Subcommittee on Tax Matters Ordinary meeting
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FISC European Parliament
Ihren Sitzungen folgen
Lotte Taylor
The impact of taxation, however, depends not only on tax rates and bases and the design thereof, but also on how it interplays with the benefit system and other regulation. So from this year's report, you can learn a lot more about the incentives to work, the tax impact on incentives to work and invest, specifically on decarbonization. I'll leave it at this for here, given the time available. So on to some data. At aggregate level, tax structures remain relatively stable over time, but recent development points to some notable differences or shifts in the composition of revenue.
So this is, it may look overwhelming, the graph, but I'll just point to three things. First, total taxes turned in 2024 as part of the post-pandemic recovery, and this is a trend which Commission services forecasts indicates will continue in 25 and 26. Secondly, labor taxes continue to account for the largest share, more than half the tax revenue in the EU, and this has in fact been the case since 1995, the beginning of the historical series. Thirdly, labor tax share increased in 23 and 24, reaching 51.5%, and this was propelled by higher revenue from personal income taxes and social contribution in a very robust labor market.
Conversely, by definition, the share of consumption and capital declined slightly. But as usual, these aggregates cover considerable variations at country level. In this second graph, we compare tax revenue in two five-year sub-periods. So we take the period before the COVID-19 pandemic, the 15 to 19, and the period during and after the pandemic to have a look at some structural changes. Starting on the right-hand side, at EU and euro area aggregate level, the total tax revenue share of GDP, these small red triangles, are slightly negative.
Doing a decomposition of the changes, there's only a small change for labour, while the taxation of capital is higher and consumption is lower. That's how to read it on the right. Without going into each country-specific explanation, I would note here that the range in the change of the tax revenue share spans from plus 2.9%, you see there's Spain, Lithuania, Luxembourg in one end, and to minus 2.8% in the case of Malta. With a broad brush, because that's what we have to apply, we see a general EU-wide shift away from consumption, this is in the light blue or periwinkle as my daughter would call it, towards capital in orange, and the reliance on labour tax has developed in both directions, the dark blue is going up and down, you can see. But if we look at the member states where the share, meaning the red triangles, have increased on the left-hand side, we see that they generally rely more on labour taxes.
And this can be due to tax brackets not keeping up with inflation or social contribution rates being increased. There's a lot more about this in the report, also about the other drivers behind these labour tax revenue developments. So yes, as I said, robust labour market, but also developments in social protection expenditure. Good. I'll ask us to shift back to the aggregate level, so where we've also done a decomposition into the tax types over the same two periods.
Again, recalling overall the tax-to-GDP ratio is down by a quarter of a percentage point. So here we see which taxes play what role in this development. Starting from the left, the corporate income tax is up by 0.39, then VAT added a further 0.15. Now you see that the increase in the personal income tax from both labour and capital income is almost neutralized by lower social contribution at the top of this hill. The tax types that bring in considerably less are the environmental taxes, property taxes, and the mixed category of other taxes, and that includes alcohol and tobacco.
If I should just summarize some explanatory factors, first there is the boost to the CIT revenue.
The post-pandemic business cycle has shown a strong rebound in corporate profitability. Gross operating surplus has increased and exceeded the even the COVID-19 trajectory, the pre-COVID trajectory, even with significant price shocks. So the bigger CIT, corporate income tax base, has been has compensated for any lower statutory rates. At the other end, and I'm just going to take a sip. At the other end is the decline in environmental tax revenue, and this is partly because tax rates have not followed inflation.
Moreover, since early 2022, there's been many temporary measures that were introduced to cushion the impact of energy bills on both households and businesses following Russia's war of aggression against Ukraine. Several of these measures were however phased out in the in the following years, but overall that that plays into this this development. For property taxes, I could also mention that house prices are growing fast, but cadastral values don't keep up, and this erodes the tax base of recurrent taxes on immovable property. And similarly as as interest rates have gone up, borrowing capacity is reduced, so property transactions have gone down, and this reduces then transaction tax revenue. The data I've shown you these on these past slides come from Eurostat combined with national tax lists, so we are very grateful to member states who diligently report this.
