What changed

Follow-up to the European Parliament non-legislative resolution on the role of simple tax rules and tax fragmentation in European competitiveness

P10_TA(2025)0227

Rapporteur: Michalis HADJIPANTELA (EPP/CY)

The role of simple tax rules and tax fragmentation in European competitiveness

References: 2024/2118(INI) / A10-0155/2025 / P10_TA(2025)227

Committee on Economic and Monetary Affairs

Date of adoption of the resolution: 9 October 2025

PE770.261

Competent Parliamentary Committee: Committee on Economic and Monetary Affairs (ECON)

European Parliament resolution of 9 October 2025 on the role of simple tax rules and tax fragmentation in European competitiveness (2024/2118(INI))

Brief analysis/ assessment of the resolution and requests made in it:

The European Parliament,

The resolution addresses critical aspects of taxation within the EU, focusing on fostering a business-friendly environment, enhancing competitiveness and economic growth, and simplifying tax regulations through digitalisation. It underscores the importance of international coordination under the Organisation for Economic Co-operation and Development (OECD) framework, addresses tax barriers impeding the single market, and emphasises combating tax evasion and aggressive tax planning. Additionally, it highlights the need for coherent cross-border taxation to facilitate labour mobility and supports innovation-driven tax incentives.

– having regard to the Treaty on the Functioning of the European Union, in particular Article 4 and Articles 63 to 66 thereof on the principles of the internal market, free movement of goods, services, capital and people, and of Articles 113, 114 and 115 thereof,

The resolution underscores the need for simplified and predictable tax rules within the EU to support a robust business environment. It highlights concerns over external threats, such as potential tariffs from the US. The European Parliament calls on the Commission to accelerate simplification and coordination of direct tax rules across the EU to boost competitiveness and reduce compliance burdens. This includes assessing the impact of new proposals, cutting duplicate reporting, guiding Member States toward more predictable tax systems and improving information-sharing between tax authorities, including through an EU Tax Data Hub.

– having regard to Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States (the Interest and Royalties Directive),

Commitment to an international coordinated approach is reinforced, particularly regarding the OECD/G20 Inclusive Framework's two-pillar approach, despite challenges such as US opposition. The resolution emphasises maintaining EU interests and preventing harmful tax competition through secure implementation of global tax rules. The Parliament also encourages work to address cross-border tax barriers and explore optional common frameworks such as a “28th regime”.

– having regard to Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (the Parent-Subsidiary Directive),

The report stresses alignment with the EU’s tax fairness agenda. The Parliament urges continued implementation of the global minimum tax and stronger cooperation to tackle tax evasion and aggressive tax planning, including streamlining existing anti-avoidance rules and enhancing joint enforcement. It also calls for improved monitoring of tax incentives to ensure they are transparent, effective and do not fragment the internal market.

– having regard to Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation [15 %] for multinational enterprise groups and large-scale domestic groups in the Union, which is the EU’s response to international tax coordination,

For cross-border taxation and mobility, the resolution seeks simplification of tax rules to eliminate fragmentation that impedes labour mobility. It supports fair and, transparent tax policies that accommodate increased mobility without harmful practices. Finally, innovation is highlighted as a driver of economic growth, stressing the importance of tax incentives for R&D.

– having regard to the ongoing developments concerning the EU’s two-pillar solution to address the tax challenges arising from the digitalisation of the economy,

6. Response to requests and overview of actions taken, or intended to be taken, by the Commission:

– having regard to the final reports of October 2015 published by the Organisation for Economic Co-operation and Development (OECD) on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project,

(Paragraph 2): On the request addressed to the Commission to limit the corresponding trade turmoil and consult European stakeholders when making decisions in response to such tariffs, the Commission remarks that different consultations with stakeholders took place in the first half of 2025 and that the negotiations between the European Commission and the US led to a political agreement at the end of the July, which transformed into a Joint Statement on 21 August 2025. The European Commission and the United States are currently working on the implementation of the Joint Statement, with the aim of delivering concrete, results-oriented, and balanced outcomes that are mutually beneficial for the EU–US trade relationship, also taking into account the European Parliament’s recommendations.

– having regard to the reports on the Pillar One and Pillar Two Blueprints adopted by the OECD/G20 Inclusive Framework on 14 October 2020, and to the results of the OECD economic analysis and impact assessment of 12 October 2020 entitled ‘Tax Challenges Arising from Digitalisation – Economic Impact Assessment’,

(Paragraph 5, 14): The Commission takes note of the call to keep business simplification at the core of our agenda and agrees on the necessity assess the impact of its proposals on SMEs. In this regard, a new SME competitiveness check has been added to the Commission’s Better Regulation requirements. The Commission welcomes the call to make concrete progress and acknowledges the potential usefulness of a comprehensive, user-friendly toolkit for SMEs.

– having regard to the OECD/G20 Inclusive Framework on BEPS statement of 8 October 2021 on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy,

The Commission is working on several initiatives to simplify administrative burdens for companies, including for SMEs. As set out in the Commission Work Programme for 2026, the Commission will continue to use targeted Omnibus packages to deliver tangible cuts in administrative burdens without lowering standards. This includes, in particular, the planned Omnibus on taxation foreseen for Q2 2026. The Commission also confirms that it will carry out ex ante impact assessments for all policy initiatives, including tax-related legislative proposals, where significant impacts are expected, ensuring proportionate analysis and transparency in line with the Better Regulation guidelines.

– having regard to the Pillar Two model rules of the OECD/G20 Inclusive Framework on BEPS of 20 December 2021 for domestic implementation of 15 % global minimum tax,

(Paragraph 6) The Energy Taxation Directive (ETD) revision proposal was presented in July 2021 as a part of the EU Green Deal and Fit for 55 package. Since then, it has been under discussion at the Council where unanimity is required for adoption. In the context of the Clean Industrial Deal, and the Action Plan for Affordable Energy recently published, the Commission recommended that Member States urgently conclude the negotiations on the ETD revision.

– having regard to United States Public Law 117-169 of 16 August 2022, known as the Inflation Reduction Act,

(Paragraph 8): The Commission welcomes the call of the resolution for better tax cooperation within the EU. The Commission continues the work on the reform of corporate taxation, including the negotiations on the corporate reform such as the Business in Europe: Framework for Income Taxation (BEFIT) proposal. In line with the call of the resolution, BEFIT aims to reduce fragmentation and complexity while fostering greater cooperation and trust among Member States. The Commission stresses that such a modernisation of the EU corporate tax environment is essential to enhance the competitiveness of the European economy. In addition, the Commission would like to stress the importance that Member States adhere to the fundamental freedoms and commonly agreed rules, which are key in the area of taxation to avoid non-discriminatory tax barriers that negatively affect economic activities on a cross-border basis in the Internal Market.

– having regard to the G20 Rio de Janeiro Leaders’ Declaration of 19 November 2024 and the G20 Rio de Janeiro Ministerial Declaration on International Tax Cooperation of 25 July 2024,

(Paragraph 10): The Commission fully agrees with the importance of stronger cooperation to promote a more consistent interpretation and application of EU tax legislation. In this context, the Commission and Member States established the informal high-level Tax Administration EU Summit (TADEUS ()) network in 2019, bringing together the heads of tax administrations to jointly address challenges in the implementation of EU tax rules. TADEUS has already delivered tangible progress through practical cooperation projects. Furthermore, the Commission has proposed the creation of “BEFIT teams” to accompany the implementation of the future BEFIT Directive, enabling national administrations to exchange information efficiently, coordinate early on specific issues, and resolve questions through a collaborative online tool.

– having regard to UN General Assembly Resolution 79/235 of 24 December 2024, on the promotion of inclusive and effective international tax cooperation at the UN,

In parallel, the Commission is advancing several simplification initiatives aimed at reducing administrative burdens, eliminating unnecessary overlaps, improving clarity and addressing divergences that hinder the smooth functioning of the single market. Within this framework, the Commission would also be prepared to facilitate and encourage greater cooperation between the Member States and national tax administrations, to enable a more consistent interpretation and application of direct and indirect EU tax legislation, including through non-binding EU guidance, where relevant, while fully preserving the Commission’s role as guardian of the Treaties and subject to the jurisdiction of the Court of Justice.

