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The European Commission (EC) published a communication setting up a “Competitiveness Compass for the EU”, emphasising the need to boost Europe’s competitiveness through innovation and productivity, on 29 January. The report identifies a lack of innovation and the failure to integrate new technologies into the industrial base as root causes of Europe’s lagging competitiveness. High regulatory burdens and energy prices also hinder European companies. In addition, European start-ups and SMEs are also negatively impacted due to market fragmentation, limited access to venture capital, and regulatory barriers.
To address these challenges, the EU will notably establish a 28th legal regime for cross-border companies, to simplify rules including in the area of taxation. The EC will also encourage Member States to align tax systems elements affecting private investment incentives, such as depreciation rules and tax credits, to support a strong business case for clean production. Finally, the EC will seek to remove tax barriers to cross-border investment in a bid to build up the continent’s capital markets.
The EC is calling on eight EU Member States to correctly transpose the Directive on the special VAT scheme, as outlined in its monthly infringements package published on 31 January. Moreover, it warns seven Member States to correctly transpose the VAT rates Directive. Should the Member States concerned fail to provide a “satisfactory response”, the EC may decide to escalate the cases to the next level by issuing a so-called reasoned opinion.
The EC published a call for evidence – a high-level strategy document – outlining its plans for developing a so-called Savings and Investments Union (SIU). Stakeholders can provide feedback on it until 3 March 2025.
The SIU is one of the expected priorities of the EC for the next few years. It will build upon the successful completion of two action plans on Capital Markets Union (CMU) and progress on the Banking Union (BU). It aims to connect savings to the most productive investment, with a focus on the EU’s strategic objectives including innovation, decarbonisation, digital technologies and defence. It will focus on increasing returns on savings of EU citizens and widening financing opportunities for businesses, in particular SMEs, and improving the competitiveness of the EU. One aspect the EC will examine is potential obstacles to cross-border investment, including tax barriers.
ATAD evaluation, VAT def/regime and IRD withdrawn?
The EC published its much-awaited work programme for 2025, outlining the legislative and non-legislative initiatives that it intends to undertake this year, on 11 February. Of relevance for tax, the following points should be noted:
For a full list of anticipated initiatives, the EC’s website contains all the relevant information and further details.
Accountancy Europe has obtained an early draft of the Clean Industrial Deal (CID) document, flagship initiatives of the EC, expected to be released on 26 February. The CID aims to support decarbonisation while driving competitiveness via business drivers like affordable energy, financing, circularity, and access to material, global markets and international partnerships. To achieve this, the CID will employ horizontal enablers for competitiveness, such as cutting red tape, fully exploiting the scale of the single market, promoting high-quality jobs and better coordinating policies at the EU and national levels. Regarding tax, the EC plans to take the following actions under CID, for example:
As the above is based on an early draft of the CID, readers should take it with a pinch of salt. Only the final document, once published, will provide full comfort on the EC’s plans.
The European Parliament’s (EP) FISC Committee convened for an exchange of views with Ms Laura Kövesi, European Chief Prosecutor, and Mr Yannic Hulot, Chair of Eurofisc, on “The Role of the EPPO and Eurofisc in Tackling VAT Fraud in the EU”, on 6 February.
The discussion revolved around the role played by and the relationship between the EPPO and Eurofisc. More concretely, the review of both bodies’ regulations was discussed. The whole chamber agreed with the importance of fighting VAT fraud and inquired the panel on ways to improve their work so as to eliminate or minimise this phenomenon. VAT fraud’s relationship with other categories of crimes, as well as the necessity to tackle it at the European level, were highlighted.
Crucially, Ms Kövesi assumed an extremely direct and frank posture and called for more support to her Office in the form of specialised dedicated staff, whilst also defending that more support be given to Europol.
The EP’s FISC Committee held a debate on the taxation of the financial sector, with Roberta Poza from Deloitte and Michael Koetter from the IHW as external stakeholders, on 6 February. The discussion revolved around key issues such as financial stability, the impact of financial transaction taxes (FTT), and the role of shadow banks. Ms. Poza emphasised the need to avoid additional administrative or financial burdens on the financial sector, particularly in the current challenging economic context. She stressed the importance of stability for European banks, which are still dealing with significant market fragmentation. She also highlighted the political difficulties in advancing tax reforms, noting that reaching unanimity on taxation matters in the Council remains a major hurdle. Mr. Koetter provided insights into the existing FTTs in EU Member States, such as Italy, where he argued that the economic impact had not been as negative as initially expected. Among other topics, he highlighted the growing importance of shadow banks and advocated for the creation of an ex-ante insurance mechanism to address emerging risks in the financial system.
MEPs raised several questions during the debate, focusing particularly on the issue of shadow banks and the potential risks they pose. There were also inquiries about how to incentivise investment from European savings, with discussions on possible tax measures and reforms to foster more investment in critical areas like the digital and green transitions.
The FISC Committee gathered for an exchange of views with EU Commissioner for climate and taxation, Wopke Hoekstra, always on 6 February. The exchange involved a discussion on key priorities in EU tax policy and its role in supporting climate and economic goals.
The Commissioner noted on simplification that the EC is looking into ATAD and exchange of tax information legislation (DAC), but also into streamlining the VAT reporting scheme for service providers. On sustainable taxation, the Commissioner re-affirmed that greening the VAT system should be looked into. On tax fairness, the Commissioner singled out reducing the VAT gap as a strong priority. The EC is also seeking to engage with the US constructively on Pillars 1 and 2, although the Commissioner regrets Trump’s executive order on the matter.
The EP Plenary adopted two final opinions on key tax initiatives on 12 February: one on DAC 9, and the other on VAT in the Digital Age (ViDA). Both files were dealt with the so-called simplified procedure, meaning without amendments or debates, to ensure their fast adoption.
The DAC 9 opinion, prepared by MEP Aurore Laluq (S&D/France), passed with 608 votes in favour, 33 against, and 8 abstentions. The ViDA opinion, in turn, was led by MEP Ľudovít Ódor (RE/Slovakia) and passed by a margin of 589 votes in favour, 42 against, and 10 abstentions.
With both EP opinions now confirmed, the files can be finalised and become EU law.
The Code of Conduct Group on business taxation at the Council re-elected Spain’s María José Garde as its chair on Wednesday 29 January. This second two-year term began on 5 February. María José Garde has chaired this Council preparatory body since 2023. She is Director General of Taxation at the Spanish Ministry of Finance and has chaired the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.
Article originally appeared on Agence Europe (read more)
The Council formally adopted new rules aimed at replacing the current paper certificates used to declare exemptions from the EU’s VAT with a new electronic form, on 18 February. Paper certificates, used when goods are exempt from VAT, will be replaced by an electronic form. This will simplify and streamline the process for companies and administrations when these goods are imported for embassies, international organisations, or armed forces.
The new measures will come into force on 1 July 2031 with a further transition period of one year during which Member States will be able to use both electronic and paper.
The necessary IT specifications will be discussed in expert groups and determined through EC’s implementing acts.
