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Discover how the EU Tax Omnibus package could simplify direct taxation, reduce compliance burdens and strengthen EU competitiveness.
In its October infringements package, the European Commission (EC) calls on Germany, Estonia, Latvia, Lithuania and Hungary to introduce effective, proportionate and dissuasive penalties for violations of the Directive on Administrative Cooperation in tax matters (DAC). The EC argues that these countries’ implementing legislation sets penalties that are manifestly too low to deter non-compliance by multinational enterprise groups or individuals involved in aggressive tax planning through cross-border tax arrangements.
In addition, the penalty frameworks often fail to adequately account for the gravity, scale or repetition of violations of DAC rules, the offender’s economic capacity, or the economic incentives linked to non-compliance for taxpayers involved, EC argues. According to the EC, these shortcomings risk undermining the quality, completeness and reliability of the information exchanged between tax authorities under the DAC.
The Member States have two months to respond to the EC. If their responses are not considered satisfactory, the EC may take further action.
The EC has proposed extending two existing VAT anti-fraud mechanisms until 30 June 2030, ensuring continuity until the EU’s new digital VAT reporting requirements under the VAT in the Digital Age (ViDA) legislation take effect.
The proposal would extend the optional reverse charge mechanism (RCM), which allows Member States to make the recipient of certain high-risk goods and services liable for VAT instead of the supplier. This helps combat missing trader intra-Community (MTIC) fraud, whereby traders collect VAT from customers before disappearing without remitting it to the tax authorities. The mechanism currently covers selected categories, including greenhouse gas emission allowances, mobile phones, computers and certain metals.
The proposal would also extend the Quick Reaction Mechanism (QRM), which enables Member States, subject to strict conditions, to introduce temporary reverse-charge measures rapidly in response to sudden and large-scale VAT fraud in sectors not covered by the existing rules.
Both mechanisms are due to expire on 31 December 2026. According to the EC, most Member States consider the RCM effective, while the QRM remains a useful deterrent despite never having been used in practice.
The proposed extension would bridge the gap until the ViDA package introduces near-real-time digital reporting and mandatory e-invoicing for cross-border business-to-business transactions from July 2030. The proposal now requires adoption by the Council under the special legislative procedure.
The EC has formally opened the consultation window for stakeholders to provide their feedback on its June proposals for the DAC recast and tax omnibus. For the tax omnibus, the deadline for stakeholder feedback is 5 November, while feedback on the DAC recast must be submitted by 1 December.
As a reminder, EU Member States are aiming to reach a final agreement on the DAC recast in mid-December, and for the tax omnibus by the end of 2027.
Accountancy Europe has recently also submitted its feedback statements on both proposals: the DAC recast and tax omnibus proposals.
The EC has published a Communication setting out a comprehensive roadmap for adapting the EU’s institutions, policies and budget to future enlargement. The roadmap reflects geopolitical realities and the accession prospects of countries such as Ukraine, Moldova, Albania and Montenegro.
The Communication contains several important tax-related messages. Most notably, the EC reiterates its longstanding support for expanding qualified majority voting (QMV) to certain tax areas, particularly measures to combat tax fraud, tax evasion and tax avoidance. According to the EC, greater use of QMV would make decision-making more effective in an enlarged Union and reduce the risk of blockages under the current unanimity system.
The document also stresses that candidate countries must develop strong administrative and regulatory capacities before accession. This includes effective customs administration, anti-fraud systems, public financial management and cooperation with EU bodies such as the European Public Prosecutor’s Office (EPPO). Safeguards relating to rule of law, anti-corruption and sound financial governance are presented as essential to protecting the EU budget in an enlarged Union.
European Commissioner for Economy Valdis Dombrovskis announced on 9 October that a “working group” would be set up to examine the possibility of taxing at EU level the windfall profits earned by energy companies amid the price surge triggered by the Iran war, as
reported by Agence Europe.
According to Dombrovskis, the group will aim to “share best practice and assist Member States”. The Commissioner nevertheless reiterated the EC’s position that Member States are “best placed” to take action in this area.
According to Agence Europe, the working group would include representatives of the EC and the Council, although its exact composition is still under discussion. No timetable has been announced for reporting the results of the group’s findings.