– having regard to the Commission communication of 15 July 2020 entitled ‘An action plan for fair and simple taxation supporting the recovery strategy’ (COM(2020)0312),

(Paragraphs 9, 12, 21, 56, 57, 58): The Commission agrees with the resolution to ensure the effectiveness of tax incentives within the Pillar Two framework and acknowledges the call of the resolution for a study and recommendations. The Commission agrees that well-designed tax incentives can be a useful part of the tax policy mix of Member States, to foster investment, R&D and innovation, among other. The Commission aims to ensure a horizontally consistent approach across various policy fields as regards increased calls for the use of tax incentives to support various policy objectives. Tax incentives should be used in a cost-effective and judicious manner, be well-targeted, simple for companies, citizens, and administrations to understand. For example, the Commission’s Recommendation on tax incentives to support the Clean Industrial Deal () sets out common guiding principles to guide Member States when introducing tax incentives in full alignment with the Clean Industrial State Aid Framework (CISAF), to reach the common goals of the Clean Industrial Deal. Many Member States already have R&D tax credits for research and development, and the Commission acknowledges the call of the resolution for further studies and recommendations to help maximise their effectiveness.

– having regard to the Commission communication of 18 May 2021 entitled ‘Business Taxation for the 21st Century’ (COM(2021)0251),

Tax incentives generally result in tax expenditures, as the tax relief associated with the incentive results in foregone tax revenues. Under Directive 2024/1265/EU (revising 2011/85/EU), which lays down requirements for budgetary frameworks, Member States are required to publish detailed information on the effect of tax expenditures on revenue (Article 14(2)). The Commission, together with the Member States, uses dedicated expert groups to discuss and exchange best practices on tax expenditures reporting and evaluation. On 11 December 2025, the Commission published a dedicated report with country-specific analysis of tax gaps that also include relevant analysis of tax expenditures as an approximation of the policy-induced tax gap ().

– having regard to the Commission proposal of 22 December 2021 for a Council Directive on ensuring a global minimum level of taxation for multinational groups in the Union (COM(2021)0823), as well as to Parliament’s position of 19 May 2022 on this proposal,

(Paragraph 11) The Commission welcomes the acknowledgement of the Joint Research Centre’s work and agrees that well-functioning local tax systems can support economic activity. At the same time, taxation, including local taxation, remains primarily a national competence, and Member States are responsible for the organisation of their tax systems and the distribution of revenues across levels of government. Within these limits, the Commission will continue to facilitate cooperation and promote mutual learning with the Member States.

– having regard to the Commission study of January 2022 entitled ‘Tax compliance costs for SMEs: An update and a complement – final report’,

(Paragraph 13): The Commission notes the Parliament’s remarks and would like to draw attention to the Commission Work Programme for 2026, which provides full transparency regarding the strategic priorities in the field of taxation. The Work Programme sets out the new initiatives the Commission intends to bring forward, identifies the proposals that will continue to be pursued, and clearly indicates those that are to be withdrawn. This approach ensures predictability for stakeholders and supports effective legislative planning.

– having regard to the Commission proposal of 11 May 2022 for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (COM(2022)0216),

(Paragraph 15): As part of the wider simplification initiative, and with a view to a future legislative proposal for a recast of the Directive on Administrative Cooperation (DAC) foreseen for Q2 2026, the Commission is currently reviewing the effective functioning of the DAC with the objective of clarifying and enhancing this regulatory framework and reducing the administrative burden for all relevant stakeholders involved. This review will also seek to identify possible instances of duplicate reporting and, where appropriate, seek solutions that streamline reporting for relevant stakeholders, while ensuring that Member States have the information necessary to correctly assess, administer, and enforce tax liabilities. A project group has been set up recently under TADEUS (network of heads of Tax Administrations) to contribute to this work.

– having regard to the Commission proposal of 8 December 2022 amending Directive 2006/112/EC as regards VAT rules for the digital age (COM(2022)0701),

(Paragraph 16) As part of the efforts to bolster European defence capabilities, the European Defence Industry Programme (EDIP) Regulation of 16 December 2025 establishes the Structure for European Armament Programme (SEAP), which will facilitate cooperative projects among Member States. and the procurement of jointly owned defence products through the SEAP may benefit from VAT exemption where all the conditions set out by the VAT directive are met

– having regard to the Commission proposal of 8 December 2022 for a Council Regulation amending Regulation (EU) No 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age (COM(2022)0703),

(Paragraph 17)

– having regard to the Commission proposal of 8 July 2024 for a Council Directive amending Directive 2006/112/EC as regards the electronic value added tax exemption certificate (COM(2024)0278),

The Commission agrees that using digital technology is essential to improving tax administration and reducing administrative burden. In recent years, the Commission and the Member States have developed technical solutions that simplify compliance for taxpayers, streamline tax collection, and support tax authorities in combating fraud. Further enhancements to existing IT systems are already planned for the coming years. The Commission remains committed to move from the current IT systems towards new data-based systems that allow for better integration of information and new and better functionalities. Within the TADEUS framework, the Commission is exploring with heads of tax administrations the best way forward in this area.

– having regard to the Council agreement on VAT in the digital age package of 5 November 2024,

(Paragraph 21) The Commission is actively working with Member States to streamline and strengthen the effective use of Taxpayer Identification Numbers (TINs) across the Union. With the adoption of Directive (EU) 2023/2226, Member States will be required to ensure the consistent use of TINs in automatic exchanges of information, with phased entry into force in 2028 and 2030 for different categories of automatic exchanges. To support implementation and facilitate validation, the Commission is expanding the publicly available “TIN on Europa” tool to cover legal persons. Further, it has launched a study to serve as a basis for the introduction of an improved verification tool and coordination of TIN formats. These measures contribute to greater tax certainty, simpler procedures and reduced administrative burdens, in line with the Union’s broader simplification agenda.

– having regard to Council Directive (EU) 2025/50 of 10 December 2024 on faster and safer relief of excess withholding taxes (FASTER),

(Paragraph 22): The Commission agrees that facilitating retail participation in capital markets is important for strengthening the Savings and Investments Union. The Commission will continue advancing work in this area to support a more efficient, user-friendly and growth-oriented EU tax environment. A recent example is the Commission recommendation on Savings and Investment Accounts (SIA) in the context of the Savings and Investment Union (SIU) where the Commission adopted targeted recommendations towards Member States to introduce well targeted tax incentives and benefits. The ultimate objective of this is to unlock existing savings and channel them into investments into assets that generate higher returns. Furthermore, the Commission is also working on building trust between tax authorities and (large) taxpayers via a European cooperative compliance project, where on a voluntary basis Multinational Enterprises (MNEs) and Member States have the possibility to improve compliance and risk focus in the form of a pilot project.

– having regard to the Commission proposal of 12 September 2023 for a Council Directive on Business in Europe: Framework for Income Taxation (BEFIT) (COM(2023)0532),

(Paragraph 23) The Directive on Administrative Cooperation (DAC1 to DAC9) establishes a fully digital framework for the automatic exchange of tax information among EU Member States, using standardised formats and IT schemes aligned with OECD standards. This systematic digitalisation simplifies procedures for tax administrations and reduces reporting burden for taxpayers—especially MNEs —through centralised filings and harmonised procedures. At the same time, it enhances cooperation between tax authorities, ensuring transparency and consistency in applying global tax rules with the same IT instruments. Best practices are, in addition, promoted by different workstreams (e.g. The Visits to Member States Directive on Administrative Cooperation (VISDAC) project). Also, their implementation is supported by the Commission through Technical Support Instrument (TSI) in those Member States who applied for it.

– having regard to the Commission proposal of 12 September 2023 for a Council Directive establishing a Head Office Tax system for micro, small and medium sized enterprises, and amending Directive 2011/16/EU (COM(2023)0528),

The Digital Reporting Requirements (DRR) stemming from the VAT in the Digital Age (ViDA) package will fully digitalise the reporting of cross-border transactions for VAT purposes with the aim of reducing compliance costs by an estimated EUR 4.1 billion and reducing VAT fraud by EUR 11 billion per year. In the implementation of the DRR and the accompanying new electronic system called central VIES, the Commission services will explore the possibility, legal and technical, for using artificial intelligence for detecting VAT fraud.

– having regard to the Commission proposal of 12 September 2023 for a Council Directive on transfer pricing (COM(2023)0529),

Moreover, the Commission actively supports the efforts of tax administrations in the Union to intensify their cooperation for the benefit of their digital transformation, be it at strategic level under TADEUS or at operational level through the cooperation activities and co-financing under the Fiscalis programme. Through strategic discussions, TADEUS promotes the use of digital tools like Data Science and Artificial Intelligence, encourages a streamlined use of platforms like EUROFISC, and supports joint initiatives under the Fiscalis programme to enhance data sovereignty, digital security and operational efficiency. This collaborative forum ensures alignment on digital transformation priorities and strengthens administrative cooperation across the EU.

