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The European Commission (EC) has proposed an amendment to strengthen cooperation between the European Public Prosecutor’s Office (EPPO), the European Anti-Fraud Office (OLAF), and Member States. The proposal provides a legal basis for the exchange of information and access to VAT data, enhancing the EU’s ability to combat fraud against the financial interests of the Union.
As part of the ‘VAT in the Digital Age’ package, real-time digital reporting of cross border transactions will give Member States the information they need to step up the fight against VAT fraud, especially carousel fraud.
This specific type of cross-border VAT fraud alone – the carousel or Missing Trader Intra-Community (MTIC) fraud – is estimated to cost EU taxpayers €12.5-€32.8 billion annually and is frequently orchestrated by criminal organisations. Carousel fraud is only a part of the overall VAT compliance gap, i.e. the difference between the expected VAT revenues assuming full compliance and the actual VAT revenues collected, which for 2022 was estimated at €89.3 billion for the EU.
The proposal marks another step forward in the EU’s efforts to combat VAT fraud. By giving EPPO and OLAF immediate access to VAT data, it will enable quicker, EU-wide assessments and help detect, stop and prosecute fraudulent activities more effectively.
The EC has published its second evaluation of administrative cooperation in the field of (direct) taxation (DAC), covering the period 2018-2023. The report finds that the DAC provides a robust and well-functioning legal framework that actively supports Member States in their fight against tax fraud, evasion and avoidance.
The evaluation also highlights some areas for improvements, including the need to consolidate and simplify the DAC and to ensure a more consistent application of the Directive across all Member States. According to the accompanying Staff Working Document, most concepts and hallmarks in DAC 6 (Annex IV) are considered to be sufficiently clear and workable by most Member States. However, around a quarter to a third of the Member States find that, in some circumstances, the concept of main benefit test, as well as some hallmarks (A3, B2, B3, C4, E2 and E3) can be unclear, overly broad or open to divergent interpretations, raising concerns about their practical effectiveness.
The EC also notes that it will explore whether elements of the withdrawn Unshell proposal could be incorporated into a simplified DAC framework. This may include amended or new DAC 6 hallmarks.
Further work is required to ensure a more robust penalty framework in all Member States, to facilitate the automatic reconciliation of DAC data with national data and to better assess and increase transparency around the benefits the DAC generates.
The EC published a package of measures to help citizens secure adequate income in retirement by improving access to better and more effective supplementary pensions. These measures are designed to complement – not replace – public pensions, which the EC underlines remain the foundation of pension systems across all Member States. The package aims to strengthen both the demand for and supply of supplementary pensions.
The package includes:
One of the main issues addressed is the role of tax incentives, or disincentives, in influencing citizens’ supplementary pension savings. To that effect, the non-binding recommendation calls on Member States to consider targeted tax incentives underpinned by transparent communication and clear, simple procedures. More broadly, it encourages Member States to explore tax incentives that encourage a broad uptake of supplementary pensions. Where such incentives are offered, shall publish detailed information on the impact of tax expenditure on revenues in accordance. These incentives must be equally available for all equivalent pension saving products, and the EC calls on Member States to remove tax barriers to cost-border investment of pension funds.
Under the IORP proposal, the EC proposes the disclosure of relevant information, including the applicable tax treatment, for savers. The PEPP Regulation, for its part, is amended to oblige Member States to ensure that PEPPs receive a tax treatment that is not less favourable than that granted to other personal pension products, or in the case of several such tax regimes to grant PEPPs the most advantageous one.
MEPs adopted at the 13 November European Parliament’s (EP) Plenary session its non-binding opinion on the BEFIT proposal. The report was adopted as amended, with 370 votes in favour, 160 against, and 107 abstentions. The file was led by Evelyn Regner (S&D/Austria).
