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The European Commission (EC) released new data on taxation trends revealing that nominal tax revenues in the EU reached a record value in 2022. Member States collected EUR 6,388 billion in taxes in 2022, marking an 8.0% increase compared to 2021. Looking into the breakdown by economic function, revenues from capital taxes increased by 12.5%, on the back of mounting businesses’ profits. Revenues from consumption taxes grew by 6.9%, supported by expanding expenditure on private consumption and higher inflation. Finally, revenues from labour taxes rose by 6.8% upheld by continued employment growth.
The EC published a report on challenges related to recurrent immovable property and labour taxation during periods of high inflation. It discusses the update of property values and liquidity issues on the side of property tax payers as well as the bracket creep (or fiscal drag) in labour taxation. It highlights the relevance of these issues on the basis of recent empirical evidence and discusses current practices and possible solutions.
The EC published on 30 March a communication outlining its views on how the EU should prepare for further enlargement of the Union. A significant aspect of this communication focuses on EU decision-making and governance, particularly addressing the challenge of achieving unanimity on tax proposals within the current 27 Member States, which could become an even bigger challenge with a larger EU.
The EC emphasises that EU Treaty reforms aren’t necessary to move to qualified majority voting (QMV) from unanimity on matters like tax, as existing Treaties include the so-called ‘Passerelle Clauses’ enabling such a shift to QMV in specific policy areas – though unanimity is still required for this decision.
Recognising the concerns of certain Member States about potentially losing their de facto veto powers on certain policy areas, the EC suggests that employing the Passerelle Clause could be coupled with “appropriate and proportionate safeguards to accommodate such strategic national interests”.
While the communication is legally non-binding, the EC hopes to bring new momentum and re-ignite discussions on the need for EU governance changes in an enlarging EU.
The EC initiated on 7 May a public consultation on the functioning of the Directives 1-6 on Administrative Cooperation on tax (DAC). The purpose of the consultation is to collect views from all stakeholders on the impact of the DACs. The stakeholders concerned include the tax administrations of all Member States which are the direct users of the instruments provided by the DAC, taxpayers carrying out or managing cross-border operations in the single market, and entities that need to report under the DAC, such as multinational companies, financial institutions and tax intermediaries.
Stakeholders have until 30 July to submit their feedback.
Published on 8 May, EC’s DG TAXUD’s annual work plan for 2024 – or “Management Plan” – gives an overview of what to expect from the DG for this year. Here are some key highlights:
The European Parliament (EP) Plenary adopted on 10 April its final opinions on the transfer pricing Directive and the Head Office Tax System for SMEs (HOT) proposal.
The EP’s work on the former was led by MEP Kira Marie Peter-Hansen (Greens-EFA/Denmark), and the draft opinion was adopted with 438 votes in favour, 99 votes against and 63 abstentions. On the latter, EP’s work was led by MEP Lidia Pereira (EPP/Portugal), and the draft opinion was adopted by 443 votes in favour, 110 votes against and 51 abstentions.
Although the EP’s stance on both files is non-binding, it is crucial for the proposals to advance into EU law.
Italy’s former prime minister and current President of the think tank Jacques Delors Institute, Enrico Letta, was tasked by the EU to prepare a report on how to reinforce the EU Single Market. The final report was published on 19 April, and one of its key objectives is to build up ambition for a truly integrated EU Capital Markets Union (CMU) – or the “savings and investments Union” – to unlock funding for Europe’s sustainable and digital transition.
The report makes several tax related recommendations too, for example:
The report is naturally non-binding and will not force the EU institutions to take action. However, it has received significant interest from EU policy-makers, including the Heads of EU Member States’ governments, and may influence their expectations to the EC following the June EP elections.
The EU and its Member States have published their common position for international discussions on setting up a UN framework for global tax reforms. Ensuring alignment with “ongoing work” in “other international fora” is a key aspect of the EU’s position. Additionally, the EU calls on the UN to prioritise “least controversial topics” at the outset. Moreover, the EU urges for the UN’s work on tax to be subject to consensus decision-making.
The Council’s rotating Presidency holder, Belgium, has reportedly given up for the time being efforts to reach an agreement on the contentious revision of the EU’s Energy Taxation Directive (ETD). Belgium had hoped to revive talks on the file that has been in an impasse for years now, with the slight hope of brokering a compromise. These efforts have not yielded fruit, however. Earlier this year, the EP abandoned its efforts to find agreement on its own position on ETD. Although the EP’s opinion is non-binding, this would have been needed for ETD to become EU law in case the Council would have succeeded to find agreement. Alas, the Council has for now thrown in the towel as well.
Ministers from four prominent economies – Brazil, Germany, South Africa, and Spain – have proposed that the world’s 3,000 billionaires contribute a minimum 2% tax on their rapidly accumulating wealth.
This measure aims to generate £250bn annually to combat poverty, inequality, and global warming on a global scale. The suggestion underscores a growing international consensus in favour of taxing the super-rich. Proponents argue that a 2% tax would mitigate inequality and provide essential public funds, particularly following the economic disruptions caused by the pandemic, the climate emergency, and military conflicts in Europe and the Middle East.
A new OECD report highlights a second consecutive year of high inflation, leading to increased labour taxes across OECD countries in 2023.
The Taxing Wages 2024 report indicates that effective tax rates on labour incomes rose in most OECD countries, resulting in a decline in post-tax income for single workers earning the average wage in 21 out of 38 OECD countries.
Despite nominal wage increases in 37 out of 38 OECD countries, real wages declined in 18, as inflation remained historically high. Without automatic indexation of tax systems in many OECD countries, high inflation tends to push workers into higher tax brackets and diminishes the value of tax reliefs and cash benefits they receive.
OECD
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European Commission
EC’s tax trends data updated to include tax revenue data up to 2022
European Commission
EC consults stakeholders on the functioning of the FISCALIS programme
European Commission
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