I shift now to another source of information, a questionnaire which we send out jointly with the OECD, and this provides us with rich data while avoiding double reporting, let's say, we we do it in in collaboration. We aggregated and processed the responses of this recent questionnaire, and they cover then implemented, legislated, or announced reform measures in each country in the previous calendar year. In total, EU member states reported 399 tax reform measures in 2026 covering the year 2025. This is a simple count, it doesn't distinguish between minor or major reform measures, and you'll see that it's remained relatively stable in the past five years, following this record number of measures to deal with the pandemic crisis in 2020. Among the measures reported in 2026, reform measures on personal income tax and social security contributions are the most common, 37% of them.
We see an more or less equal number of VAT and corporate tax reform measures, less a bit less than 15%. And among this group of others, the environmentally related taxes were most prominent, comprising about 11% as a subgroup of that that bar. I change now to another topic covered by the the report. We use the report also to take stock of EU tax initiatives. This is a good, as I said, as a reference document, a good quick introduction to a range of topics.
I've presented it here as the overall competitiveness agenda and how in the area of taxation it cannot be about taxing less, but taxing better, given the fiscal outlook.
I list here the recent Commission initiatives, but I believe that the honorable members are well familiar with this and have other opportunities to discuss them. So in interest of time, I skip straight to our special topic on tax compliance from the taxpayer's perspective. And that picks up both on the compliance cost and collection cost. But first I'll start with a bit of vox pop, the voice of the people. So what do taxpayers think when you ask them what we should focus on?
In a Eurobarometer survey, we asked citizens to pick which actions, if any, the EU should prioritize with regards to taxation. Clearly, they think that the fight against tax avoidance and evasion should be top of that list. I read into it as well that a significant share also points to challenges in the tax administration. Another question, we asked citizens how easy or difficult they find it when they're completing their tax returns, and this had very varied responses. In more than half the member states, more than half respondents find it easy.
This is good news. In about a third of countries, at least one in four respondents finds it difficult. And in some countries, it's quite common to use professional help, and in others, not at all. So this was just a bit of the voice of the people, let's say. In response to these voices, we are eager to understand what can be done in collaboration with national tax administration to reduce tax gaps and to ensure that taxes due are collected effectively.
High levels of tax compliance are the product of institutional, social, and economic factors, and they result from an interplay between tax administration and taxpayers. We discussed it just before the meeting as well, it's not a simple relationship. To summarize the chapter, the key takeaway is that compliance is shaped not only by enforcement and tax rates, but also by the system design, the fairness perceptions, and the cost of complying, both in practical terms and psychologically or socially. So in brief, specific features of the tax system matter. For fines and punishment, most member states apply penalties proportional to evaded taxes, and they do consider aggravating factors.
Depending on the penalty structure and the risk of detection, theory shows that tax evasion can increase or decrease with the tax burden, but empirically it often seems to increase. Higher compliance cost reduce compliance. As complexity is also linked to compliance cost, simplification can have positive effects for compliance. Tax administration capacity also matters. There is much, much more about this in our Mind the Gap report, of which we have a second edition in the pipeline.
Then I've stated tax morale. Well, compliance enforcement is important, but the observed level of compliance we acknowledge and the difference across countries hinges on many other factors like tax morale, which is likely linked to a generalized trust or trust in the government. So I am out of time, but I hope to have conveyed three of the main messages in this year's report. First, labor taxation remains the backbone of the revenue system across the EU. Second, looking at a detailed decomposition shifts very markedly across member states, but the data points to a general shift relying more on capital and less on consumption taxes.
In particular, environmental and property taxes play a lesser role. And third, tax design and tax administration matter greatly for compliance outcomes. Broad bases, simpler systems, well-targeted taxpayer support can improve the taxpayer experience and the effectiveness of revenue collection. So I look forward to the discussion and to the contribution of the experts to follow. Thank you.