There are several changes proposed to the EC proposal. For example, MEPs included a ‘significant economic presence clause’ which states that companies having more than EUR 1 million in revenues in a member state will be considered to be permanently established there. MEPs also propose introducing a royalties limitation rule for companies forming part of a ‘BEFIT group’. If a company in the group pays royalties or licence fees to another group company in the EU that is taxed at less than 9%, the paying company must add those payments back to its own taxable income — unless the receiving company carries out substantive economic activity supported by staff, equipment, and offices.
Another amendment adopted by the EP proposes faster tax write-offs for certain assets that support EU climate, social, digital, or defence goals. Finally, to reduce abuse of potential losses, if a subsidiary’s loss creates a negative taxable amount, the parent company can use this to reduce its own taxable income, but only for up to five years and shall be set off against the next positive tax base. The eventual tax deductions cannot reduce the company’s taxable income to below zero.
The 20 November’s FISC Committee hearing brought together a panel of experts to exchange with MEPs about green tax rules to support the EU’s sustainability transition.
A key theme was the need for clearer, investment-friendly tax rules to help businesses advance energy decarbonisation. Business Europe’s Mariella Caruana stated that the reform of the Energy Taxation Directive (ETD), currently blocked in Council (see article below), must strengthen and not undermine EU competitiveness. Andreas Rüdinger noted that in 2023 around EUR 111 billion was provided in direct subsidies for fossil fuels, with EUR 50 billion in the form of direct tax measures. He underlined that Member States should not be allowed to tax low carbon fuels and electricity more than fossil fuels, as is currently the case in some countries such as France.
Professor Patrick Lenain, for his part, argued that while it made sense to have long transition periods to move away from fossil fuels, the key was to avoid including escape clauses. MEP Matthias Ecke (S&D/Germany) suggested considering whether the EC should withdraw the current ETD proposal before putting forward a new one.
EU finance ministers met on 13 November for their regular ECOFIN meeting, this time attempting to reach a compromise agreement on the long-standing revision of the EU’s Energy Taxation Directive (ETD). Despite the Danish Council Presidency’s efforts, the finance ministers could not reach agreement on the ETD revision. Several Member State delegations, including Italy, stated they could not support the text on the table as, among other issues, minimum tax rates for natural gas were still too high. On the other hand, other Member States such as Slovenia and Estonia regretted that the text had been watered down, underlining that more ambition should have been shown. The Danish Presidency concluded that any concessions to satisfy some states would likely face objections from others, making progress on this file challenging.
On the other hand, finance ministers achieved progress on the small parcels issue. ECOFIN agreed to abolish the current rule that allows goods worth under EUR 150 to enter the EU without customs duties being paid. Once the EU customs data hub (the proposed EU central platform for interacting with customs and strengthening controls) becomes operational, currently expected in 2028, relevant customs duties will apply to all goods entering the EU.
Recognising the urgency, the Council committed to a simple, temporary solution to levy customs duties on such goods from 2026 until the hub becomes operational. Work on this solution will continue in the coming weeks.
OECD has published a report titled “Effective Carbon Rates 2025”. It provides comparable data and insights into how 79 countries, accounting for 82% of global greenhouse gas (GHG) emissions, use carbon taxes, emissions trading systems (ETSs), and fuel excise taxes.
Two key trends emerge from the latest data: carbon pricing policies are increasingly diverse and flexible to balance diverse policy objectives, and their adoption, particularly that of ETSs, continues to expand to new countries and more sectors.
The OECD issued on 19 November an update to the model tax convention on income and capital, as reported by Agence Europe. This revised text provides new and detailed guidance on short-term cross-border remote work and on taxing income from the extraction of natural resources.
This update aims to provide greater legal certainty for governments and businesses. It specifies that cases of cross-border remote work, such as from home office, creates a taxable presence for companies. It clarifies the circumstances in which a natural person’s home could constitute a “place of business”.
The updated convention introduces a new alternative provision for taxing income from activities related to the extraction of natural resources such as oil, gas and minerals. The central element of this provision is a lower permanent establishment threshold, which would be crossed after a non-resident enterprise has carried on business in a country beyond a bilaterally agreed period.
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