The EC plans to publish a non-binding recommendation on the taxation of cross-border and remote work in Q3 2027.
The EC notes that increased cross-border mobility and the growing use of technology to work across borders and remotely present challenges and opportunities for individuals, businesses and governments. Through this initiative, the EC aims to address tax obstacles hindering businesses from recruiting and retaining talent across borders and may discourage individuals from taking up cross-border employment. These obstacles can restrict labour mobility and prevent businesses and individuals from fully benefiting from the EU single market.
The European Parliament’s (EP) FISC and Development (DEVE) Committees held a joint hearing on 1 October on fair taxation, illegal financial flows and inequalities in developing countries. MEPs discussed how fairer taxation and action against illicit financial flows could reduce inequality in these countries.
The discussion covered the UN framework convention, the OECD/G20 Inclusive Framework, tax transparency, digital services taxation, debt servicing and support for developing-country tax administrations. Speakers raised concerns that international progress had stalled over the past two years, reportedly partly due to the new US administration. The EC, however, maintained that progress was continuing., while panellists noted a decline in untaxed wealth.
One key warning was that capacity building cannot resolve what is fundamentally a political problem.
The EP Plenary adopted its non-binding report on the EU’s approach to corporate tax policy in a changing international environment on 6 October, with 364 votes in favour, 69 against and 162 abstentions. The report received broad support from the EPP, S&D, Renew and Greens groups. The work was led by rapporteur Kinga Kollár (EPP, Hungary).
The report takes stocks of developments on digital taxation and notes that recent shifts in the international tax landscape may warrant a rethink of the allocation of taxing rights. It calls on the EC to revisit its BEFIT proposal on a common corporate tax base to tackle potential inconsistencies with the new Pillar II rules and to consider presenting a new, narrower proposal with a step-by-step approach.
Before the vote, 111 MEPs, mainly from S&D group, tabled an amendment calling on the EC to swiftly propose a tax on the consolidated excess profits of large oil and gas companies. Despite receiving the support of rapporteur Kinga Kollár, the amendment was rejected, with the vast majority of EPP MEPs voting against it.
On 12 October, the EP’s FISC Committee held an inter-parliamentary hearing on the EU’s 28th regime and wealth taxation, bringing together MEPs and national parliamentarians.
On the 28th regime, MEP Ľudovít Ódor (Slovakia/RE) welcomed the EU Inc. proposal as a positive first step but warned that it could fall short of its objectives if key areas such as taxation remain outside its scope à ee Accountancy Europe’s factsheet for more information.
Trade union representative Mr Vlaisavljević raised concerns about labour rights and potential tax avoidance loopholes, while Startup Network representative Mr Wauters urged swift progress on taxation.
Representing the EC, Mr Biebel highlighted the proposal’s once-only reporting principle as a key simplification measure.
National parliamentarians broadly supported the regime’s aims of reducing bureaucracy, encouraging cross-border investment and helping European businesses grow. However, they stressed that simplification must respect national competences and fiscal sovereignty. Representatives from Malta and Czechia questioned the use of QMV for direct taxation, while Czech representatives also warned that the proposed tax omnibus could adversely affect the country.
Legal certainty and the protection of national powers were further concerns. Czech and Polish representatives emphasised the need for a sound legal basis, with the Polish representative questioning the use of Article 114 TFEU and QMV for measures affecting national taxation powers. Portuguese representatives called for safeguards for national parliaments’ tax decision-making authority, clear eligibility criteria and measures to prevent businesses from circumventing national obligations.
At the same inter-parliamentary hearing (see article above), the European Parliament’s FISC Committee also discussed wealth taxation with national parliamentarians.
Growing wealth concentration and the relatively low effective tax rates faced by ultra-high-net-worth individuals were highlighted as major challenges for tax fairness and economic inequality. While some speakers advocated new wealth taxes, others favoured strengthening existing tax systems and improving enforcement.
The International Tax Observatory proposed a 2% minimum tax on centimillionaires and billionaires, with high wealth thresholds and no asset exemptions. Speakers also stressed the importance of sound tax design, including broad tax bases, limited exemptions, reliable asset valuations and safeguards addressing liquidity constraints.
