EU leaders set their priorities and timetable to boost competitiveness
EU leaders met in Brussels on Thursday 20 March and Friday 21 March to discuss competitiveness and to address recent developments in Ukraine and the next steps on defence. In their conclusions published at the end of the meeting, the leaders underlined that the need to invest in defence is closely interlinked with the EU’s competitiveness. They agreed to prioritise simplification, lowering energy prices and mobilising private savings in order to unlock necessary investments. They also welcomed the Competitiveness compass, the Clean Industrial Act and the two Omnibus simplification packages presented by the Commission. Simplification must be implemented at all levels to provide a clear and innovation-friendly regulatory framework, without undermining predictability, policy goals or the Single Market, EU leaders said. In this regard, they called on the Commission, the Council and the Parliament to: - work towards achieving the target of reducing administrative burdens by at least 25% and 35% for small- and medium-sized businesses: - advance work on the two Omnibus simplification packages with the view of finalising them as soon as possible in 2025; - adopt the stop-the-clock mechanism on sustainability reporting and due diligence by June 2025 the latest and; - adhere to better regulation principles throughout the legislative process. They also called on the Commission to present further simplification packages, including on industrial decarbonisation and on security and defence.
Main highlights from the 2025 EU Tax Symposium in Brussels
This year’s edition of the EU Tax Symposium took place on Tuesday 18 March in the Hemicycle of the European Parliament in Brussels under the theme "Strengthening competitiveness and fairness to build prosperity”. In his keynote speech, the European Tax Commissioner Wopke Hoekstra outlined the EU's tax priorities aimed at fostering competitiveness and the green transition. He notably stressed the importance of reducing the VAT gap and enhancing cooperation between Member States and tax authorities. Commissioner Hoekstra also reaffirmed the EU's commitment to continue working to finalise the OECD Global Tax Deal and address the challenges posed by digitalisation despite the US withdrawal from the deal – a commitment that was also expressed later that day by the OECD Secretary General Mathias Cormann. The first panel debated the need for international cooperation and a unified EU approach to tax ultra-high-net-worth individuals. The discussion was driven by the EU Tax Observatory proposal of a 2% global minimum wealth tax. The second panel largely emphasised taxation as a key tool for boosting EU competitiveness, innovation and investment. Several calls were made for tax incentives, alongside simplification and harmonisation to create a level playing field. During the third panel discussion on European and International corporate tax reform, participants outlined the need for a fair and efficient corporate tax system that supports growth and aligns with EU priorities as well as the importance of multilateralism. Finally, the fourth and last panel discussed the role of AI in tax systems, stressing its potential to improve tax audits, fraud detection and data analysis while also raising concerns about regulatory gaps and business impacts. The full event can be watched again here.
European Commission proposes VAT waiver for defence spendings
As part of its proposal for a Security Action for Europe (SAFE) through the reinforcement of the European Defence Industry Instrument published on Wednesday 19 March, the European Commission proposed a temporary VAT exemption on importation and supply of joint EU defence products. This proposal belongs to the broader ReArm Europe Plan, to increase the military aid to Ukraine while strengthening the EU’s own defence capabilities in a context of growing military threats from Russia. The new financial instrument proposed by the Commission would provide up to 150 billion € in loans to Member States for defence investment. “It is appropriate, in a spirit of solidarity and in order to ensure the financial sustainability of the effort that is necessary to address the severe difficulties in the availability of defence products, to take measures to avoid having to finance taxes on these expenditures upfront”, the proposal reads. Therefore, it proposes that defence products acquired under common procurements involving the contribution of the European Defence Industry Instrument should be exempted from the VAT, by the introduction of a temporary exemption under Directive 2006/122/CEE. This exemption should be limited in time and only apply for the duration of the contracts resulting from common procurements under the SAFE instrument, the Commission specifies.
Tax aspects of the Savings and Investments Union Strategy
The European Commission published on Wednesday 19 March its Savings and Investments Union Strategy to improve the way the EU financial system channels savings to productive investments. The strategy contains certain tax elements. The Commission notably says that it will take action to “remove differences in national taxation procedures creating administrative burden and barriers to cross-border investment” and also support Member States’ actions for this purpose, e.g. through exchanges of best practices, enforcement of free movement of capital and other single market freedoms, and by issuing recommendations. The Commission will also adopt legislative and non-legislative measures by Q3 2025 to create a European blueprint for savings and investments accounts or products based on existing best practice. These measures will be accompanied by a recommendation addressed to the Member States on the tax treatment of savings and investments accounts, the strategy says. The text further mentions the proposal for a Debt-Equity Bias Reduction Allowance (DEBRA), on which discussions in the Council have been on hold since 2022. The status quo on this proposal maintains the debt bias in taxation systems in many Member States giving undue fiscal incentives to debt financing at the expense of equity financing, the Commission stresses without announcing further measures.
Talks on a Joint Transfer Pricing Forum in dead-end
Negotiations in the Council of the EU on the Transfer Pricing Directive have been put on hold until further notice. During a meeting on Friday 14 March, the European Commission reportedly rejected the idea of a non-binding Joint Transfer Pricing Forum, while Member States continued to oppose any political commitment or peer review attached to the Forum. The proposal for an EU Directive to transpose the OECD Transfer Pricing Guidelines into EU law, presented in September 2023, faced significant opposition from Member States from the beginning and quickly talks revolved around replacing it by a non-binding Joint Transfer Pricing Forum (JTPF), similar to the one that existed until 2019. At the meeting, the Polish Presidency of the Council of the EU reportedly advanced the idea of setting up a coordinating group, which would provide a platform for conducting technical work on proposing and designing consensus-based, non-legally binding solutions to practical issues in the area of transfer pricing, in line with the OECD framework. This proposal deviates from earlier proposals which would have ensured a certain level of political commitment and peer reviews, and was therefore subsequently rejected by the European Commission, leaving the Transfer Pricing discussions in a dead-end.
A 2% minimum wealth tax could raise 67 billion € for Member States, the EU Tax Observatory says
A 2% minimum tax on the wealth of people owning more than 100 million € would raise 67 billion € for European Member States, according to a note published by the EU Tax Observatory on Monday 17 March. According to the three authors, Gabriel Zucman, Quentin Parrinello and Giulia Varaschin, a 2% minimum wealth tax expressed as a fraction of wealth would be more effective than a minimum tax expressed as a fraction of income, because wealth is better defined than income for ultra-high-net-worth individuals. It would also address all potential forms of tax avoidance, without the need to target specific schemes, and would not create any double taxation as any individual income tax and similar levies already paid would be creditable against this new tax, they argue. The note contains a table displaying the revenues estimations country-by-country using March real-time billionaire data from Forbes. With a 2% minimum tax on the wealth of centi-millionaires, France would raise 19,4 billion €, Germany 16,9 billion €, Austria 1,9 billion €, Belgium 1 billion €, Romania 300 million €, Hungary 200 million € and Croatia 100 million €. The total revenue estimation for the EU could raise up to 121 billion € with a 3% minimum tax, the authors found.
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