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REPORT (2024/2118(INI))

On the role of simple tax rules and tax fragmentation in European competitiveness

A-10-2025-0155

Committee on Economic and Monetary Affairs · Rapporteur: Michalis Hadjipantela

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This resolution addresses the role of simple tax rules and tax fragmentation in European competitiveness. It calls for simplifying tax systems, reducing compliance costs, and enhancing cooperation among member states. It urges the Commission and member states to reduce administrative burdens, digitalise tax administration, and combat tax evasion and aggressive tax planning. It also stresses the importance of tax incentives for research and innovation, and calls for studies on cross-border workers and tax barriers.

Committee position. The Committee on Economic and Monetary Affairs proposes a resolution calling for tax simplification, reduced fragmentation, and enhanced cooperation to boost EU competitiveness.

Key points

  1. Calls for simple, predictable tax rules to ease compliance and administration, and stresses that overly complex rules deter investment.
  2. Expresses concern over threats to EU tax sovereignty and urges the Commission and member states to limit trade turmoil.
  3. Stresses that tax rules must respect subsidiarity and proportionality, while coordinating to reduce compliance costs.
  4. Calls for common implementation tools like standardised templates and best practice exchange to simplify tax compliance.
  5. Urges the Commission to assess SME impact of tax proposals and develop a toolkit for SMEs and start-ups.
  6. Calls for better tax cooperation and regrets the omission of taxation in the New European Competitiveness Deal.
  7. Calls for coordinated approach to tax expenditure transparency and for tax incentives to be well-designed and not fragment the internal market.
  8. Urges the Commission to cut reporting requirements by at least 25% (35% for SMEs) and conduct impact assessments.
  9. Calls for an EU Tax Data Hub and for streamlining tax obligations for the defence industry.
  10. Calls for simplification of VAT framework, including expanding One Stop Shop and assessing e-commerce rules.
  11. Reiterates commitment to OECD Pillar Two and urges the Commission to protect the agreement and prevent harmful tax competition.
  12. Calls for addressing tax barriers to cross-border investment and labour mobility, and for studies on a 28th regime and cross-border workers.

Who is affected

  • Small and medium-sized enterprises (SMEs) and start-ups, which face high compliance costs and would benefit from simplified tax procedures.
  • Cross-border workers and self-employed individuals, who face administrative burdens and double taxation.
  • Tax administrations in member states, which are called on to modernise and cooperate more closely.
  • Multinational enterprises subject to Pillar Two rules, which need legal clarity and simplified compliance.

Figures and deadlines

  • EU tax revenues in 2023: EUR 6 712 billion, 4.7% more than 2022.
  • Tax burden in EU: 39.0% of GDP in 2023.
  • Global uncollected tax revenue estimated at EUR 500 billion, with EUR 100 billion from the EU.
  • VAT compliance gap in 2022: EUR 89.3 billion, about 7% of expected VAT revenue.
  • Total tax compliance costs in EU plus UK: EUR 204 billion, 1.3% of combined GDP.
  • SME compliance costs estimated at around 30% of taxes paid, compared with about 2% for large companies.
  • Commission goal to reduce reporting requirements by at least 25% (35% for SMEs).

Legal basis: Treaty on the Functioning of the European Union, in particular Article 4 and Articles 63 to 66, 113, 114 and 115.