Although research suggests that capital flight may be limited, speakers called for stronger exit taxation and EU coordination to discourage tax avoidance through relocation. Better international cooperation, information exchange, beneficial ownership transparency and closer administrative coordination also received broad support.
Concerns remained about potential effects on investment, European competitiveness and national fiscal sovereignty. Taxing unrealised capital gains was discussed as a way to address tax deferral, despite valuation and liquidity challenges.
Wealth taxation was also presented as a potential source of funding for European investment priorities and a means of addressing the wider social, environmental and political consequences of extreme wealth concentration. However, speakers stressed the need for further research into revenue potential, behavioural responses, economic impacts and legal feasibility before introducing new measures.
The EP’s draft report on the recast of the Directive on Administrative Cooperation (DAC), prepared by MEP Francisco Assis (S&D, Portugal), broadly supports the EC’s tax simplification agenda while proposing amendments to preserve the effectiveness of EU tax transparency and anti-avoidance measures.
The report welcomes efforts to streamline reporting obligations and reduce compliance burdens for taxpayers and tax administrations. Key simplification measures include centralised filing for certain notifications related to country-by-country reporting and Pillar Two top-up taxes, alignment of digital platform reporting rules with OECD standards, and improvements to information exchange systems.
At the same time, Mr. Assis seeks to strengthen the Directive’s anti-abuse framework. The report proposes expanding automatic exchanges of information on immovable property to include capital gains and beneficial ownership data, while improving tax authorities’ access to national registers and databases. It also argues against removing reporting obligations for certain cross-border tax arrangements involving groups subject to the OECD’s global minimum tax rules, warning that this could create information gaps.
Further proposals include stronger feedback mechanisms between tax authorities, enhanced enforcement coordination for digital platforms, and more detailed indicators of economic substance inspired by the former Unshell proposal. Looking ahead, it calls on the EC to assess extending automatic information exchange to additional asset classes, including high-value movable assets and certain digital investments.
The EP Plenary is scheduled to adopt its final position on 15 February 2027. Although the EP cannot amend the proposal, its non-binding opinion is required for the DAC recast to become EU law.
The EP Plenary adopted its draft report on information sharing and coordination between tax administrations and EU law enforcement agencies, including Europol, the European Public Prosecutor’s Office (EPPO) and the EU Anti-Fraud Agency (OLAF).
In the adopted report, MEPs call on national authorities and EU bodies to strengthen cooperation in tackling cross-border VAT fraud, which continues to cost governments billions of euros.
The report, drafted by MEP Ondřej Knotek (PfE, Czechia), was adopted with 357 votes in favour, 271 against and 31 abstentions.
The work programme sets out the priorities of the Council’s Code of Conduct Group (Business Taxation) under the Irish Presidency of the Council during the second half of 2026. It reflects the finance ministers’ continued support for the Group’s central role in combating harmful tax practices, both within the EU and internationally.
A key priority will be the ongoing monitoring of Member States’ compliance with the EU Code of Conduct, including scrutiny of newly notified tax measures and the implementation of previous commitments under the standstill and rollback process. The Group will also continue assessing the real-world effects of tax regimes subject to enhanced monitoring.
International tax governance remains high on the agenda. The Group has prepared the October 2026 update of the EU list of non-cooperative jurisdictions (see article below), reviewing countries’ compliance with EU tax good-governance standards and monitoring commitments made by cooperative jurisdictions. It will also evaluate the effectiveness of tax defensive measures applied against listed jurisdictions.
Further priorities include beneficial ownership transparency, potential adjustments to the geographical scope of the EU listing exercise, and the impact of international developments on EU screening criteria.
The Council has published a presentation by the Irish Presidency outlining the main changes made in Ireland’s early-September compromise text on the DAC recast.
The presentation focuses on compromise proposals relating to DAC6, DAC4 and DAC9, with a clear emphasis on simplifying compliance obligations while preserving the effectiveness of tax transparency rules.
A key feature is the proposed DAC6 “Pillar Two carve-out”. Under the compromise text, cross-border arrangements involving multinational groups already within the scope of the EU Pillar Two Directive or the OECD GloBE Rules could be exempt from DAC6 reporting, but with application deferred until 1 January 2031, pending an EC review and a separate legislative proposal.