– having regard to the European Council conclusions of 17 and 18 April 2024 on a new European competitiveness deal,

(Paragraph 24) The current Fiscalis programme supports the development and operation of the major trans-European digital systems for taxation, as well as establishing networks of officials across the EU. This cooperation programme, that allows tax administrations to create and exchange information and expertise, runs until the end of 2027. The Commission has recently presented a proposal, the Single Market and Customs programme (), which, among other objectives, aims to enable the continuation of the Fiscalis programme’s interventions. The proposed programme should continue to support the work of the tax authorities, by ensuring a solid digital environment, reinforcing expert networks, the sharing of good practices, and by complementing the national efforts for training tax officials and professionals with Union level solutions. The future programme should further support the continued collaboration and cooperation between the national tax authorities, the Commission and with other national authorities. It should also support digital, administrative, human and operational capacity building, including development and operation of Union level digital solutions for taxation.

– having regard to the Council conclusions of 24 May 2024 on a Single Market for the benefit of all,

(Paragraph 25) The Commission is already working to simply the current VAT framework. The ViDA package will bring simplification and reduce administrative burden. It modernises the EU’s VAT system, enhances its efficiency for businesses, increases its resilience against fraud, and addresses the challenges in VAT raised by the development of the platform economy.

– having regard to the European Council’s Budapest declaration on the New European Competitiveness Deal, adopted on 8 November 2024,

Following its adoption, the Commission now focuses on ensuring the smooth implementation of the 3 aspects of ViDA: (i) Digital Reporting Requirements (DRR), (ii) Platform economy, and (iii) Single VAT Registration (SVR). This requires laying down further detailed legal provisions, adapting and developing Member States’ and EU Digital systems, as well as rolling out a communication strategy. It will be accompanied by guidelines and explanatory notes. To that end, the Commission recently published an Implementation Strategy.

– having regard to the Council conclusions of 11 March 2025 on a tax decluttering and simplification agenda which contributes to the EU’s competitiveness,

ViDA is expected to improve tax compliance in the field of VAT and therefore to contribute to a reduction of the VAT compliance gap.

– having regard to the European Council conclusions of 20 March 2025 on competitiveness, with a focus on simplification and the reduction of regulatory and administrative burdens,

The Commission sees the implementation of ViDA as a matter of priority and welcomes the European Parliament’s support. In taking this forward, it will continue to engage with Member States and businesses via dedicated expert groups or through targeted meetings. As implementation dialogues are a key tool to ensure that policy objectives are achieved, ViDA implementation was on the agenda of the implementation dialogue held by Commissioner Hoekstra with the business community on 28 October 2025.

– having regard to its resolution of 16 February 2022 on the implementation of the Sixth VAT Directive: what is the missing part to reduce the EU VAT gap?,

(Paragraphs 25 and 46) The Commission is working closely with Member States and other stakeholders on the development of methodologies suitable for EU wide tax gap measurement, beyond the existing VAT gap estimates. The TADEUS forum already includes a dedicated workstream on tax gap estimation. It explores the development of tax gap methods applicable across the EU for PIT and CIT, as well as methods to estimate different sub-sets of the VAT compliance gap, such as the VAT compliance gap due to Missing Trader Intra-Community fraud (MTIC gap) and e-commerce (e-commerce gap). The Commission is also fostering the development of excise gap measurement. Related insights and evidence have been put into a recent dedicated report that the Commission published on 11 December 2025. The Mind the Gap Report provides country-specific analysis on Member States’ efforts to close the tax gaps, including an assessment of the efficiency of tax collection and efforts to digitalise tax administrations and rolling out AI at Member State level ().

– having regard to its resolution of 7 October 2021 on reforming the EU policy on harmful tax practices (including the reform of the Code of Conduct Group),

(Paragraphs 26 and 27) It is essential for the VAT acquis to be adapted to the new reality created by the digital transition. The adoption of ViDA serves that very objective but improvement may still be needed. With a view to assess whether further action is required to make the VAT acquis fully fit for purpose, the Commission has launched a study looking at the challenges of VAT beyond ViDA. That study will serve as basis for the work to be taken forward by the Commission.

– having regard to its resolution of 15 February 2022 on the impact of national tax reforms on the EU economy,

(Paragraph 28) The Commission subscribes to the need for key taxation concepts to be applied consistently across Member States. Paving the way for common definitions, soft law efforts such as Explanatory Notes drawn up by Commission services and guidelines agreed by the VAT Committee are of the essence. The Commission services will continue to pursue these efforts.

– having regard to its resolution of 10 March 2022 on a European Withholding Tax framework, calling for a standardised withholding tax framework,

(Paragraphs 29 and 30) VAT is a general consumption tax. Neutrality is amongst its main characteristics and should be kept in mind when striving to make the VAT system sustainable and equitable. The Commission is currently exploring other avenues to greening VAT such as reviewing the second-hand scheme. For VAT rates, steps were already taken with the reform adopted in 2022 which provides for regular review of these rates based on a report submitted by the Commission. The first report is due by 31 December 2028.

– having regard to its resolution of 4 October 2022 on the impact of new technologies on taxation: crypto and blockchain,

(Paragraphs 25 and 39): In relation to studies to assess the current fragmentation, the Commission launched in June 2024 an external study that will analyse, inter alia, potential challenges on cross-border operations stemming from the current taxation framework of the financial sector (VAT exemption for financial services and national, uncoordinated sectoral taxes).

– having regard to its resolution of 10 March 2022 with recommendations to the Commission on fair and simple taxation supporting the recovery strategy (EP follow-up to the July Commission’s Action Plan and its 25 initiatives in the area of VAT, business and individual taxation),

(Paragraph 31) Commission has proposed the withdrawal of the DEBRA and UNSHELL proposals in the 2026 Commission Work Programme.

– having regard to its resolution of 4 May 2022 on the follow-up to the conclusions of the Conference on the Future of Europe,

(Paragraph 33): The Commission is continuing the work on the reform of corporate taxation and encourages incoming Council Presidencies to bring the discussions on the BEFIT proposal back on to the table in Council. The Commission agrees with the call of the resolution for an effective and balanced approach that benefits all Member States, respecting the principle of subsidiarity and aligning coherently with the implementation of the OECD Global Minimum Tax set of rules.

– having regard to the Commission Joint Research Centre’s study of 19 April 2022 entitled ‘Local taxes on economic activity in municipalities in EU Member States’,

(Paragraph 34): The Commission is working closely with Member States on the implementation of the global agreement on international tax reform at the OECD/G20 Inclusive Framework. The global minimum effective tax rate for MNEs, is being implemented in the EU through the Pillar Two Directive (). The Commission agrees with the resolution to prioritise work that maintains and protects the agreement. As regards Pillar Two, the Commission and EU Member States have ensured that the side-by-side agreement with the United States and other countries within the Inclusive Framework preserves the important role and benefits of Pillar Two while providing greater stability, simplicity and certainty. This agreement provides a solution on the respective application of the Pillar Two rules and the existing U.S. minimum tax rules, in a way that must prevent a return to harmful tax competition, safeguard the integrity and effectiveness of the Pillar Two Directive, protect EU interests, and prevent retaliatory measures. In addition, as part of the agreement, the EU also obtained material simplifications for EU tax administration and businesses in the implementation of the Pillar Two, not only as regards its application in the EU but also around the world. As stated at the ECOFIN Council of 12 December 2025, the Commission also remains committed to further simplifying the implementation of Pillar Two and will assess the impact of the side-by-side package on EU competitiveness, including the possibility of an extension of the delayed implementation by smaller EU Member States under Article 50 of the Directive, at the latest by 2029 when the stocktake by the Inclusive Framework is also due.

– having regard to its resolution of 15 June 2023 on lessons learnt from the Pandora Papers and other revelations, also calling for the improvement of reporting and information sharing,

(Paragraph 35): The Commission agrees on the need for legal clarity as regards the implementation of Pillar Two rules by the Member States. To this effect, the Commission adopted the proposal for a Council Directive to implement Pillar Two in a uniform manner across the EU and will continue to ensure its consistent transposition into national law and further application, including for shipping activities. The side-by-side package will provide further legal clarity, as regards the operation of Pillar Two and other global minimum tax rules internationally. It will provide further certainty to businesses and ease compliance burden through the permanent Simplified Effective Tax Rate (ETR) Safe Harbour. The Commission will also make sure that work on further simplifications to the global Pillar Two framework continues to be prioritised at the Inclusive Framework in 2026.