Pasquale Tridico
Thank you. Thank you very much, Madam Taylor, for your talk. Now I give the floor to Michael Jäger for seven minutes.
Michael Jäger
I try my best. Lots to say. Thank you very much. Maybe you wonder, we agree in the most points. But to start from the taxpayer's perspective, taxes and duties that are legally due must be paid.
So that's clear. So tax evasion harms the public. But what is interesting to us, that 54% of the people also see it in your study. And that brings us also, the fight of the tax avoidance is really, really important. It's a tax policy priority.
But also from the perspective of taxpayers, what is not in your report, but is important to us, as a second side, waste of taxpayers' money is also, also harms the public. So whether one euro is not paid or misused, finally not spent efficiently, the result is the same. The money, the euro is lost and not available for use of public tasks. So what does good tax compliance mean? So one thing is for sure, to register correctly all these things, declarations, reports and so on, and to pay taxes in time.
And also to keep data and keep clear and variable records of the transactions for corporates. But it also points out, what is really interesting, that it's not tax compliance is not created by more audits and higher penalties alone. That's important. We need simpler rules, legal certainty, support with tax filling, trust in public institutions, as what we already discussed, and perception of a fair tax system. So if we want better tax compliance, we also have to improve the quality of the tax systems.
That's also important. Especially I come from Germany, I can tell you later in a private discussion what it means. So we cannot, but what we cannot ignore, what is also in your report, is the tax pressure. So compared to GDP ratio. So it's increasing.
So in Germany, if you compare an average earner, it's more than 50% is social security contribution and taxation already. So that's, there's a limit of possibility to, and you said labour is really to tax, too high to be taxed actually. So that's clear that if we discuss tax changes, compliance, it should not lead to higher tax pressure. So for sure everybody should pay its taxes, but tax compliance should not only be also about tax fairness, if you discuss tax fairness finally. From our perspective, it should foster better conditions, a better framework for growth.
Only grows to higher tax revenues. For sure we can ensure that everybody contributes, but there will be a natural limit. And if you have more growth, you have automatically more revenues finally. And for that reason, it brings me to other important topics: simplicity and predictability. So if you run a corporate, you must understand the rules.
So anyone who invests, who creates jobs or operates across border finally needs reliable conditions. So if we have frequent changes, too many changes, we have additional costs, and especially for small and medium-sized entrepreneurs, it will be a problem. If you have a big corporate, you can stand it, but finally if you have a small corporate, too many changes, too many reporting, too many bureaucracy will hinder cross-border sales, and that's also a topic. We think digitalization could be helpful. It could be a tool.
E-invoicing, digital accounting, automated procedures can reduce bureaucracy for sure and prevent errors. But bureaucracy should not only be seen in the sense as a benefit to tax administration. There must be a dividend to all taxpayers. That's what I say my finance minister: if you only digitalize the tax system and only tax administration is benefiting, it's not necessary because we need to do something for corporates too and for the taxpayers from our perspective. So although the impact assessment for any change also in tax law is important to see it.
If you see now in Germany a 1300% for cigar increase of taxes, it will lead to less consumption for sure and people will go in the grey market too. So from our perspective, finally, reliable rule of law of a tax system, four principles are essential. First, no tax without a clear legal basis and clearly defined conditions. It's really important. Second, tax fairness and ability to pay.
Third, protection of legitimate expectation. So if you have retroactive tax burdens, this should be avoided. We had it in Germany under the government of Merkel. So retro-seen taxation is bad because if you invest, you need trust. Nobody will invest if the law is permanently changed.
And fourth, subsidiarity and personal responsibility. And for sure, it's necessary to guarantee the minimum of existence. So in a certain sense, redistribution can be part of a tax system, but it should not become its only purpose. And that's important. And also if it comes to data protection, what is not discussed yet, it's really important because tax data gives deep insights into economic and personal circumstances.
