Accountancy profession’s recommendations to streamline the EU tax system

European businesses, including SMEs, are increasingly weighed down by the complexity of the tax environment in which they operate. Multiple and sometimes overlapping EU rules, inconsistent national implementation, and outdated administrative processes create unnecessary burdens for taxpayers and tax authorities alike. 

In its paper on tax simplification, Accountancy Europe sets out a vision and practical recommendations for a more streamlined, coherent, and technology-enabled EU tax framework that reduces compliance costs, strengthens legal certainty, and preserves the competitiveness of European business without undermining tax revenues. 

Read the full paper.

Why simplification matters 

For companies engaged in cross-border trade, divergent interpretations of EU directives, inconsistent guidance, and duplicated reporting requirements lead to uncertainty, delays, and higher costs. At the same time, tax authorities themselves are often under-resourced and reliant on outdated systems that prevent them from using data effectively. 

The European Commission has recognised the urgency of this issue, with a “tax omnibus” initiative expected in 2026. Accountancy Europe supports the Commission by presenting concrete, practitioner-driven proposals for simplification, grounded in the experience of accountants, advisors and auditors who see the real-world impact of complexity every day. 

A call for stability and proportionality 

The statement calls for a consolidation pause in the further expansion of tax legislation. The past decade has seen an unprecedented wave of EU and international tax rules, compounded by new requirements in sustainability and due diligence reporting. Against this backdrop of political and economic uncertainty, businesses need stability. The paper therefore calls on the EU to focus on reviewing and refining existing legislation, ensuring it is proportionate, coherent, and aligned with international standards, before proposing new, wide-ranging measures. 

Strengthening tax authorities through digitalisation 

One of the central challenges identified in the paper is the lack of effective IT resources within tax administrations. While digital tools such as real-time reporting and e-invoicing have improved compliance in some Member States, many authorities still operate with outdated, paper-based systems. This causes delays in registrations, rulings, audits, and enforcement, while also leaving vast amounts of data under-utilised. 

Accountancy Europe recommends that Member States invest in modern IT systems that are secure, user-friendly, and based on an “enter once” principle. Member States should leverage advanced analytics and AI to target high-risk areas more effectively. Alongside this, cooperative compliance programmes should be expanded to build trust and assist tax authorities deploy their scarce resources in targeting high risk taxpayers. 

Tackling inconsistent implementation 

The paper underlines that EU Directives, by design, give Member States flexibility in implementation. This has led to widely diverging national practices, inconsistent guidance, and an uneven playing field for businesses. To address this, Accountancy Europe calls on the European Commission to: 

• make EU guidance legally binding on Member States 

• ensure tax forms and guidance are available in at least two other major business languages beyond the national language; and 

• extend the scope of the Arbitration Convention to cover disputes arising under all EU tax directives 

Such measures would significantly reduce uncertainty and compliance costs, including for SMEs navigating cross-border activity. 

Direct tax simplification priorities 

The paper identifies several areas where EU direct tax rules overlap, conflict, or impose unnecessary burdens: 

• Pillar Two: while the EU has moved quickly to implement global minimum tax rules, uneven adoption by other jurisdictions and complex EU rules could put European businesses at a disadvantage. Accountancy Europe recommends deferring reporting until at least 2026, introducing a permanent safe harbour, simplifying treatment of investment entities, and rationalising overlaps with existing directives 

• Directive on Administrative Cooperation (DAC): while DAC has helped fight tax evasion, certain elements of the DAC impose excessive administrative costs with questionable effectiveness. The paper calls for a thorough review, elimination of duplications, introduction of de-minimis thresholds, and creation of EU-wide “whitelists” of benign arrangements 

• Anti-Tax Avoidance Directive (ATAD): the rules on interest limitation and hybrid mismatches are seen as overly rigid and poorly adapted to today’s context. The paper notably recommends raising limits, exempting genuine third-party financing, clarifying definitions, and removing redundant overlaps with global minimum tax rules 

• Unshell proposal: Accountancy Europe questions whether the benefits outweigh the compliance burden and suggests its withdrawal unless a strong case can be made otherwise 

• Remote working and permanent establishments: divergent national rules on cross-border employment and permanent establishments create double taxation risks and discourage mobility. The statement calls for harmonised EU legislation, including SME-specific safe harbours 

VAT reform: a fundamental overhaul 

On indirect taxes, the paper makes a strong case for comprehensive VAT reform. Despite being the EU’s most harmonised tax, VAT rules remain fragmented, costly, and ill-suited to modern business models. SMEs are particularly disadvantaged by divergent reporting obligations, refund processes, and interpretations of key concepts. 

The paper’s recommendations include: 

• consolidating and simplifying EU VAT legislation 

• harmonising exemptions, reduced rates, and place-of-supply rules 

• introducing a mandatory dispute resolution framework 

• modernising outdated schemes such as the Tour Operators’ Margin Scheme (TOMS) 

• extending VAT groups across borders 

• leveraging digitalisation (e-invoicing and real-time reporting) while supporting SMEs through co-funded EU programmes 

The paper also highlights distortions caused by exemptions in financial services, real estate, and corporate reorganisations, suggesting that targeted social policies would be more effective than reduced VAT rates. 

A forward-looking agenda 

Accountancy Europe’s paper is a constructive roadmap for reform. It emphasises that simplification is not about reducing tax obligations but about making them clearer, more consistent, and easier to comply with, ultimately benefiting businesses, tax administrations, and governments alike. 

The message is clear: Europe’s tax system must evolve from a patchwork of complex, overlapping rules into a streamlined, digitally enabled framework fit for the realities of modern business. By acting now, the EU can ease burdens on businesses including SMEs, boost competitiveness, and build trust in the tax system while still safeguarding revenues in the public interest. 

Read the full paper.