– having regard to its resolution of 12 December 2023 on further reform of corporate taxation rules,

(Paragraphs 36 and 51) The importance of close cooperation between competent authorities at EU level for tackling VAT fraud and the key role of the European Public Prosecutor’s Office (EPPO) and the European Anti-Fraud Office (OLAF) in the fight against cross-border VAT fraud were highlighted in the Commission’s White Paper for the Anti-Fraud Architecture Review published in July 2025. In particular, the White Paper recalled that the VAT-based own resource is calculated on the basis of VAT actually collected by Member States. Accordingly, any shortfall in VAT collection not only reduces revenue for Member States but also reduces VAT own resources for the general budget of the EU, with consequences for the level of the GNI-resource for all Member States. Moreover, a significant amount of loss stems from cross-border VAT fraud.

– having regard to the report of 9 May 2022 on the final outcome of the Conference on the Future of Europe,

According to the Commission study on the Missing Trader Intra-Community fraud of December 2025, cross-border VAT fraud amounts to between EUR 12.5 and 32.8 billion per year and is often committed in the framework of criminal organisations. Therefore, the Commission will work in the short term on reinforcing the EU multidisciplinary approach to tackling VAT fraud and establishing an EU front composed of administrative authorities, judicial and law enforcement bodies. The Commission proposed giving EU targeted access to VAT data for the EPPO and OLAF as well as enhancing their cooperation with the Eurofisc network to leverage synergies between administrative and judicial means against VAT fraudsters at EU level (). Against this background, the control of VAT is primarily in the hands of Member States and the success of the fight against VAT fraud depends on their involvement. The Commission is working with the Heads of Tax Administrations in the framework of TADEUS to guarantee Member States stay committed to this joint effort.

– having regard to the report by Enrico Letta of April 2024 entitled ‘Much more than a market’,

(Paragraph 37) There is no proposal for a digital services tax under active consideration at this stage. The Commission’s preferred option to address the tax challenges arising from the digitalisation of our economies is, and remains, a multilateral and global solution under Pillar One of the OECD/G20 Inclusive Framework. This approach is superior to the proliferation of unilateral measures, that would fragment the international tax system and risk creating double taxation. The proposed ‘side-by-side' system between Pillar Two and the US tax rules envisaged in the G7 Statement of 28 June 2025 provides an opportunity to soon restart discussions on Pillar One and the Commission remains fully committed to resume and actively engage in those discussions. However, if the global discussion were to fail, the Commission would reassess its options and remain in close contact with the European Parliament and Member States on the best way forward. The Commission would have to conduct an impact assessment on any possible policy proposal, in line with the Better Regulation principles, as is done for any Commission proposal.

– having regard to the report by Mario Draghi of 9 September 2024 entitled ‘The future of European competitiveness’,

(Paragraph 38, 39, 43, 44): The Commission will assess the costs and benefits of the future proposal for a 28th regime for innovative companies in the impact assessment that will accompany such a proposal. The Commission concurs that tax barriers to cross-border investment must be tackled, and Member States must avoid introducing discriminatory tax legislation. In this regard, it notes that tackling such barriers to the free movement of capital are a key priority in the area of taxation in its enforcement policy. As communicated in the Commission’s Communication on Savings and Investment Union, the Commission will take action to remove differences in national taxation procedures creating administrative burden and barriers to cross-border investment and support Member States’ actions for this purpose. Additionally, to follow up on the SIU communication, the Commission has released a SIA recommendation, which calls on Member States to introduce SIAs to increase retail participation to capital markets, thereby improving their returns on retail investments. Greater retail participation will also benefit depth and liquidity of EU capital markets and increase the supply of long-term capital in the EU. By moving some of their savings into more productive investments, citizens can also facilitate the financing of businesses, driving economic growth and job creation across Europe, in line with the SIU objectives. The Commission acknowledges the call to carry out further targeted studies on the economic and competitive effects of the taxation barriers to cross-border investments. A recent study carried out for the Commission () identified cross-border tax fragmentation as one of the barriers to the scaling-up of funds investing in innovative and growth companies. The Commission also acknowledges that differences in capital taxation can also act as a barrier to cross-border investment but notes that this is challenging to address as it is linked to the design of national tax systems.

– having regard to Rule 55 of its Rules of Procedure,

(Paragraph 40): With the Faster and Safer Tax Relief of Excess Withholding Taxes (FASTER) Directive, which will be applicable from 1 January 2030, an important step was taken towards removing barriers to cross-border investments by streamlining, harmonising and digitalising withholding tax procedures across the EU. The quick and fast procedures laid down in the FASTER Directive will avoid double taxation on dividend payments. The standardised reporting obligation will allow national tax administrations to check eligibility for the reduced rate and detect potential abuse. Therefore, the FASTER Directive has, to a large extent, already addressed the recommendations of the European Parliament’s resolution on a withholding tax framework. The Commission will consider the European Parliament's suggestions when developing the implementing acts for the FASTER Directive and when offering support to Member States as they implement the Directive.

– having regard to the report of the Committee on Economic and Monetary Affairs (A10-0155/2025),

(Paragraph 41) The Commission concurs with the message of the report that tax-related barriers in the Internal Market should be eliminated as a matter of priority. In this regard, based on complaints it receives, stakeholder enquiries, and meetings, the Commission takes a strategic approach towards engaging with Member States in achieving (informally) a correct application and implementation of the fundamental freedoms and EU direct and indirect tax legislation. In this regard, the Commission services regularly hold bilateral package meetings with Member States in the area of taxation to address tax barriers. Where such an approach does not lead to tangible or timely results, the Commission initiates infringement action. In addition, the Commission undertakes horizontal studies to map potential obstacles to the internal market. For instance, the Commission is currently exploring simplification measures in the field of excise duties. We are holding regular discussions with businesses and Member States tax authorities to identify potential areas. Notably, in the context of the Fiscalis programme, Member States experts are currently discussing simplification and harmonisation of the procedures applicable to the business-to-consumer distance selling of excise goods. Other areas for simplification concerning the movements of excise goods are being explored, while minimising risks of avoidance and abuse. Another example concerns the request for information that has been sent on 26 September 2025 to the Member States regarding the tax treatment of the Pan-European Pension Product (PEPP). In its legislative proposal published in November 2025, the Commission proposes that PEPP products receive the same tax treatment as national pension products in the respective Member State, thereby ensuring that labour mobility is not hindered. In the past, the Commission undertook a horizontal study to map cross-border tax obstacles for pension funds and life insurers, key actors for investment in the companies in the internal market and followed up, and will continue doing so, on detected issues with Member States to achieve compliance. The Commission is also undertaking a study on the taxation of financial sector actors with a view to draw lessons on VAT treatment.

A. whereas effective, fair and efficient tax policies play a key role in promoting long-term sustainable growth and inclusive societies;

(Paragraph 42): The Commission wishes to reassure the European Parliament that the rights of EU citizens who are making use of the fundamental freedoms in the Internal Market, in particular the right of movement for workers, self-employed, but also retirees to go live and work in another Member State is at the centre of its enforcement priorities whenever tax barriers are detected in Member States tax legislation.

B. whereas EU Member States collected EUR 6 712 billion in taxes in 2023 (including compulsory actual social contributions), which represents 4,7 % more than in 2022;

(Paragraph 46): The Commission shares the Parliament’s strong commitment to tackling aggressive tax planning, which can undermine fair competition and erode public revenues. The EU has significantly strengthened the legislative framework to address tax avoidance and enhance transparency, among others, through the Anti-Tax Avoidance Directive (ATAD), the Directive on Administrative Cooperation and the work of the Code of Conduct Group on Business Taxation. The Commission continues to support Member States in improving cooperation and enforcement, including through enhanced information exchange, coordinated audits and capacity-building under the Fiscalis programme.

C. whereas the EU faces a significant investment gap; whereas closing this gap is crucial to ensuring sustainable economic growth, enhancing competitiveness, and achieving the EU’s green and digital transition objectives;

In addition, the Commission is ensuring that the commitments taken by the Member States to act against aggressive tax planning in their Recovery and Resilience Plans are carried out accordingly. Several Members States, which have received country specific recommendations to act against aggressive tax planning, are putting into place defensive measures against aggressive tax planning. These include introducing withholding taxes on interest, royalty and dividend payments exiting the EU towards zero or low-tax jurisdictions, or non-deductibility of interest and royalty payments to zero or low-tax jurisdictions.

