Final composition of the European Parliament is taking shape
The final composition of the future hemicycle is taking shape. Political groups in the European Parliament have given themselves until Thursday 4 July to form, before beginning negotiations on the distribution of posts in the parliamentary committees according to their size. According to the European Parliament’s latest projections, the European Conservatives and Reformists (ECR) has grown to 84 seats with the Polish PiS finally deciding to stay in the group, therefore confirming, for the moment, its third place behind the European People's Party (EPP) group (188 seats) and the Socialists and Democrats (S&D) group (136 seats). However, a new far-right group called “Patriots for Europe” recently announced by Hungarian Prime Minister Viktor Orbán, Austrian Herbert Kickl and former Czech Prime Minister Andrej Babiš is reportedly trying to form itself and could have up to 95 MEPs. This new group is likely to replace the Identity and Democracy (ID) group and to attract French Rassemblement National and German AfD, who would consequently drop their project of creating “The Sovereignists” group. The formal decision is set to be taken on Monday 8 July, when the Patriots for Europe group is scheduled to hold its constitutive meeting.
DG TAXUD 2024 Annual Report on Taxation
The Directorate-General for Taxation and Customs Union (DG TAXUD) of the European Commission published on Wednesday 3 July its 2024 Annual Report on Taxation, which presents facts and analysis of the state of play of taxation and tax systems in the Member States. The report discusses both recent reforms in tax systems and changes in the main indicators used by the Commission to assess taxation policies in EU Member States and at EU level. The analysis contains a survey of different tax bases and types of taxes and their role for the tax mix, with a focus on differences across countries and over time. This year’s edition includes a focus on the role of taxation to support a competitive EU economy. Changes to the tax mix and the tax burden have been small, with some heterogenous developments across EU Member States, the report finds. The overall tax burden has increased from 39.8% to 40.2% of GDP over the past ten years. Moreover, it states that revenue losses due to tax avoidance and evasion continue to be a problem for all types of taxes. In particular, revenue losses due to corporate profit shifting are estimated to be worth up to 20% of all CIT revenues collected in 2022 in the EU which would amount to about EUR 100 billion in nominal terms. Reducing tax uncertainty through simple and predictable tax rules, coupled with the efficient use of revenues for growth-enhancing public spending, would contribute to a more growth-friendly environment, the report concludes. In parallel, ensuring increased compliance by all EU taxpayers, including by fighting against aggressive tax planning, would help to promote a prosperous economy by harnessing the full revenue potential of current tax bases and rates, it adds. The report was presented and debated during an event organised by the European Commission on Thursday 4 July. It will feed the reflexion on the future tax mix, including in view of the forthcoming annual EU Tax Symposium, scheduled for 6 November 2024.
OECD still optimistic about Pillar One after the missed June deadline
The OECD is maintaining its optimism on the conclusion of the Pillar One tax reform after the 30 June deadline to finalise the negotiations has been missed. In a statement sent to the media Tax Notes on Monday 1 July, the director of the OECD’s Centre for Tax Policy and Administration, Manal Corwin, reportedly said that the OECD Inclusive Framework continues to make significant progress in closing the gaps amongst members on various issues, in particular on the multilateral convention itself, and also on the architecture of amount B. A first draft of the Multilateral Convention (MLC) providing for the reallocation of taxing rights to market jurisdictions over some of the profits of the largest multinational enterprises regardless of their physical presence (so-called Amount A of Pillar One) was published in October 2023. However, several objections on technical aspects were remaining. On 30 May, the Co-Chairs of the OECD/G20 Inclusive Framework on BEPS, Marlene Nembhard-Parker (Jamaica) and Tim Power (United Kingdom), assured in a statement that the Inclusive Framework was “nearing completion” of the negotiations on a final package on Pillar One, maintaining its goal of reaching a final agreement in time to open the MLC for signature by the end of June.
European Court of Auditors assesses the performance of the recognition of professional qualifications in the EU
The European Court of Auditors (ECA) published on Monday 1 July a special report on how the Directive on the recognition of professional qualifications is actually enforced in the EU. The audit covered the period from 2013 – 2023 and focused on four professions: nurse responsible for general care, secondary school teacher, carpenter/joiner, and civil engineer, with visits in four Member States (Austria, Belgium, Czech Republic and Luxembourg). The ECA’s main finding is that the number of regulated professions in the EU remains high, while the EU systems for recognising professional qualifications are sparsely used (only in around 6 % of the cases of EU mobility). The ECA also found some shortcomings in the application of the Directive by Member States such as the lack of electronic procedures, the charges to use the recognition procedure being set arbitrarily and differing considerably among the Member States, authorities requiring more documents than laid down in the Directive and the code of conduct, imposition of excessive prior checks and compensation measures, and procedures longer than provided for. The ECA notably recommends clarifying, by proposing changes in the legislation or issuing Commission recommendations, the importance for the Commission and/or an independent body to review the proportionality tests carried out by the Member States. In its reply to the report, the European Commission recalls that it initially included this in its proposal for the Proportionality Test Directive but that the final legal act as adopted by the co-legislators does not include this requirement. The Commission said it will follow up with Member States to highlight the benefits of involving an independent body in proportionality tests, provide concrete guidance to Member States and facilitate the exchange of best practices.
