Ursula von der Leyen (VDL) was re-elected on 18 July in the European Parliament for a second term as the President of the European Commission. The margin of votes in favour and against was wider than in the first term, handing her a strong victory and mandate despite an even more fragmented Parliament following the June elections.
Since then, VDL has not wasted time and announced on 17 September the portfolio allocations for the Commissioner nominees appointed by the EU Member States. Each nominee has received a so-called ‘mission letter’ in which VDL states her expectations for them.
On the basis of these mission letters, VDL’s own stated priorities for the 2024-2029 Commission term, as well as a number of other recent developments, a somewhat clear picture is emerging as to what might be the next tax priorities for the new term. These can be summarised as simplification, sustainability and financing.
On simplification, VDL has put great emphasis to improve Europe’s competitiveness and notably reduce unnecessary administrative burdens on companies. For example, VDL has called on all the Commissioner nominees to reduce companies’ reporting burdens by 25%, and for SMEs even up to 35%. A lot of these burden reduction opportunities could be found in EU tax legislation.
In 2025, the European Commission is due to evaluate its Directive on Administrative Cooperation in the field of taxation (DAC), as well as the Anti-Tax Avoidance Directive (ATAD). It is possible that as a result of these evaluations, the next Commission may attempt to reduce and simplify the numerous reporting and administrative requirements stemming from these Directives. Additional burden reduction and simplification measures could stem from further advancement of digitalised and more real-time reporting, through files such as the ongoing VAT in the Digital Age (ViDA) proposal which is yet to be approved by the Council. And, of course, Commission civil servants may very well identify additional opportunities through other means and in other pieces of legislation. Watch this space!
Moving on to sustainability, during the election campaigning for the June 2024 European Parliament elections it looked very much like the EU’s ambitious sustainability and Green Deal agenda might be challenged and watered down by the emerging competitiveness and burden reduction agendas. However, on the basis of VDL’s own priorities as well as the mission letters, such assumptions may prove to be premature.
This is visible in the area of taxation as well. VDL appointed Wopke Hoekstra from the Netherlands as the new Commissioner in charge of taxation and climate, combining the two portfolios under one person. Whilst this could certainly be indicative that tax is just an ‘after-thought’ for VDL and thus not high in the priorities, another interpretation is that VDL expects concrete and further measures on green taxation.
In her mission letter to Hoekstra, VDL for example asks him to work on the following:
As always, the main challenge with any tax legislation is that Member States’ unanimity in the Council is required. However, Hoekstra’s mission letter gives a clear indication of where at least VDL’s priorities for taxation lie.
The final area where tax can pop up is in the area of financing. Mario Draghi, former Italian prime minister and European Central Bank’s (ECB) Chair, published his long-awaited report on the future of European competitiveness on 9 September. In it, Draghi argues that Europe will need up to €800bn additional annual investments notably for its digital and sustainability transitions, and to close its productivity gap with global competitors such as the US and China. Draghi points to several potential sources for this new financing, including joint EU debt issuance, new EU own resources (including potentially pan-EU taxes), as well as increased Member State contributions to the EU budget.
Joint EU debt issuance has already been ruled out by usual suspects such as Germany and Finland, but for example the Finnish government recently signaled its openness to consider new EU own resources. This could be a compromise ‘landing zone’ in the tough budgetary discussions ahead. What these own resources might consist of is still open, but options such as a portion of a (future) Pillar One EU regime, a ‘Single Market levy’ on profitable companies and a financial transaction tax (FTT) have been flaunted. More or alternative options may emerge.
The second side of this financing pillar is to better integrate EU’s capital markets and ensure the better flow and scale of private capital into EU’s priorities. This will trigger reflections in Brussels on tax incentives – and disincentives – that could be tinkered to foster EU’s capital market integration.
The above is just a snapshot of what the next VDL term’s tax priorities could include. There are many others to also consider, and the next few months will provide additional ‘signals’.
It should also be reminded that VDL’s Commission members and their portfolio allocations are not yet a done deal. As a next step, the European Parliament will be quizzing each of the nominees and will then approve – or reject – the proposed Commission as a whole. In this process, it is possible that some Commissioner nominees are replaced, and the portfolios re-allocated.