D. whereas in 2023 the tax burden (i.e. overall tax revenues as a share of GDP) in the EU stood at 39,0 % of GDP, a slight decrease compared with 2022, but still a significantly high ratio;

With DAC6, which was adopted in 2018, a legal framework for combating tax evasion through mandatory exchange of information on potentially aggressive cross-border tax arrangements was introduced EU-wide. Aligning with the goals of DAC in terms of prevention of tax evasion and tax avoidance, and in compliance with the principle of proportionality, the mandatory exchange of information on potentially aggressive cross-border tax arrangements has been designed to be used for tax-risk assessment as a trigger to further analysis by tax authorities. It is complemented by Commission’s support based on the provision of IT infrastructure and collaboration with Member States to enhance data utilisation in risk analysis through projects like Fiscalis.

E. whereas estimates suggest that global uncollected tax revenue amounts to approximately EUR 500 billion, of which an estimated EUR 100 billion is uncollected from the EU area; whereas additional revenue is impacted by instances of tax non-compliance and aggressive tax planning strategies; whereas these losses deprive Member States of essential public funding;

Moreover, the Commission provides crucial support to the EU Advanced International Administrative Cooperation (AIAC) Community, an expert network focused on collaborative efforts in international tax cooperation. Fiscalis acts as the financial backbone, funding the network's activities, including promoting cooperation instruments like simultaneous and joint audits to combat tax fraud and evasion. The Commission also facilitates crucial functions for the network, including the operation of secure IT systems for the exchange of tax information between Member States and the provision of training opportunities to upskill tax and customs officials. This support is particularly relevant for ensuring the effective and reliable implementation of EU tax law and helping national tax administrations address complex cross-border arrangements, as this activity led to several billions in additional tax base over the 5 past years.

F. whereas in 2023 the VAT revenue-to-GDP ratio amounted to 7,1 % of EU GDP and 18,3 % of total government revenue;

In its commitment to supporting the necessary simplifications combined with the constant need to improve risk-analysis techniques and tools, the Commission will continue to propose appropriate developments, whether in the context of the recast of the DAC, the improvement of joint approaches (Direct taxation / VAT), or the pooling of data in IT (central registers).

G. whereas according to the Commission, in 2022 the EU VAT compliance gap alone amounted to EUR 89,3 billion, or around 7 % of the total expected VAT revenue; whereas according to estimates, one quarter of the VAT compliance gap is directly linked to criminal VAT fraud;

(Paragraph 48) The Commission is currently reviewing the ATAD with the aim to simplify its application and enhance its effectiveness and efficiency at the national level. This includes exploring ways for addressing the potential inconsistencies between certain elements of the ATAD and the OECD Pillar Two approach. These efforts are carried out in the context of the evaluation of the ATAD and within the broader simplification exercise and involve very extensive and detailed technical consultations with the Member States and private stakeholders. The Commission also agrees with the need to provide further guidance on the interpretation of the general anti-abuse rule and intends to discuss with Member States potential ways forward.

H. whereas Member States differ in their reliance on taxation, in the taxes they levy to collect these revenues and how they have changed their tax mix over the past decade;

(Paragraph 49) As part of the wider simplification initiative, and with a view to a future legislative proposal for a recast of the DAC, the Commission is currently reviewing the effective functioning of the DAC with the objective of clarifying and enhancing this regulatory framework and reducing the administrative burden for all relevant stakeholders involved.

I. whereas tax compliance costs impose an additional financial burden on companies, which accumulates on top of the tax liability itself, diverting time and resources from other investment opportunities;

This review will be informed by the outcomes from the recently concluded Evaluation of the DAC, which assessed the effective functioning of DAC1 – DAC6 and examined issues pertaining to compliance costs, data quality, data completeness and use of information.

J. whereas according to estimates, the total tax compliance costs in the 27 EU Member States plus the UK are estimated at EUR 204 billion, equating to 1,3 % of their combined GDP; whereas micro-enterprises bear the overwhelming majority of these costs (87 %), followed by small businesses (10 %), placing a disproportionate administrative burden on smaller companies;

In addition, the review will also be informed by the recommendations arising from the 2021 and 2024 Reports by the European Court of Auditors (ECA), the latter Special Report having issued specific recommendations on guidance, to support the implementation of legislation. Finally, the results of the extensive consultations of Member States and stakeholders have been carried out since the start of 2025 will be considered to identify further possible reductions in the administrative burden for business and in particular SME’s covering DAC1 – DAC9.

K. whereas the Member States face major challenges that could impact their tax revenues and tax mix such as significant demographic changes, climate change, digitalisation and automation;

(Paragraph 52) In view of cross-border tax obstacles concerning citizens from all Member States and frontier workers who pursue an economic activity in one or more Member States in which they do not reside, the Commission will be working on a Recommendation calling for the elimination of tax obstacles for remote cross-border working and for relocation of employees in order to allow in particular start-up and scale-up companies to compete for the best talents in Europe and ensure a level playing field across all Member States for improving the functioning of the internal market.

L. whereas according to the Treaties, taxation is primarily a national competence of the Member States;

With regard to the call on the Commission to present a study, the Commission currently does not see the need for mandating a further study. The FISC Subcommittee of the European Parliament published a study on “Tax Barriers and Cross-border Workers: Tackling the Fragmentation of the EU Tax Framework” in June 2025. Furthermore, although not recent, most of the Conclusions of the Report of the Expert Group on "Ways to tackle Cross-border tax obstacles facing individuals within the EU” from 2015 continue to apply to the present tax landscape. A new study most likely would confirm the results of the existing studies.

M. whereas growing capital mobility, along with the broader trends of globalisation and digitalisation over recent decades, has had the unintentional impact of progressively diminishing the capacity of individual countries to ensure the effectiveness of their tax policies;

(Paragraph 54) The Commission recalls that the 2021 proposal for extension of the mandate of the Code of Conduct Group to cover individual taxation did not get much traction with the Member States, who seem to be reluctant to extend the mandate beyond the business taxation.

N. whereas the 2022 Commission study estimated that in 2019, businesses within the then 28 Member States of the EU incurred, on average, an annual tax compliance cost equivalent to 1,9 % of their turnover; whereas among the various taxes, businesses regarded VAT and corporate tax as those with the highest compliance burden;

O. whereas Draghi’s comprehensive report on the EU’s economic situation warns about the EU’s declining productivity and competitiveness, and it was stated that, without decisive action, the EU faces a ‘slow and agonising decline’, also underscoring the necessity of coordinated policies – including, for example, eliminating unnecessary barriers and reducing bureaucratic taxation-related hurdles;

P. whereas tax policy fragmentation and overly complicated tax policy design create various obstacles for companies and citizens in the single market, such as legal uncertainty, red tape, risk of double taxation and difficulties claiming tax refunds; whereas such barriers discourage cross-border economic activity in the single market and create risks for tax authorities, such as double non-taxation and opportunities for tax arbitrage; whereas Draghi’s comprehensive report also highlights the need to ‘eliminate any taxation obstacles to cross-border investing in the EU’ to reduce capital market fragmentation and stresses that ‘EU citizens should be able to invest in other Member States without complex taxation procedures, effectively resulting in double taxation’;

Q. whereas the Letta report highlights that tax fragmentation remains a major barrier for EU businesses and small and medium-sized enterprises (SMEs) in particular, and that better alignment through cooperation on an EU tax framework is key to facilitating the free movement of workers, goods and services and in supporting growth and private investment; whereas robust and fair taxation is a key instrument in generating the revenues necessary to invest in and maintain services of general interest across all regions of the EU;

Taxation and the business environment

1. Emphasises that simple and predictable tax rules should make it easier for taxpayers to pay their taxes and for governments to administer and collect revenue; highlights the need to create a compliance-friendly and business-supportive EU, where productive sectors can compete and thrive and workers can earn a fair wage while supporting the twin transition; stresses that overly complex taxation rules risk deterring investment, while also noting that tax policy design should avoid distorting economic actors’ decision-making;

2. Is deeply concerned by the threat to EU tax sovereignty expressed in the US President’s statements of 2 April 2025 on VAT in EU Member States, as part of the justification for imposing tariffs on imports to the US from the EU; emphasises that trade wars undermine businesses and urges the Commission and the Member States to limit the corresponding trade turmoil and consult European stakeholders when making decisions in response to such tariffs;

