EU Finance Ministers reach agreement on the full ViDA package
EU Finance Ministers reached an agreement on the full VAT in the digital age (ViDA) package during their meeting on Tuesday 5 November. Originally proposed by the European Commission in December 2022, the ViDA package aims to modernize the EU’s VAT system in line with digital transformation. Progress had stalled for months, primarily due to the proposed “deemed supplier” rule for digital platforms in the short-term accommodation and passenger transport sectors. This rule, which would make online platforms responsible for collecting VAT on behalf of their users, has faced resistance from Estonia, particularly over concerns that it could negatively affect small traders who fall below the VAT registration threshold. A compromise proposal, presented by the Hungarian Presidency of the Council of the EU, broke the deadlock by allowing Member States to exempt SMEs from this rule and by introducing a transitional period where the deemed supplier rule will be voluntary starting 1 July 2028 and mandatory as of 1 January 2030. Other parts of the package were already provisionally agreed in May 2024. According to new rules, e-invoicing will become the default system for cross-border transactions, although Member States may still permit paper invoices for domestic transactions. Cross-border e-invoices will need to follow EU standards and will have to be issued within 10 days of the chargeable event, offering more flexibility than the original two-day requirement proposed by the European Commission. The intra-EU digital reporting requirements, set to begin in 2030, will replace current recapitulative statements with near real-time reporting requirements, including expanded data points such as bank details to facilitate tax tracking. Finance Ministers decided to extend the reporting deadlines from two to five days after issuing an e-invoice. Moreover, a new centralized VAT Information Exchange System (VIES) database will be established to collect and manage data. The ViDA package also expands the One-Stop Shop (OSS) VAT registration system by mid-2028, simplifying VAT collection across Member States and reducing the need for multiple registrations for cross-border B2C transactions. This political agreement opens the door to the long-awaited formal adoption of the ViDA package, after a re-consultation of the European Parliament. All legal texts are available here.
Main highlights from Commissioner-designate for Taxation’s confirmation hearing
Wopke Hoekstra, Commissioner-designate for Climate, Net-Zero, Clean Growth, also in charge of Taxation, was quizzed by MEPs on Thursday 7 November in the framework of the European Parliament vetting process. In his introductory remarks, Mr Hoekstra focused on aligning tax policies with environmental goals and simplifying the EU’s tax framework. He outlined his commitment to climate transition friendly taxation, including closing the negotiations of the Energy Taxation Directive, exploring new ways to further greening the VAT system and looking into some form of aviation levy. The other priorities of his mandate will be decluttering the EU tax system, closing the tax gaps and advancing the fight against tax fraud. In response to MEPs' questions, he further clarified his stance on tax competition, tax harmonization and unanimity in taxation. Asked about how to advance the work at the international level on Pillar One, the Commissioner-designate said he remains fully committed to a multilateral approach on digital taxation while admitting that should the negotiations fail he will convene Finance Ministers to find an EU solution. Addressing some criticisms linked to his involvement in the Pandora Papers and previous position in the consulting firm McKinsey, he clarified the legality of his investment and reassured his independence from prior corporate ties. The recording of the hearing is available here. Following the hearing, the majority of political groups reportedly greenlighted Mr Hoekstra. The Left and Europe of Sovereign Nations (ESN) groups voted against his appointment while the Patriots for Europe (PfE) abstained. The European Parliament should also request to add "taxation" to his Portfolio’s title.
Main highlights from Commissioner-designate for Simplification’s confirmation hearing
During his confirmation hearing on Thursday 7 November, Valdis Dombrovskis, Commissioner-designate for Economy and Productivity, Implementation and Simplification, pledged to address excessive bureaucratic red tape within the EU, acknowledging its negative impact on economic growth and investment. Mr Dombrovskis explained that the Commission will start by stress-testing the existing legislation focusing on priority areas identified by stakeholders as the most burdensome and come forward with simplification proposals in the first Commission’s Work Programme, which will come in the first 100 days of the new Commission. Each Commissioner will be responsible for this exercise in his/her portfolio while he will have the task to coordinate the work. The analysis will not be made legislation by legislation, but rather using a sectoral or value chain approach, looking also at the interplays and cumulative effects of different legislations, he explained. First areas emerging from consultations with stakeholders are sustainability reporting, data protection, energy, EU funds, taxation, agriculture and competition rules. Many of them are also identified in the Draghi report. This will follow a user-centric approach by hearing from stakeholders who apply EU rules on the ground, he said, and will be followed-up with annual automatic reports to the European Parliament and the Council. He assured to MEPs that simplification does not mean deregulation. The recording of the hearing is available here. The hearings of Commissioners-designate will continue until 12 November. The European Parliament's Conference of Committee Chairs will then assess the outcomes of all hearings and forward its recommendation to the Conference of Presidents, which will ultimately decide whether to close the hearings in its meeting on 21 November. The full Commission needs to be elected by a simple majority of the votes cast in Plenary. The vote is currently scheduled to take place on 27 November in Strasbourg. If all goes according to plan, the new European Commission will take office on 1 December 2024.
EU leaders adopt Budapest declaration on EU competitiveness
EU leaders gathered in Budapest on Thursday 7 November and Friday 8 November for an informal meeting. On Thursday evening, they held a strategic debate on the EU’s transatlantic relations in the light of the re-election of President Donald Trump. On Friday, they discussed and adopted a declaration on EU competitiveness (so-called Budapest declaration). The declaration welcomes the reports ‘Much more than a market’ by Enrico Letta and ‘The future of European competitiveness’ by Mario Draghi that identify critical challenges and make future-oriented recommendations. “They provide a solid foundation on which we will ambitiously advance our work”, EU leaders say. To this end, they notably invite the Commission to present by June 2025 a new comprehensive horizontal strategy on the deepening of the Single Market including a roadmap with clear timelines and milestones. EU leaders also call for launching a “simplification revolution ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs”. “We must adopt an enabling mindset based on trust, allowing business to flourish without excessive regulation. Key objectives to be implemented without delay include making concrete proposals on reducing reporting requirements by at least 25% in the first half of 2025”, the declaration reads. While a previous version said increased harmonisation on tax issues in the Single Market would increase productivity and growth, all references to tax disappeared from the final version.
FISC Subcommittee to discuss the future of European and International tax policy
On 21 November 2024, from 09:00 to 10:15, the FISC Subcommittee of the European Parliament will host an exchange of views with officials from the United Nations (UN), the OECD and the European Commission to discuss the state of play and the future of European and international tax policies. Developments such as the landmark global tax reform agreed in October 2021 and the recent work on a UN Framework Convention on International Cooperation raise several questions about the future global governance of tax policy-making that MEPs would like to discuss. The exchange of views will focus on the role the UN will play in tax, its cooperation with the OECD and the role the EU will have in both fora. FISC MEPs will discuss these matters with Mr Sanya Gbonjubola (United Nations), Ms Manal Corwin (OECD) and Mr Gerassimos Thomas (European Commission) (tbc).
OECD Tax Certainty Day 2024
The OECD is hosting its Tax Certainty Day 2024 on Friday 15 November. The event will allow tax policymakers, tax administrations, business representatives and other stakeholders to take stock of the tax certainty agenda. The agenda of the meeting features a presentation of the 2023 Mutual Agreement Procedure (MAP) and Advance Pricing Agreement (APA) statistics, a session about tax certainty aspects of Pillar Two and a session about how to move from dispute resolution to dispute prevention. The meeting is scheduled to take place virtually via Zoom. Interested stakeholders have until Friday 8 November to register here.