For that reason, we need also this protection. And finally, the report confirms I think really one central point: simpler systems reduce compliance cost and can improve tax compliance. So we need taxes as a part, as we know it as a taxpayers association, that we need taxes and duties, but not seen as an end in themselves. It's necessary to finance public services, but also to realize social market economy based on personal responsibility, subsidiarity principle, competition and social balance. So the state should create from our perspective opportunities and also European Union, European Commission, and provide reliable conditions for work, for labor, investment, especially growth and prosperity.
So good tax compliance therefore requires both: responsible taxpayers to pay taxes and a responsible state. Thank you very much. Seven minutes sharp.
Pasquale Tridico
Thank you.
Thank you very much for your talk and also for being time. Now should be connected with us Mr. Pascal Saint-Amans. Pascal, are you there?
Pascal Saint-Amans
Thank you very much, Mr. President. Very, very happy to be invited. And let me start with a word of congratulation to Lotte and the Commission for the extremely good report. I think it's very important to have this type of compilation of where legislation is going and what the fundamentals are. Next slide.
I will just do a quick introduction of where I speak from. You know my background. I was at the OECD. I led the international tax reform. I have now joined Bruegel, which is the European think tank that you all know.
And Bruegel has recently won a bid by the EU Commission to lead what we call the EU Tax Compass, which is the new branch of the EU Tax Observatory. You've been familiar and you've worked very closely with my friend Gabriel Zucman, who has headed the EU Tax Gap. And we will be, within a coalition of seven organizations, you can see them on the slides, we will be leading in the next three years the tax policy debate in Europe on how to improve competitiveness within the European Union. That's the goal, which is to offer a platform for an informed and documented tax policy debate. Next slide.
To put things in context, and I think the Commission's report, the annual report on taxation 2026, hints to that. I think we are probably at a juncture in terms of international tax conversation and European tax conversation. On the right-hand side of this presentation, on this slide, you can see the recap of the international tax debate for the past 15 years, which I had the honor to lead when I was at the OECD, which is how to improve the fight of the fight against tax avoidance and tax evasion by promoting tax cooperation through exchange of information, by fighting BEPS, which has now become a proper four-letter word in the tax environment, and then all that culminating with the two-pillar solution and in particular the implementation of the global minimum tax. And all that was translated within the European Union by the DAC, by the ATAD, and more recently by the adoption of Pillar Two. So an agenda which was quite unidimensional and which was about fighting avoidance to improve compliance by all taxpayers, going beyond the fight against tax evasion.
What you see on more recently on the left-hand side of the presentation is that was last Monday, I think, on the 1st of September, the G20 chair statement. I went back to the G20 because the overall tax avoidance agenda was led by the G20. And what we can see, even though we have to mitigate that by the fact it's the US presidency of the G20 and this very much reflects the G20 agenda, but I think it reflects an overall shift of focus in the tax policy debate. You can see it here. The G20 says, we have identified significant common impediments to robust economic growth, including inefficient tax regimes.
Further on, we are working to address these impediments and among others promoting tax regimes that support broad-based growth and prosperity, with a mandate to the OECD, which was the case when we were developing the anti-avoidance agenda. And this is not only a US perspective. Within the European Union, what we can see is a shift of focus.
And the Tax Omnibus on the one hand, the 27th regime, even though the tax dimension is limited to stock options, but that's an interesting dimension of it because it puts the emphasis on the need to grow startups in Europe. We have this shift from compliance or fighting avoidance to promoting...
Yes, now we hear you.
Pascal Saint-Amans
Okay, so I don't know whether you when you missed me, but I was basically saying...
Pascal Saint-Amans
Okay, so I was saying that within the European Union, we now have this shift of focus from pure tax anti-tax avoidance to promoting tax competitiveness. And on the next slide, you will see that what I think is interesting is that are we on a complementary agenda or are we in a friction-full type of agenda? Clearly, we have the need in Europe, back to other famous Italians in addition to Pasquale Tridico, but Letta, Draghi, the need for bridging the productivity gap in Europe. And the question that you find in the two reports I mentioned on how tax rules can actually improve investment decisions. All that in an environment, and that's where I find the tax policy debate ahead of us very interesting.
