2024 EU elections: latest results, main takeaways and next steps
The European elections of 6 to 9 June, marked by a surge of the far-right in several countries including Italy, France, Germany, Austria, Greece and the Netherlands and which caused a political earthquake in France with the dissolution of the French National Assembly, did not upset the major political balances within the Strasbourg hemicycle. EPP, S&D and Renew Europe grand coalition indeed retains its majority after EU elections. The latest projections published on Friday 14 June by the European Parliament services show that the EPP political group would win four more seats than estimated on 10 June, giving a total of 190 seats (+14 compared to the outgoing Parliament). The estimates remain at 136 elected members for the S&D Group and 80 members for Renew Europe (-22). The Greens/EFA Group would total 52 MEPs (-20). The ECR Group has also 3 seats more than previous estimates reaching 76 seats (+7), ID 58 (+9) and The Left 39 seats (+2). There are also gains for certain forces among the Non-attached Members (NI), such as the AfD and the Fidesz party of Hungarian Prime Minister Viktor Orbán. What about the next steps? The formation of political groups has started and will continue until the constituent plenary sitting of the European Parliament from 16 to 19 July, where MEPs will elect their President and Vice-Presidents. The constituent meetings of parliamentary committees will take place from 22-25 July. In the meantime, EU leaders will meet informally on 17 June to draw the first lessons from the results of the European elections and test several names for appointment to the “top European posts”, before a decision that should be taken at the European Council meeting on 27-28 June.
New attempt to agree on ViDA despite remaining Estonia concerns
The Belgian Presidency will try again to reach an agreement on the VAT in the digital age (ViDA) package during the next ECOFIN meeting (and last of its mandate) on Friday 21 June. During the last ECOFIN meeting on 14 May, an agreement was not possible because of the concerns raised by Estonia on the new deemed supplier regime for digital platforms (Pillar Three of the reform). EU Finance Ministers however did agree on the two other Pillars of the reform (Digital Reporting Requirements and the Single VAT registration) but these will only pass if a compromise can be reached with Estonia on the third Pillar. The Belgian Presidency already accommodated part of these concerns by giving Member States the possibility to prevent the deemed supplier regime from applying to SMEs. But Estonia wants Member States to be allowed to opt in to the deemed supplier instead of having the option to exclude SMEs. In a new compromise proposal discussed on Tuesday 11 June the Belgian Presidency reportedly gave Member States the option to check the status of an SME by consulting an online database. The proposal would also state that the deemed supplier provision should not add undue administrative burden on businesses and tax administrations. But it appeared that these efforts would not be enough to convince Estonia. Bilateral talks between the Belgian Presidency and the countries are continuing. During the Ecofin meeting, Ministers will also exchange views on the state of play of the implementation of the Recovery and Resilience Facility (RRF) and on the state of play of the economic and financial impact of Russia’s aggression against Ukraine. Furthermore, the Commission will present the 2024 European Semester Spring Package and Ministers will approve a report to the European Council on tax issues as well as conclusions on the progress achieved by the Code of Conduct Group during the Belgian Presidency.
Member States open to relaunch talks on UNSHELL on the basis of the Commission’s new approach
Member States reportedly showed openness on Tuesday 11 June to relaunch technical talks based on the new approach proposed by the European Commission on the UNSHELL Directive laying down rules to prevent the misuse of shell entities. The new approach no longer includes an economic substance test and would limit reporting obligations to entities that present a high risk of being used in abusive tax schemes. The proposal would still include risk hallmarks under which entities should self-assess. A high-risk entity would then have to report to authorities the hallmarks it met and information about its shareholders and beneficial owners. The new approach also reportedly no longer includes common tax consequences. Instead, it would create an obligation for Member States to use the exchanged information and take administrative measures, to identify possible abuse schemes and apply their national anti-abuse rules accordingly. During a meeting of the High-Level Working Party on tax questions, Member States reportedly broadly agreed to consider this new approach as a basis for restarting the negotiations under the upcoming Hungarian Presidency of the Council of the EU, although some Member States have issues with the proposal and are eager to see a redrafted text.
EU takes stock of the progress on the draft terms of reference for a UN Tax Convention
In a note published on Wednesday 12 June, the Belgian Presidency of the Council of the EU informed Member States about the outcomes of the first session of the Ad Hoc Committee to Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation, which took place in New York, from 26 April to 8 May. The note recalled that the EU approved a common position for this meeting, which emphasized the importance of a rules-based international order, inclusive and equitable tax cooperation, and fostering global dialogue to create policy synergies. The discussions during the first substantive session of the Ad Hoc Committee focused on the possible structure of the terms of reference, including substantive elements of the convention and potential topics for high-level commitments, the note says. On substantial issues, key discussions focused on the concept of domestic resource mobilization (DRM) and the role of capacity building, the importance of effectively taxing high-net-worth individuals and possible tax measures to address environmental challenges. The most controversial issues were the equitable taxation of income of multinational enterprises (MNEs) and the taxation of cross-border transactions. Another divisive issue was the possible development of early protocols, specifically whether to first develop the framework convention (FC) and only then the protocols, or to develop simultaneous protocols on urgent issues. The Ad Hoc Committee Chair proposed a timeline for the next steps, including the circulation of a zero-draft of the terms of reference and opportunities for written submissions from UN Member States and stakeholders in the lead-up to the second substantive drafting session, which will take place from 29 July to 16 August 2024 in New York. Negotiations on the text of the convention will proceed in the subsequent stage.
European Commission’s annual report on taxation to be presented on 4 July
The European Commission will present its 2024 Annual Report on Taxation during an event in Brussels on 4 July. Entitled “Building strong foundations for growth: EU Tax Policy for lasting prosperity”, the conference will have two panel discussions. The first panel will address the job market of tomorrow and how taxation can help to address labour and skill shortages. Among others it will answer the following questions: How can policy makers address labour and skill shortages that hinder competitiveness? Can the design of taxation contribute to higher employment rates? Is there a role for taxation to ensure a smoother transition from education and training to employment, especially for young people? Can taxation support necessary periods of reskilling in a fast-changing job market? Is there a role for taxes in supporting longer working lives? In the second panel, participants will discuss tax compliance costs and their impact. The event will also be livestreamed.