3. Stresses, as stated in the Draghi report, that divergent tax rules across the EU are a significant hurdle to achieving a true single market; acknowledges that the EU tax framework must strictly uphold the principles of subsidiarity and proportionality, as well as cooperation, to reduce compliance costs for businesses; emphasises that the Member States have the right to tailor their tax systems to their specific national needs, while adhering to common standards, and coordinating efforts to combat tax fraud and evasion, ensure timely information exchange and promote a level playing field; believes that these outcomes can be achieved, specifically, by striking a balance between respect for national competences and ensuring consistent interpretation;

4. Stresses that, aside from harmonisation efforts, substantial progress can be achieved in simplifying tax compliance and eliminating administrative hurdles in the internal market through common implementation tools– for example, standardised templates for data gathering and reporting, guidance from the Commission, and dialogue and exchange of best practices between the Member States;

5. Notes that EU companies, particularly SMEs, are key drivers of economic growth and job creation across the continent; recalls that SMEs face significant fiscal challenges on account of complex tax regulations and fragmented tax systems, which impose high administrative burdens and compliance costs, with SME compliance costs estimated at around 30 % of taxes paid compared with about 2 % for large companies, hindering their growth and innovation; urges the Commission to assess the impact on SMEs of current and future proposals, and explore solutions that simplify tax procedures and reduce compliance costs, in strict cooperation with the national tax authorities; calls, furthermore, on the Commission to assess why the proposed directive establishing a Head Office Tax system for SMEs has not gained traction in the Council and asks for concrete progress and feasible solutions to advance on this; calls for the development of a comprehensive, user-friendly toolkit for SMEs and start-ups, including guidelines, templates and automated tax filing options for VAT, corporate tax, payroll and other obligations, freely available and regularly updated;

6. Takes note of the Draghi report on sector-specific taxation proposals, specifically the recommendations on lowering the cost of electricity consumption without undermining the EU’s competitiveness, deterring investment, damaging job creation or weakening business confidence; in this respect, acknowledges the EU finance ministers’ informal reflections of January 2025 on high energy prices and their prioritisation; takes into account the ongoing work on the revision of the Energy Taxation Directive, highlighting the importance of climate ambitions, current economic realities, high energy prices and connectivity needs;

Competitiveness and economic growth

7. Highlights that competitiveness is a broad term, which refers to rate of productivity that is able to drive sustainable growth and, consequently, income and welfare for all; stresses that a competitive economy is not merely business-friendly, but rather one that delivers high levels of employment and social welfare, provides innovation capability, adequate educational opportunities and infrastructure, and strong institutions and rule of law standards; acknowledges that efficient and effective taxation – including measures to curb harmful tax competition and a race to the bottom, in terms of tax rates – is critical, in order to generate the public resources needed for sustained public and private investment that will enhance the EU’s competitiveness, social and economic cohesion, and growth;

8. Welcomes the European Council conclusions on the New European Competitiveness Deal; regrets, in this regard, the omission of the field of taxation in improving Europe’s competitiveness; calls for better tax cooperation within the EU, reducing fragmentation and complexity while fostering greater cooperation and trust among Member States as this is essential to enhance the competitiveness of the European economy;

9. Calls on the Commission and the Member States to agree on a coordinated approach to enhance the transparency of government tax expenditure, to ensure that it is producing the desired policy goals in line with EU common objectives and priorities in a cost-effective way, has no unexpected or negative impacts on the internal market, and does not offer opportunities for tax evasion and aggressive tax planning;

10. Welcomes the European Council conclusions on tax decluttering and simplification; stresses that future EU initiatives on taxation should focus with priority on administrative simplification, elimination (where relevant) of overlapping tax rules, increasing clarity and streamlining the application of tax rules, and addressing identified divergences or inefficiencies that may affect the functioning of the single market; stresses that the Commission should facilitate and encourage more robust cooperation between the Member States and national tax administrations to enable more consistent interpretation of direct and indirect tax legislation;

11. Takes note of the research done by the Commission’s Joint Research Centre in 2022, which finds that revenues to local budgets from taxes on local economic activities can work as an incentive for municipalities to act locally and boost local economic activities; calls on the Commission, in this regard, to intensify this research and engage in mutual learning exercises with the Member States to encourage municipalities to take care of their businesses, thereby unleashing untapped potential for more economic growth across the EU;

12. Stresses that well designed and justified tax incentives with economic substance and socio-economic benefits can support economic activities that advance public goals, including peripheral and otherwise geographically disadvantaged areas in the EU; notes that tax incentives should not only comply with the Treaties and constraints relating to fiscal space, but should also not lead to internal market fragmentation, and calls for a set of tools to ensure dialogue, transparency and coordination between the Member States on tax incentives; welcomes the Commission’s intention to issue non-binding guidelines on tax incentives and calls for a further study on the effect of the implementation of the OECD’s Pillar Two rules on tax incentives and issue recommendations to ensure their effectiveness within the Pillar Two framework; underlines the importance of ensuring that tax incentives remain consistent with the EU State aid framework; recalls the EU’s climate change commitments and Parliament’s continued support for these targets, and urges the Commission and the Member States to coordinate efforts and consider the potential benefits of tax incentives for green investments;

13. Recalls that several legislative initiatives in the field of taxation are not moving forward; underlines, in this regard, the need to provide legal certainty and predictability to EU businesses; takes note of the Commission’s clarifications on which initiatives are to be withdrawn in the field of taxation;

Tax simplification and digitalisation

14. Recalls the Commission’s priority to ensure business simplification across all policies, including taxation within its competences, with the goal of reducing reporting requirements by at least 25 % (and for SMEs by at least 35 %); calls, in this respect, on the Commission, in close and continuous dialogue with the Member States, to systematically conduct ex ante impact assessments of all new tax-related legislative proposals, as well as a competitiveness check on current measures, to quantify the expected reduction in administrative burdens and ensure that new rules align with the EU’s economic growth, and green and digital transition objectives;

15. Urges the Commission to identify and eliminate all instances of duplicate reporting and establish a system for efficient data-sharing between tax administrations, thereby relieving taxpayers of double reporting obligations; notes that, in this context, simple gains could be made, such as amending Directive (EU) 2021/2101 on public country-by-country reporting to grant equivalence of the EU rules with the Global Reporting Initiative’s 207 reporting standard for tax; calls on the Commission to assess the merits of such equivalence;

16. Calls on the Commission and the Member States to streamline tax obligations for the defence industry, by expanding and simplifying VAT exemptions for procurement in the context of joint EU defence initiatives;

17. Calls for the establishment of an EU Tax Data Hub to improve the automatic exchange of tax information and reduce administrative burdens; encourages the Commission and the Member States to build on existing tools, such as the VAT Information Exchange System (VIES) and the Excise Movement and Control System (EMCS), and explore extending their application to areas such as direct taxation; emphasises that such a hub should enable joint analysis of information relevant to the control process of taxation with a cross-border component, prevent duplication and serve as a single access point for tax administrations across the EU;

18. Highlights the key role electronic invoicing can play in enhancing transparency, reducing administrative burdens, and enabling the practical and efficient use of reported data;

19. Recalls that in the absence of robust reporting, tax administrations would lack the basic information necessary to detect, investigate and prevent abusive tax practices; underlines that access to timely and comprehensive tax data is essential for safeguarding the fairness of tax systems and protecting public revenues;

20. Recognises that to justify the costs of compliance with reporting requirements, there is a need for well-resourced and efficient tax administrations, equipped with adequately trained personnel and modern digital infrastructure; stresses the need to invest in the capacity of tax authorities to ensure that existing reporting obligations are used to their full potential;

21. Recalls that simple, stable and predictable tax rules are essential for a competitive economy and will contribute to the creation of jobs and economic growth; calls on the Commission to issue recommendations towards a simplified, competitive tax system to reduce the administrative burden for companies and citizens, where deemed appropriate, for example by streamlining the use of the Tax Identification Number across the Member States, and in the area of tax incentives; acknowledges that tax certainty, simplifying refund procedures and deductions are key solutions to reduce the administrative burden, especially for SMEs;

22. Notes the importance of tax simplification across the board; stresses the need to increase retail participation in capital markets by simplifying tax declaration procedures for savings and investment accounts, particularly when these accounts are accompanied by tax incentives; further notes the Commission’s pilot projects on cooperative compliance for businesses, which aim to reduce audits and improve dispute resolution for companies meeting high compliance standards;