All that in an environment where, as per Lottos' report, we can see that labor income, labor taxation has increased, capital taxation is still decreasing in an environment where we have increasing inequalities. And the question will be how do you combine the improvement of competitiveness through good tax regimes while maintaining the need to improve fairness and to fight avoidance? Because that's another finding of the report where you can see that a majority of citizens almost everywhere in Europe, except in Estonia, think that the top priority is to improve compliance and to fight tax avoidance. Next slide. So we are just a few words on what the tax policy debate could be after the BEPS agenda.
That's a paper I published with Roel Dom, who's another fellow at Bruegel, which we have called the tax trilemma, the EU tax trilemma. You have tax sovereignty, which remains core. You have the need to protect the revenue, and you have the need to promote investment, what we've called investment neutrality. And what can be done there? A few recommendations: build on Pillar Two to try to harmonize as much as you can the tax base, remove the remaining intra-EU tax frictions, I'll go back to that in one second with the EU Tax Omnibus, per international harmony, internal harmonization with stronger external borders of the European Union, and finally coordinate tax incentives.
Next slide to finish quickly. We welcome in that sense the EU Tax Omnibus. I have two quick slides on that, but one is it's useful simplification, it streamlines the implementation of some legislations, it does some form of decluttering, but we need to be careful that the agenda of simplification doesn't turn into an agenda of cutting taxes, which could be a political agenda but shouldn't be hidden behind simplification. Two quick examples: the fact that you would suppress CFC legislation, controlled foreign companies type of legislation, for SMEs, which in Europe can go up to 400 million of revenue, hmm, that seems going beyond simplification.
Or the hybrid simplification: hybrid mismatch rules are extremely complex, but they are done not to be used. So suppressing one may actually create more problem than simplify. Next slide, which relates to the withholding taxes: an extremely brilliant idea to suppress withholding taxes for company-to-company payment, but this has to come with strong external borders of the EU, otherwise we will lose again. And if we build this external border, we reinforce the chance of harmonizing further within the European Union. Last slide, very quickly on what the agenda could be.
Mr. Herr Jäger said it: tax administration can be a booster of simplification for taxpayers, and it's not only about the digitization of tax administration. I think we can do a lot in simplifying, streamlining the compliance process through tax administration. It's not a legislative agenda, but it can be very helpful. And I believe we have in Europe a couple of other challenges ahead of us. On Pillar Two, we need to streamline, we need to simplify, but we need to be consistent.
We cannot have the side-by-side system, which is a gift to the US, and not asking some countries like Malta not to have a QDMTT, because then you have a lot of American companies doing tax avoidance in European countries, which I believe should be addressed. And finally, the question of taxing right, that was the Pillar One: how to address the tax challenges of the digitalization of the economy. And I would add of artificial intelligence. The European Union should lead there; international negotiation is not making any progress. I look forward to the response by the European Union.
Thank you, I was a bit too long, but thanks for bearing with me. Thank you.
Pasquale Tridico
Thank you, Pascal, very interesting. Now we give the floor to the members, starting with Fernando Navarrete for up to two minutes. Thank you.
Fernando Navarrete Rojas
Muchas gracias. Thank you, Chair. Hablaré, I will speak in Spanish. Viniendo de un país como España que aparece en el informe de la Comisión como en el que más ha subido la carga fiscal y donde más ha subido la imposición al trabajo, preguntaré a la señora Taylor precisamente sobre este punto. Estamos hablando que en España la carga fiscal ha subido casi tres puntos porcentuales del PIB, de los cuales 2,5 vienen del incremento de la carga del trabajo.
