First insight into the European Commission Work Programme 2026
The European Commission will present its 2026 Work Programme to the European Parliament in Strasbourg on 21 October 2025, outlining new legislative and non-legislative initiatives aimed at boosting the EU’s competitiveness, sustainability, security and social cohesion. Although still being finalised, an early draft confirms several initiatives of particular interest to the tax profession, including a proposed 28th regime for innovative companies (Q1 2026), a Single Market Roadmap to 2028 (Q1 2026), an Omnibus on taxation (Q2 2026) and an update of the rules on shareholders’ rights (Q4 2026). The draft Work Programme also announces the evaluations of key directives, notably the Shareholders’ Rights Directive and the Whistleblower Protection Directive, both scheduled for Q4 2026. Once officially presented, the European Parliament will debate the Work Programme and define its own priorities for the year ahead.
Member States weigh mandate for European Commission in talks on UN second early tax protocol
On 17 October 2025, EU Member States debated granting the European Commission a mandate to negotiate on their behalf the second early protocol of the UN Tax Framework Convention, addressing tax dispute resolution. The Commission proposed this mandate on 29 September, and the Danish Presidency of the Council of the EU circulated a compromise draft addressing concerns about the Commission’s negotiating role. The text reportedly clarified that granting the mandate would not prejudice Member States’ right to participate in negotiations or alter the balance of powers between the EU and national authorities regarding the eventual signing or conclusion of the protocol. However, despite these assurances, 15 Member States reportedly expressed concerns and reluctance to grant a mandate to the Commission. The Danish Presidency will continue to assess the issue and determine the next steps. The discussion comes ahead of the third UN Intergovernmental Negotiating Committee session in Nairobi from 10–19 November 2025, where the tax dispute resolution protocol and broader elements of the global tax framework will be examined.
Tax outcomes of ECOFIN Council on 10 October 2025
On 10 October 2025, the ECOFIN Council discussed several tax matters, notably the proposal to revise EU excise duty rules on tobacco products. Most Member States supported extending the rules to new tobacco products, though many also warned that excessive duty increases could encourage illicit trade. The Commission also presented its proposal on new EU own resources, which obtained broad support for the CBAM resource but widespread criticism of the Corporate Resource for Europe (CORE) proposal over competitiveness concerns and of the proposed tobacco excise duty own resource for potentially diverting revenue from national budgets. Under another agenda item, the Council welcomed the Commission’s recommendation on the tax treatment of savings and investment accounts. The ECOFIN Council also adopted several tax decisions, including an update of the EU list of non-cooperative tax jurisdictions, maintaining 11 countries in Annex I and adjusting Annex II to reflect cooperation progress by removing Vietnam and adding Greenland, Jordan, Morocco and Montenegro. The Council also approved conclusions on using tax incentives to promote clean technologies and industrial decarbonisation under the EU’s Clean Industrial Deal, highlighting the importance of competitiveness and resilience. Additionally, it adopted decisions to amend agreements with Switzerland, Liechtenstein, Andorra, Monaco, and San Marino on automatic financial account information exchange, and authorised the negotiations with Norway on administrative cooperation in direct taxation.
European Commission’s October tax infringement decisions
On 8 October 2025, the European Commission launched several tax infringement actions, notably sending letters of formal notice to Belgium, France, and Malta for failing to implement the necessary IT functionalities to enable information exchange under Directive 2020/285/EU on the VAT special scheme for small enterprises. The directive simplifies VAT obligations and allows cross-border small enterprises to benefit from similar VAT exemptions as domestic ones, requiring operational IT systems by 1 January 2025. As the three Member States’ systems remain incomplete, they now have two months to address the shortcomings before potential escalation to a reasoned opinion. The Commission also referred Greece to the Court of Justice of the European Union for breaching Directive 2020/262/EU on excise duty arrangements, as Greece continues to exempt goods sold in tax-free shops at its land borders with Albania, North Macedonia and Turkey — a practice no longer permitted since 2017. The Commission deemed Greek efforts insufficient to resolve the infringement.
ETAF answers European Commission’s questionnaire on new VAT rules for the travel and tourism sector
On 15 October 2025, ETAF responded to the public consultation of the European Commission on the upcoming legislative VAT package on travel and tourism. ETAF welcomed this initiative to modernise the VAT rules for the travel and tourism sector, as the current framework is outdated and inconsistent with the realities of today’s digital and globalised economy. ETAF indeed considers that the Tour Operators’ Margin Scheme (TOMS) no longer meets its original objectives, creates legal uncertainty and distorts competition due to its divergent interpretation across Member States. The current rules impair VAT neutrality, especially for business customers and unfairly disadvantage EU-established travel agents compared to non-EU operators supplying EU destination travel services. ETAF would therefore support a reform that clarifies TOMS' scope and limits it to B2C supplies, excludes MICE activities and other B2B transactions. Regarding passenger transport, ETAF notes that the existing patchwork of VAT treatments between transport modes in Member States leads to complexity, compliance burdens and distortions. ETAF supports greater harmonisation, clearer definitions and the alignment of VAT policy with the EU’s environmental and competitiveness goals, ensuring neutrality and fairness while simplifying compliance for cross-border operators.
