In our last tax blog, we spoke on what the last mandate did on tax. Now we look into the future over the next five years. What can we expect from the new mandate?
At Accountancy Europe, we have been monitoring the election debates and Commission documents and can make some educated guesses as to the next Commission’s plans on tax.
First, the Commission will try to improve Single Market functioning and aim to balance EU Member States’ tax sovereignty and tax competition. Specific measures in this area might include: continuing to push for a harmonised and consolidated European tax base (so-called CCCTB); and improving tax certainty through promoting cooperative compliance.
Secondly, the Commission will pursue a tax system that supports the transition to a more sustainable economy. This could include: a European approach to aviation taxes; coordination on carbon taxation; a shift of the tax burden onto resource use; and a possible tax framework for green bonds.
Third, the Commission will also seek to adapt the tax system into an increasingly digitalised economy. This would include contributing the ongoing OECD negotiations on digital and minimum taxation and introducing an OECD agreement into EU law. Moreover, the Commission will want to address tax challenges stemming from an ageing workforce, automation and the gig economy.
On top of the above, efforts to fight tax avoidance and increase tax transparency will continue. The Commission can be expected, for example: to push for public country by country reporting (CBCR); and to continue the EU list of non-cooperative tax jurisdictions; and progress the range of VAT measures still on the table.
Although the European Parliament has no formal power on tax matters, the departing MEPs were very active in pushing the Parliament’s tax agenda. We should expect nothing less from the new MEPs.
The Greens have increased in numbers, placing them into a decisive role on many issues; their ambitious tax priorities will also gain prominence, supported at least by the social-democrats. Many MEPs across political Groups could be expected to want a permanent tax Committee to replace all the temporary and ad hoc Committees convened to tackle specific tax-related issues until now. Although right now the decision on whether or not to set up the Committee has been pushed to autumn.
MEPs are also likely to continue advance the tax agenda in non-tax files. For example, it is conceivable that they would call for stricter rules on tax advisors as part of audit, services or competition legislation.
The EU Council is where the Member States get to have their say, and this often results in preserving the status quo – for better or worse. The Council’s reluctance to move forward will likely be seen in the areas of digital taxation, qualified majority approval of tax initiatives, VAT and CCCTB.
However, on the more proactive side there is a renewed push by some Member States for a so-called financial transaction tax (FTT). If FTT succeeds, it will give the future Commission an encouragement to proceed with enhanced cooperation on other tax files in the future. Moreover, several Member States are calling for a common EU approach to environmental taxation – including taxes on flying, ‘dirty’ energy imports and carbon at Europe’s borders.
Whether it is the European Commission, the European Parliament or the Council, the EU’s tax agenda will be full for the next few years. It will go beyond the current reaction to scandals and anti-avoidance agenda to building a more future-proof European tax system.
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