EU watch: last steps before the new Commission

The political agreement on the European Commission's proposal for a pan-European withholding tax framework (FASTER) did not take place in April as had been expected, and outstanding issues remain. EU Finance Ministers are now due to discuss the file at the 14 May ECOFIN meeting, with a possibility of finding a final agreement. Failing that, a final attempt under the current Belgian Council Presidency will take place at the June ECOFIN. The same applies to the VAT in the Digital Age (ViDA) proposal.

Meanwhile, the new Commission will be gradually formed over the summer and early autumn, after this June’s EU elections. Member States will draft their own tax policy demands and recommendations for the next EU Commission, and they may consider including recommendations from a recent report by Enrico Letta, President of the Jacques Delors Institute. Letta’s report – Much more than a market (19 April 2024) – was tasked with making recommendations to reinforce the Single Market, and he identified several areas where tax issues should be addressed. These include: 

• Reaching a swift agreement on the pending Energy Taxation Directive to provide right incentives to renewables energy across the Single Market.
• Creating a new, single set of rules to determine the tax base of enterprises, with differentiated frameworks for large groups of companies and for SMEs.
• Stepping-up efforts to guarantee simple VAT compliance for businesses.
• Assessing the feasibility and establish the political viability of using article 116 of the Treaty on the Functioning of the EU (TFEU) to address potential tax related market distortions. As a reminder, article 116 allows the Commission to propose tax legislation that is decided by qualified majority of Member States rather than unanimity, if that legislation’s purpose is to address specific distortions to the Single Market.
• Supporting the Commission’s technical work on advancing the two-pillar solution at an international level.

While there is no guarantee that Letta’s recommendations will be taken up, they are in tune with the current mood in Brussels which calls for more focus on improved competitiveness of the EU Single Market and cutting red tape. But whether Member States priorities this agenda – including in the area of taxation – remains to be seen.