Debate: Impact of national tax reforms on the EU economy
Date: MONDAY, 14 FEBRUARY 2022
Speaker: Kadri Simson
Language: EN

The committee rightly points to those challenges and complexities arising from a policy area which remains largely a responsibility of the Member States. While there are good reasons for that, as Member States are often best placed to take tax policy measures fit for the structure of their economy, it also bears risks in terms of fragmentation and disruption in the functioning of our single market. In a context of close economic integration and deep interdependency, uncoordinated tax policies can lead to harmful tax practices and unfair tax competition, to the detriment of Member States’ tax bases. They may also lead to double taxation or non—taxation, legal uncertainty and red tape, therefore discouraging cross—border activities and investment. The report therefore calls for the right balance to be found in terms of coordination of national tax policies, and for a certain level of harmonisation to further strengthen single market integration and prevent tax base erosion. In particular, it provides useful recommendations in support of our EU tax priorities from the implementation of the global agreement on corporate taxation to the adoption of an ambitious EU business tax framework fit for the decades to come. Let me dive into some of the new initiatives you mentioned in the report. The global agreement to reform international corporate taxation that was endorsed last year by G20 world leaders is historic, and the Commission is moving quickly to implement it at EU level. We have collectively committed to an implementation roadmap. The Pillar One and Pillar Two rules are due to come into effect in 2023. We already tabled on 22 December a proposal for an EU directive on implementing minimum taxation, known as Pillar Two. It will put a floor on excessive tax competition between jurisdictions, thus contributing to both fair taxation and to a sound business environment. A proposal for a directive implementing Pillar One, dealing with a reallocation of taxing rights, is planned to be tabled in the course of this year to allow for the work to be finalised at the Organisation for Economic Co—operation and Development (OECD). The implementation of the two pillars of the global agreement by 2023 will ensure that our tax system reflects the new reality of our economies and allows for a level playing field between all business models where all companies, including digital ones, pay their fair share of taxes in the right place. As you will have noted, the digital levy remains on hold. The Commission considers the implementation of the OECD global agreement to be a key priority in the area of corporate taxation. The Commission has proposed last December an own resource that builds on Pillar One of the OECD agreement, and your report rightly calls for the debt bias in the corporate tax system to be addressed. The current debt bias induced by most EU tax systems not only leads to higher debt levels, which make companies more fragile and economies more vulnerable to crisis, it also discourages equity financing, which is crucial for innovation. In the coming months, the Commission is planning to come forward with an initiative to help redress the current debt bias with a view to ensuring a better balance between the treatment of debt and equity for tax purposes. The initiative will help to develop a well—functioning capital markets union and supporting the re-equitisation of EU companies. This measure is only a starting point for a comprehensive reform of our EU business tax system. In 2023, as you know, the Commission will put forward a proposal that will move the EU towards a common tax rulebook, the ‘Business in Europe: Framework for Income Taxation’.  Commissioner Gentiloni’s services are currently at the stage of reflection and are consulting widely with stakeholders in order to properly frame the new challenges and assess which aspects of current corporate tax systems require reforms. Your contribution will be particularly valuable in this regard. The tax symposium that DG TAXUD will be organising during the second half of the year will include an important series of events for our benefit and will serve as an excellent opportunity to determine our way forward and an ambitious timeframe.