What has the EU achieved so far on tax?

19 July 2019

What has the EU achieved so far on tax? By Johan Barros

The EU is meant to have very little power on tax. All Member States must unanimously approve any tax proposal. This puts small countries on a level playing field with large ones. The European Parliament, for its part, may only submit non-binding opinions to Member States on any new tax legislation. Despite these limitations, the EU has taken the lead on many tax matters in the last five years. We have compiled some of the most significant tax achievements of the last mandate below.

The previous European Parliament successfully mobilised public opinion, generated political momentum and put pressure on national governments. At the same time, it also provided the Commission with a strong case for action. A number of tax-related proposals from past years can be traced back to repeated calls and campaigns from the Parliament. To name just a few, public country by country reporting (CBCR), the tax intermediaries Directive (‘DAC 6’) and the whistleblower protection Directive.

The departing European Commission, for its part, reacted to scandals such as Luxleaks and Panama Papers, and heeded the European Parliament’s calls for action. The Commission’s motivation was also bolstered by Europe-wide opinion polls that have repeatedly shown that one of areas where citizens want more EU action is on tax. The Commission would have been foolish not to act.

And the Commission has been relatively successful in its efforts, with 14 tax Directives adopted! For example, it managed to get EU Member States to agree on more extended exchange of tax information between tax administrations. It pushed through the anti-tax avoidance Directive (ATAD) that implements OECD BEPS into EU law. It established a list of non-cooperative tax jurisdictions. And it has taken forward a number of key VAT files, including on e-commerce. The list goes on.

The Commission further demonstrated its ability to expand its tax reach into conventionally non-tax areas. Famously, the Commission’s competition department (DG COMP) under the firm leadership of the Danish Commissioner Margarethe Vestager initiated several state aid investigations into EU Member States offering beneficial tax treatment to large multinationals.

Tax professionals should expect nothing less from the next European Parliament and Commission, who will continue to see tax policy as an opportune area to harness public support and deliver results.

In our next tax blog, we will look into the future and try to discern what is on the menu for the next five years.

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