without affecting Member States’ fiscal competences. MEPs also recommended excluding companies breaching rules on fraud, tax evasion, social security evasion or employee participation, and stressed the need to prevent letterbox companies. The Commission is expected to table a proposal by Q1 2026. In a World Economic Forum address on 20 January, Commission President Ursula von der Leyen stated that the Commission will soon propose the “28th Regime”, or “EU Inc.”, as a single EU-wide company framework to foster cross-border business activity.
EPRS briefing on VAT rate-setting and the use of preferential rates in the EU
A briefing published by the European Parliamentary Research Service (EPRS) in January 2026 analyses how EU rules influence Member States’ ability to set value added tax (VAT) rates and the challenges of an increasingly complex rate structure. It traces the evolution of EU VAT rate-setting from early, largely unsuccessful harmonisation efforts to the current VAT Directive framework, which provides a common structure but allows wide national discretion through reduced, super-reduced and zero rates. While these preferential rates pursue social, environmental and economic goals, the briefing notes concerns over legal uncertainty, administrative burdens for tax authorities and businesses, and foregone revenues. It also finds that VAT rate reductions are often only partly passed on to consumers, questioning their effectiveness compared with alternative policy tools, especially amid fiscal constraints.
EU Tax Observatory to operate under two-pillar research structure
The EU Tax Observatory is set to operate under a revamped structure built around two complementary research pillars, according to a LinkedIn post on 15 January 2026 by Benjamin Angel, Director for Direct Taxation at the European Commission. One pillar will focus on tax competitiveness, with a strong contribution from a Bruegel-led consortium headed by Pascal Saint-Amans, while a second pillar will concentrate on identifying and addressing tax gaps, under the leadership of Gabriel Zucman and the Paris School of Economics, as explained in his LinkedIn post on 14 January 2026.The two pillars will work in close cooperation with a broad network of European research institutions across Europe. The revised structure aims to strengthen analytical work on key EU tax challenges and support evidence-based policy discussions on competitiveness, social models and the green transition.
EBA and AMLA complete handover of AML/CFT mandates
On 1 January 2026, the European Banking Authority (EBA) and the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) completed the transfer of all AML/CFT mandates and functions from the EBA to AMLA, ending the EBA’s stand-alone AML/CFT role introduced in 2020. The move forms part of the EU AML/CFT package establishing AMLA at the centre of an integrated European supervision system. Key tools and expertise, supervisory insights and risk assessments, were transferred, while existing EBA AML/CFT guidelines remain in force until replaced. Under the new framework, AMLA will finalise the EU AML/CFT Single Rulebook, promote supervisory convergence, coordinate financial intelligence units and directly supervise selected high-risk financial institutions, while the EBA will continue addressing money laundering and terrorist financing risks through its prudential role in close cooperation with AMLA.
OECD global forum on VAT to hold sixth meeting from 26–27 January
The OECD will hold the sixth meeting of the global forum on VAT from 26 to 28 January 2026 at its conference centre in Paris. According to the published agenda, the event opens with a session marking the tenth anniversary of the OECD VAT/GST recommendation, followed by plenary and break-out discussions on global VAT/GST developments, international solutions, and taxation of traded services and intangibles. Later sessions will address VAT/GST in the sharing economy, low-value e-commerce, digital transformation and AI implications, e-invoicing, fraud risk mitigation and administrative co-operation, concluding with reflections on priorities ahead. The OECD lists key themes such as digital economy challenges, crypto-asset policy responses, transactional reporting, VAT/GST gaps, AI impacts and compliance risk management. Attendance is limited to invited delegates from tax administrations, international organisations and selected stakeholders. The last meeting was held in Melbourne in March 2019, making the 2026 forum the first since then.