The Presidency compromise also retains the removal of the so-called “A hallmarks”, which have been criticised for generating large numbers of reports with limited risk-assessment value. In addition, reporting deadlines would remain extended to 90 days. On the other hand, Ireland proposes clarifying certain definitions and revising provisions on legal professional privilege, reportedly to bring them more closely into line with EU Court of Justice case law.
For DAC4 and DAC9, the compromise text introduces mainly technical amendments, aligning terminology with OECD standards and simplifying reporting procedures, including the retention of an optional single notification mechanism.
EU finance ministers have updated the EU list of non-cooperative jurisdictions for tax purposes, which aims to tackle tax evasion and avoidance worldwide. The list is based on the screening, assessment and monitoring of jurisdictions against internationally agreed criteria for tax good governance.
Panama and Viet Nam were removed from Annex I (the list of non-cooperative jurisdictions) after addressing outstanding issues. Both were moved to Annex II pending an in-depth Global Forum review of their exchange-of-information frameworks. Vanuatu also made progress on tax transparency but remains in Annex I due to outstanding concerns about fair taxation.
Anguilla was added to Annex I for failing to address deficiencies in its exchange-of-information framework. The Council called on the jurisdiction to work with the EU’s Code of Conduct Group and the Global Forum to resolve these issues.
Changes were also made to Annex II, which lists cooperative jurisdictions. Belize was removed after bringing its framework into compliance with the international standard on exchange of information on request. Montenegro fulfilled its commitment to undergo an in-depth Global Forum review but remains under monitoring pending publication of the results. Brunei Darussalam was granted additional time to align its tax framework with fair taxation principles, in recognition of the steps already taken.
The EU list is updated twice a year to reflect developments in jurisdictions’ tax policies and their cooperation with international tax good governance standards.
The think tank Bruegel has published a policy brief examining the EC’s planned VAT in the Circular Economy initiative.
The brief notes that 88% of materials used in the EU discarded rather than re-used or recycled wasting valuable resources and increasing waste disposal costs.
According to Bruegel, tax systems favour the linear ‘take-make-waste’ model because the environmental costs of extracting virgin materials remain largely unpriced. The EU Circular Economy Act should therefore improve the effectiveness of fiscal instruments to encourage more efficient resource use.
The brief finds that taxes on virgin materials and aggregates are often too weak to change behaviour and should be combined with downstream measures. Plastic-bag levies can effectively influence consumption, while reduced VAT rates are less effective due to incomplete pass-through and high administrative costs. End-of-life measures, such as landfill taxes, pay-as-you-throw schemes and deposit-refund systems, perform best when supported by complementary policies.
Finally, Bruegel warns that high labour taxes disadvantage labour-intensive activities such as repair and remanufacturing, while harmful subsidies undermine incentives for a more circular economy.
The Tax Administration EU Summit (TADEUS) in Dublin, hosted by the Revenue Irish Tax and Customs, brought together the Heads of Tax Administrations and the EC to strengthen administrative cooperation and support the effective implementation of EU tax policy priorities.
The summit provided a forum for strategic discussion, exchange of experience and practical cooperation on common challenges facing tax administrations across the EU. This year’s discussions focused on preparing for the effective implementation of EU legislation, improving Member States’ agility to tackle VAT fraud, and closing tax gaps more effectively through data-driven and collaborative actions. Participants also discussed operational approaches to combat VAT e-commerce fraud, building on project outcomes and launching joint risk analysis initiatives.
The summit concluded with the publication of a joint outcome statement, outlining areas of agreement, including technology-enabled compliance and improved data sharing.
EESC organises a public hearing on October 27 on AI in tax administration and compliance
The European Economic and Social Committee (EESC) will organise on 27 October a public hearing on how using artificial intelligence (AI) and digitalisation in tax administration can strengthen legal clarity, cross-border comparability, economic development and tax certainty.
The public hearing will focus on the capacity to reduce fragmentation and compliance burdens, while facilitating compliance and collection across Member States.
It will bring together policymakers, stakeholders and experts from across countries and organisations to discuss on digitizing the EU tax system. It will take place both in-person in Tallinn as well as online.