European Commission report signals wide gaps in VAT derogation practices
A European Commission report released on 14 October 2025 highlights inconsistencies in how EU Member States apply VAT rate derogations, sparking concerns about fairness and transparency in the Single Market. While the VAT Directive allows flexibility within clear parameters — standard rates of at least 15% and up to two reduced rates of 5% or more on 24 categories listed in Annex III implementation varies widely. The findings show that Luxembourg, Ireland and Italy account for 75% of the 64 active derogations, while seven other countries (Malta, Cyprus, Greece, France, Portugal, Spain, and Austria) share the remaining 25%. Housing and construction dominate, representing nearly 30% of all exceptions, followed by sectors like culture, tourism, public services, food, hospitality and finance. Super-reduced and parking rates make up over 90% of derogations. The report warns that such fragmentation undermines tax consistency across the EU and calls for greater harmonisation to ensure a level playing field.
MEPs and national experts discuss digital services taxes
On 16 October 2025, the European Parliament’s FISC Subcommittee held an interparliamentary meeting to exchange experiences on digital taxation at both national and international levels. Joined by representatives from the European Commission, national tax administrations and economists, MEPs and national MPs discussed the rationale for adopting or rejecting a digital services tax (DST), its tax base, applicable rates and related challenges. Six invited experts presented arguments supporting a DST to better capture 21st-century digital economic activity, outlining existing models in Spain, Portugal and Italy, and suggesting possible improvements. Some experts, however, recommended focusing on closing the VAT gap instead of creating a new levy. Parliamentary views were divided: some advocated for developing an EU-wide DST pending a global agreement, while others cautioned that unilateral EU action could hurt competitiveness. All the session’s expert statements are publicly available here. The debate over digital taxation and the EU-US relation in the field of taxation will continue during a FISC delegation visit to Washington and New York from 27–29 October 2025.
MEPs support EU simpler tax rules
On 8 October 2025, MEPs adopted the non-legislative own initiative report on the role of simple tax rules and tax fragmentation in European competitiveness with 499 votes in favour, 66 against and 53 abstentions. Drafted by MEP Michalis Hadjipantela (EPP, Cyprus), the report calls on the European Commission to create an EU Tax Data Hub to improve automatic exchange of information and cut administrative burdens. It also urges wider use of a unified Tax Identification Number to facilitate cooperation and reporting across Member States. In particular, MEPs ask the Commission to review and simplify the VAT framework, the Directive on Administrative Cooperation in Tax Matters and the Anti-Tax Avoidance Directive. They further invite the Commission to assess the benefits and drawbacks of a possible 28th regime as a single set of EU-wide rules for innovative companies, including on taxation. The report received a broad support from the EPP, S&D, Renew Europe and the Greens, all advocating for a simpler and more harmonised tax compliance. It will now feed into the ongoing legislative work on legislative simplification, more particularly a dedicated tax omnibus proposal expected in early 2026.
G20 renews commitment to finding solution for Pillar Two implementation
Meeting in Washington under South Africa’s Presidency on 15 and 16 October 2025, G20 Finance Ministers committed to continue engaging constructively to address concerns regarding Pillar Two global minimum taxes “with the shared goal of finding a balanced and practical solution that is acceptable to all as soon as possible”. Discussions are ongoing on a “side-by-side system” that could exempt US multinational groups from the scope of other countries’ Pillar Two global anti-base-erosion rules. “Delivery of a solution will need to include a commitment to ensure any substantial risks that may be identified with respect to the level playing field, including a discussion of the fair treatment of substance-based tax incentives, and risks of base erosion and profit shifting, are addressed and will facilitate further progress to stabilise the international tax system, including a constructive dialogue on the tax challenges arising from the digitalisation of the economy”, the Chair summary published after the meeting states. In his tax report to G20 Finance Ministers, OECD Secretary-General Mathias Cormann expressed optimism that an inclusive framework agreement could be reached by the end of the year.
OECD unveils real estate information exchange framework
On 16 October 2025, the OECD released a new international framework for countries to automatically exchange real estate ownership data, aiming to strengthen tax transparency and curb tax evasion. The report sets out a Multilateral Competent Authority Agreement (MCAA) allowing signatories to share readily available information on immovable property for tax purposes. Requested by the G20 earlier this year, the initiative follows OECD findings that cross-border real estate holdings pose significant tax compliance risks. The MCAA, open to countries that have joined the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, operates on voluntary participation. It enables authorities to use existing real estate and ownership databases, facilitating electronic and searchable data exchanges. According to the report, initial one-time exchanges covering taxpayers’ existing real estate holdings must occur by 31 January of the year following the MCAA’s entry into force between two competent authorities. Subsequently, annual exchanges should be completed by 31 January each year, and no later than 30 June, to include all information that became available to tax administrations during the preceding year.