23. Underlines the potential of digitalisation, especially artificial intelligence (AI), as a tool for reducing administrative burdens and compliance costs for companies, particularly SMEs, and for supporting VAT fraud detection, while still maintaining a human element for quality checks and to ensure safeguards against risks of discrimination; notes that digitalisation can also enhance public tax administration, provided that transparency and sufficient oversight of automated tax-related decision-making are guaranteed; urges the Commission and the Member States to advance digitalisation and simplification of tax administration, while enhancing cooperation, coordination and the exchange of best practices and know-how among national authorities, with the Commission acting as a facilitator;

24. Stresses that the Member States should allocate adequate human and financial resources for the implementation of any new tax legislation and the modernisation of tax administrations, particularly through investing in staffing, training, and integrated, interoperable IT systems and consultations with the private sector; calls on the Commission to enhance its support through the Fiscalis programme and to explore a dedicated EU funding programme to further support such investments;

25. Calls on the Commission to assess and simplify, within the limits of its competence and in close and continuous dialogue with the Member States, the current VAT framework, to reduce administrative burdens, including for businesses and community organisations, enhance competitiveness and reduce the gap between expected revenue and the amount actually collected (VAT gap); reiterates its call for a simplified and modernised VAT system with limits on exemptions and non-standard rates, aimed at promoting fair competition, reducing compliance costs and improving voluntary compliance; takes note of the VAT in the Digital Age (ViDA) package and calls on the Commission to issue clear and consistent guidelines to support the smooth implementation of Directive (EU) 2025/516, specifically regarding the EU Digital Reporting Requirement; highlights that the VAT compliance gap varies significantly between the Member States and welcomes the ViDA package as a tool to enhance transparency and reduce fraud; urges coordinated implementation at national level to ensure coherence and that the VAT One Stop Shop model is efficient and user-friendly, particularly for SMEs; calls for further reforms to facilitate electronic VAT registration for small businesses and to increase the digitalisation of VAT collection; calls on the Commission to build on and expand the VAT One Stop Shop for cross-border business-to-consumer e-commerce, with the aim of reducing administrative burden and compliance costs;

26. Notes the marked shift in purchasing behaviour in the past decade, with a surge in e-commerce during the COVID-19 pandemic that persists today; acknowledges that online purchases should contribute to greater VAT compliance due to the electronic audit trail, yet the Commission’s report on the 2024 VAT gap underlines that the correlation is not as clear due to the complexities arising from online sales; urges the Commission to assess whether the VAT acquis is fit for purpose, given the increasing popularity of e-commerce;

27. Calls for the improvement of Council Directive 2008/9/EC; underlines the importance of exploring the integration of cross-border VAT refunds into the One Stop Shop model, in order to further simplify VAT compliance for businesses engaged in cross-border trade, while ensuring alignment with existing VAT obligations across the Member States;

28. Calls for a consistent application of key concepts and the streamlining of definitions for a more effective VAT system, including, for example, the application of common interpretations for ‘goods installed and assembled’, as outlined in Article 36 of the VAT Directive, and the consistent application of definitions of permanent establishment and fixed or other establishments;

29. Highlights the need for a more sustainable and equitable VAT system with further consideration on how VAT rates can be utilised to achieve sustainability goals; suggests that the Commission assess whether VAT charges can be eliminated on goods supplied free of charge for social and environmental benefit;

30. Notes that while reduced VAT rates have a legitimate purpose in supporting the broad social and economic goals of the Member States, including support for the vulnerable members of society and for children, their broader application increases legal uncertainty and the complexity of the tax system; highlights that while reduced VAT rates can lead to a decrease in prices for the consumer, this is also dependent on other factors; considers, therefore, that a periodic review and assessment of which reduced VAT rates remain necessary and effective in achieving Member States’ intended policy goals will be useful in undertaking the simplification task;

31. Reiterates Parliament’s position on the proposed Head Office Tax system for SMEs, the proposed ‘Unshell’ directive and the proposed debt-equity bias reduction allowance (DEBRA);

32. Stresses that the complexity of, and discrepancies in, the interactions between different national tax systems can create an uneven playing field, and can have an adverse effect on the functioning of the internal market; emphasises that this can discourage cross-border investments, which can be particularly disadvantageous to SMEs and purely domestic businesses, who lack the resources to engage in complex tax planning schemes, and therefore face an unfair competitive environment that is not conducive to scaling-up;

33. Takes note of the work on the Business in Europe: Framework for Income Taxation (BEFIT) proposal; recalls the Commission’s objectives, in proposing BEFIT, to reduce the complexity of tax rules and the compliance costs for EU businesses with cross-border operations; takes note of its potential to reduce fragmentation and create a level playing field for businesses within the internal market; emphasises that any EU initiative must deliver added value both in the legal and economic sense, and calls for an effective and balanced approach that benefits all of the Member States, respects the principle of subsidiarity and aligns coherently with the implementation of the OECD’s Pillar Two rules;

OECD Pillars One and Two, and international taxation

34. Reiterates the EU’s strong commitment to the implementation of the OECD/G20 Inclusive Framework’s two-pillar approach, while taking into account the current situation regarding Pillar Two rules, including the recent Executive Order issued by the US President on 20 January 2025 declaring that the OECD Global Tax Deal has no force and effect in the United States; urges the Commission to prioritise work that maintains and protects the agreement, so as to prevent a return to harmful tax competition at the cost of public revenue and EU interests; urges the Commission to inform Parliament of contingency plans and take prompt, targeted action to safeguard the integrity and effectiveness of the Pillar Two Directive, protect EU interests and prevent retaliatory measures; notes the possibility of administrative simplification in the implementation of the Pillar Two Directive;

35. Stresses that Pillar Two should ensure a global minimum level of taxation for multinational and large-scale domestic groups in the EU; welcomes its transposition into national law; calls for legal clarity, taking into account differences between OECD Pillar Two rules and their implementation by the Member States, specifically in relation to shipping activities, to avoid creating conflicting taxation regimes which can lead to confusion; expects the process of negotiating and publishing the administrative guidance to be finalised soon and provide companies falling under the scope of Pillar Two with the necessary certainty; expects further developments with regard to existing safe harbours to ease compliance, such as the development of a permanent safe harbour;

36. Highlights the impactful role that the European Public Prosecutor’s Office (EPPO) and the European Anti-Fraud Office (OLAF) have had in identifying and investigating tax fraud and evasion, and stresses the need for effective collaboration between these bodies and with the national tax authorities;

37. Acknowledges the publication by the OECD of the Multilateral Convention in October 2023, laying down the technical rules to implement Amount A of Pillar One and the ongoing negotiations; calls on the Commission to assess the potential effects of a Digital Services Tax;

Tax barriers in the single market

38. Takes note of the Letta report and the reference to a voluntary 28th regime, which aims to attract and retain innovative start-ups in the EU; notes that the fragmented EU tax landscape creates complexity, uncertainty and high compliance costs for EU businesses, especially SMEs, and invites the Commission to explore and assess the benefits and drawbacks of the option of a 28th regime; underlines the need to address tax obstacles to cross-border investment to decrease over-reliance on debt and to increase equity in business financing; recalls, in this regard, the Draghi report, highlighting the fact that EU citizens should be able to invest in other Member States without complex taxation procedures, effectively resulting in double taxation; emphasises that adherence to these principles is essential to making the EU a competitive and innovation-driven investment hub; underlines the importance of exploring avenues for simplifying and standardising transfer pricing documentation rules across the EU, including a careful and balanced assessment of existing thresholds and materiality criteria while accounting for Member State specificities, with the aim of reducing compliance costs for transactions, without compromising transparency standards and without facilitating aggressive tax planning and tax evasion;

39. Regrets that the Commission’s Competitiveness Compass lacks concrete guidance on removing taxation barriers to cross-border investments; calls on the Commission to conduct targeted studies assessing the economic and competitive effects of this fragmentation, with a focus on identifying the most affected sectors and proposing concrete measures to simplify tax systems and strengthen mutual trust between the Member States, particularly to support SMEs;

40. Welcomes the recent entry into force of the FASTER Directive on withholding tax as an important first step towards modernising and streamlining cross-border tax procedures within the EU; notes the recommendations of the Draghi report and recalls Parliament’s recommendations in its resolution on a withholding tax framework, the establishment of which is essential to reduce complexity, increase legal certainty for investors, and stem the practice of treaty shopping; additionally points out that tax policy reform could also facilitate the further integration of EU capital markets, in the context of the savings and investments union;