Ursula von der Leyen (VDL) was re-elected on 18 July in the European Parliament for a second term as the President of the European Commission. The margin of votes in favour and against was wider than in the first term, handing her a strong victory and mandate despite an even more fragmented Parliament following the June elections.
Since then, VDL has not wasted time and announced on 17 September the portfolio allocations for the Commissioner nominees appointed by the EU Member States. Each nominee has received a so-called ‘mission letter’ in which VDL states her expectations for them.
On the basis of these mission letters, VDL’s own stated priorities for the 2024-2029 Commission term, as well as a number of other recent developments, a somewhat clear picture is emerging as to what might be the next tax priorities for the new term. These can be summarised as simplification, sustainability and financing.
On simplification, VDL has put great emphasis to improve Europe’s competitiveness and notably reduce unnecessary administrative burdens on companies. For example, VDL has called on all the Commissioner nominees to reduce companies’ reporting burdens by 25%, and for SMEs even up to 35%. A lot of these burden reduction opportunities could be found in EU tax legislation.
In 2025, the European Commission is due to evaluate its Directive on Administrative Cooperation in the field of taxation (DAC), as well as the Anti-Tax Avoidance Directive (ATAD). It is possible that as a result of these evaluations, the next Commission may attempt to reduce and simplify the numerous reporting and administrative requirements stemming from these Directives. Additional burden reduction and simplification measures could stem from further advancement of digitalised and more real-time reporting, through files such as the ongoing VAT in the Digital Age (ViDA) proposal which is yet to be approved by the Council. And, of course, Commission civil servants may very well identify additional opportunities through other means and in other pieces of legislation. Watch this space!
Moving on to sustainability, during the election campaigning for the June 2024 European Parliament elections it looked very much like the EU’s ambitious sustainability and Green Deal agenda might be challenged and watered down by the emerging competitiveness and burden reduction agendas. However, on the basis of VDL’s own priorities as well as the mission letters, such assumptions may prove to be premature.
This is visible in the area of taxation as well. VDL appointed Wopke Hoekstra from the Netherlands as the new Commissioner in charge of taxation and climate, combining the two portfolios under one person. Whilst this could certainly be indicative that tax is just an ‘after-thought’ for VDL and thus not high in the priorities, another interpretation is that VDL expects concrete and further measures on green taxation.
In her mission letter to Hoekstra, VDL for example asks him to work on the following:
As always, the main challenge with any tax legislation is that Member States’ unanimity in the Council is required. However, Hoekstra’s mission letter gives a clear indication of where at least VDL’s priorities for taxation lie.
The final area where tax can pop up is in the area of financing. Mario Draghi, former Italian prime minister and European Central Bank’s (ECB) Chair, published his long-awaited report on the future of European competitiveness on 9 September. In it, Draghi argues that Europe will need up to €800bn additional annual investments notably for its digital and sustainability transitions, and to close its productivity gap with global competitors such as the US and China. Draghi points to several potential sources for this new financing, including joint EU debt issuance, new EU own resources (including potentially pan-EU taxes), as well as increased Member State contributions to the EU budget.
Joint EU debt issuance has already been ruled out by usual suspects such as Germany and Finland, but for example the Finnish government recently signaled its openness to consider new EU own resources. This could be a compromise ‘landing zone’ in the tough budgetary discussions ahead. What these own resources might consist of is still open, but options such as a portion of a (future) Pillar One EU regime, a ‘Single Market levy’ on profitable companies and a financial transaction tax (FTT) have been flaunted. More or alternative options may emerge.
The second side of this financing pillar is to better integrate EU’s capital markets and ensure the better flow and scale of private capital into EU’s priorities. This will trigger reflections in Brussels on tax incentives – and disincentives – that could be tinkered to foster EU’s capital market integration.
The above is just a snapshot of what the next VDL term’s tax priorities could include. There are many others to also consider, and the next few months will provide additional ‘signals’.
It should also be reminded that VDL’s Commission members and their portfolio allocations are not yet a done deal. As a next step, the European Parliament will be quizzing each of the nominees and will then approve – or reject – the proposed Commission as a whole. In this process, it is possible that some Commissioner nominees are replaced, and the portfolios re-allocated.