41. Calls on the Commission to survey the existing taxation-based obstacles to single market integration, and produce an action plan for tackling them;

42. Calls for guiding principles on taxpayers’ rights to pinpoint lingering tax barriers within the single market and recommend best practices drawn from across the EU to enhance taxpayers’ experiences, while ensuring that such guiding principles do not limit the ability of the Member States to have in place anti-abuse measures to ensure proper enforcement of their tax laws; acknowledges the Commission’s reluctance to present the planned communication on citizens’ rights as taxpayers that was announced in its action plan for 2021;

43. Welcomes the Commission communication on the savings and investments union, and in particular the willingness to remove the differences in national taxation procedures that create administrative burden and barriers to cross-border investment, and also to support Member State action for this purpose;

44. Notes that disparities in the tax treatment of capital income can create complexity and legal uncertainty for cross-border investors; highlights that Draghi’s comprehensive report acknowledges the need to ‘eliminate any taxation obstacles to cross-border investing in the EU’ to reduce capital market fragmentation; underlines the importance of a more balanced tax mix for economic resilience, and invites the Commission and the Member States to assess the merits of further coordination and simplification in this field, in order to foster cross-border investment;

Combating tax evasion and avoidance, and aggressive tax planning

45. Recalls that, as the Pillar Two rules are implemented, it is important to monitor new forms of harmful tax competition that may develop;

46. Commits to fighting aggressive tax planning, by both companies and individuals, for a fair European economy, taking into account the specific situation and interests of SMEs, and of low- and middle-income households; recognises the substantial revenue implications of aggressive tax planning, which tilts the playing field for economic actors, threatens to undermine tax morale and erodes the tax base of the Member States; urges the Commission and the Member States to improve cooperation between the Member States in addressing aggressive tax planning, particularly through enhanced information exchange, coordinated audits and improved enforcement; recalls its resolutions on the implementation of the EU requirements for exchange of tax information, on reforming the EU list of tax havens and on reforming the EU policy on harmful tax practices; highlights that increasing the complexity of tax regimes can create perverse incentives for aggressive tax planning and evasion, which may be opaque; calls for the Member States and the Commission to apply a risk-based and appropriate approach to fighting tax fraud and aggressive tax planning;

47. Stresses the importance of existing mechanisms under the Directive on Administrative Cooperation (DAC), the Anti-Tax Avoidance Directive (ATAD) and the Multilateral Competent Authority Agreement (MCAA), which have significantly improved transparency and cross-border cooperation between tax authorities, enabling a more effective response to aggressive tax planning; underlines the increasing administrative burden and compliance costs on tax administrations and taxpayers under the DAC and ATAD, and welcomes their review and simplification while still maintaining current standards;

48. Highlights the need to address inconsistencies between the ATAD and the OECD’s Pillar Two approach to ensure coherence and legal certainty across the EU, including considering the streamlining of options and exceptions granted to Member States; takes note of the Commission’s announcement that it will evaluate the ATAD in the light of Pillar Two and present a comprehensive report on the measures in Q3 2025, in accordance with the Pillar Two agreement; calls on the Commission to provide guidance to the Member States on the interpretation of the general anti-abuse rule laid down in the ATAD and calls for a revision to make the ATAD simpler to implement and increase its effectiveness;

49. Notes the role of the DAC in reducing tax evasion and avoidance, and aggressive tax planning, and in increasing transparency, while also highlighting the complexity and administrative burden, especially under DAC 6; stresses the need for the revision of DAC 6 and calls on the Commission to conduct an assessment of compliance costs under this Directive, as well as to strengthen guidance, enhance risk analysis, and leverage technology for better data collection so as to ensure effectiveness in promoting tax transparency, and prevent disproportionate costs and administrative burdens; states that this reassessment should consider shielding SMEs from unnecessary reporting obligations and provide more clarity regarding the benchmarks for reportable cross-border arrangements; suggests an assessment for a possible review of DAC 7 to consider whether the exchange of information can be reduced with the introduction of real-time reporting under the ViDA package;

50. Notes, in particular, the need to take advantage of the review process to address current overlapping rules, and to streamline and simplify the application of common rules and concepts; points out that standardisation of terms and concepts is crucial to simplify compliance, since various domestic interpretations may give rise to fragmentation and complexity;

51. Calls for enhanced collaboration between the EPPO and Eurofisc to strengthen intelligence-sharing, coordinated enforcement efforts and cross-border investigations in the fight against VAT fraud and other forms of tax evasion and avoidance; stresses the need for streamlined cooperation between these bodies to ensure a more effective and unified EU response to cross-border tax fraud, leveraging their respective mandates and expertise; urges the Commission and the Member States to facilitate this cooperation by improving data exchange mechanisms, ensuring adequate resourcing and fostering joint investigative efforts; stresses that further tax coordination between the Member States in tackling tax evasion and avoidance is necessary for facilitating cross-border economic activity; notes that the EU must ensure that all imported products are properly subject to adequate customs duties;

Cross-border taxation and labour mobility

52. Calls on the Commission to present a study and, if necessary, a package of measures on how to simplify tax rules and address tax fragmentation for cross-border workers and the self-employed, to boost competitiveness by deepening the internal market and to protect tax revenues by creating a level playing field; notes that divergent national tax systems create significant hurdles, administrative burdens, legal uncertainty and double taxation, hindering labour mobility and cross-border entrepreneurship;

53. Notes that the mobility of individuals across borders is increasing at an unprecedented rate and that such a high level of global mobility has a substantial impact on tax systems; stresses that such mobility and its impact on tax systems must be carefully considered in policymaking, while not discouraging mobility and employment opportunities in the EU; notes, in this respect, that Member States use tax incentives to foster labour mobility and cross-border entrepreneurship; stresses, however, that Member States must also prevent harmful tax practices attracting individual taxpayers and the distortion of competition by having clear caveats and safeguards;

54. Acknowledges the increasing cross-border mobility of highly skilled workers and other individuals driven by freedom of movement and preferential tax regimes in some of the Member States; underlines the importance of ensuring that tax policy in the internal market remains fair, transparent and compatible with the sustainability of public finances across the EU; reiterates its call for the Council to revise the mandate of the Code of Conduct Group on Business Taxation;

55. Recalls that tax implications arise from the risk of a taxable presence, or of permanent establishment, when cross-border workers engage in activities such as business trips or teleworking; notes that a safe harbour rule for teleworking coordinated between the Member States could provide tax certainty for employers and reduce administrative burdens, simplifying individual taxation;

Taxation and innovation

56. Highlights that innovation is a key driver of economic growth, global competitiveness, welfare and that, according to the OECD, tax incentives are a widely used and economically significant innovation-support policy instrument; takes the view that governments should ensure that research and development (R&D) tax incentive schemes provide value for money, through regular evaluation and the adoption of targeted incentives that drive investment and growth, and enhance EU competitiveness on the global stage, in line with the proposals of the Draghi report;

57. Calls on the Commission to conduct further studies on the cost-effectiveness of the different kinds of tax incentives for R&D and innovation, in enhancing EU competitiveness on the global stage, in line with the proposals of the Draghi report, ensuring that these incentives are well designed to achieve set policy objectives, without eroding tax revenues and contributing to the risk of tax avoidance; invites the Commission to explore different solutions and mechanisms in supporting R&D for start-ups, including, among other things, transferable tax credits, in a coordinated approach with the Member States and based on common criteria, to improve the accessibility and effectiveness of such measures; calls on the Commission to further assess the cross-border effects of such incentives in other Member States, including risks of tax avoidance; stresses the need for wider availability of tax incentives, including tax breaks, credits, accelerated depreciation and super deductions; in this respect, calls for the Commission to issue recommendations and properly integrate tax incentives, specifically related to R&D where appropriate, without exacerbating economic asymmetries in the EU; stresses that it would be prudent to align incentives for innovation and R&D with tailored incentives for investment; calls for strengthened cooperation and trust between the Member States, promoting a level playing field for e‑commerce, digital services and other rapidly growing sectors;

58. Stresses the importance of ensuring that tax incentives remain fully consistent with the current EU State aid framework; highlights the value of the EU State aid framework in preserving fair competition within the internal market and ensuring legal certainty and a level playing field for all Member States;

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59. Instructs its President to forward this resolution to the Council and the Commission.