En el informe se habla de que es una forma subrepticia de subir impuestos sin coste político, básicamente no subiendo las tarifas del impuesto de la renta de las personas físicas. Y yo lo que quería preguntarle es esto aparte de temas de justicia, temas de representatividad de que no está discutido en el Parlamento nacional, ¿qué piensa hacer la Comisión Europea para que este comportamiento no sea incentivado? Porque de hecho en las normas fiscales recientemente se beneficia este tipo de comportamientos diciendo que es una medida que da ingresos, es una medida de ingresos. Entonces yo lo que le quería preguntar es qué van a hacer para desincentivar este tipo de comportamientos que en el informe comentan que no es muy adecuado. Entre otras cosas porque dicen que la estabilidad a largo plazo de esta fuente no está garantizada por el envejecimiento de la población.
Y por lo tanto yo le quería preguntar exactamente de nuevo qué piensa hacer la Comisión para desincentivar este tipo de antireforma fiscal que por la puerta de atrás se está haciendo en algunos países. Muchas gracias.
Lotte Taylor
Yes, thank you for the question. I'll give a first response and might come back with further information if necessary. Indeed, just on the method, we took, if you understood how we took, we've not taken a snapshot over the 10 years and what's the situation today. We've tried to look at more the structural changes. So indeed, the largest hike in the tax-to-GDP ratio, which also reflect a very strong Spanish labor market and growth for which the Spanish should be very happy, let's say.
So there are some good signs behind that as well. But coming to, if I now generalize more to the what you could call the concealed tax hikes as you said, the question of keeping tax brackets unchanged at a time when or not keeping up with inflation, fiscal creep, some would call it in academic research as well. What is the Commission going to do? Well, I have to put this within the larger question of the economic governance and the economic governance rules. And I am familiar to a certain extent with standards being set to make the indexation the default.
So I'm very happy to come back on this in writing. But let's say that there has been some uncertainty of what is discretionary fiscal policy and should it be the default that there's indexation or not indexation. Honestly, I'd want to double-check with my fiscal experts and come back to you on that. That being said, in the broader context of having public scrutiny of tax policy, I think this is very much what we are pushing within the our so-called Mind the Gap report, that we strengthen the budgetary procedures and processes so that there is a scrutiny also of on the revenue side to match the scrutiny on the expenditure side. As Michael Jäger also said, a tax poorly collected is as wasteful as wasteful expenditure.
So to have that scrutiny on the budgetary side is something we give special focus to by looking also at tax expenditures where tax benefits are being granted. So I veer now away from the question of fiscal creep, but I'm happy to elaborate further on that bilaterally.
Matthias Ecke
Thank you, Chair. I'll speak in German. Ja, vielen Dank an die Kommission, an die Experten hier für den Vortrag. Wir haben ja gesehen, dass sich der langfristige Trend in der EU nicht dramatisch verändert hat mit der Zusammensetzung. Aber wenn wir es uns quasi im Bestand anschauen, dann müssen wir einfach sagen: Unser Steuersystem besteuert Arbeit zu stark und Vermögen zu schwach.
Also das ist überall in der EU ein Thema, aber es ist insbesondere ist es bei uns in Deutschland so. Wer arbeitet, der zahlt, und wer Vermögen hat, der kann halt optimieren. Und ich finde, genau das muss sich ändern. Da müssen wir Arbeit entlasten, vor allem eben die unteren und mittleren Einkommen bei den Sozialabgaben, bei den Einkommenssteuern. Aber anstatt darüber zu sprechen, wie man das machen kann, wie man das vielleicht auch kompensieren kann, haben wir relativ häufig das Thema, dass es dann darum geht: Okay, lass uns die Verbrauchssteuern anheben.
Das ist der einfache Weg, da kriegen wir die Einkommensausfälle kompensiert.
Und wer sparen kann, entgeht dem natürlich. Also finde ich, muss die Antwort woanders liegen. Wir müssen ran an die hohen, an die höchsten Vermögen und wir müssen vor allem Steuervermeidung konsequent unterbinden. Und ich habe das mit Interesse zur Kenntnis genommen, dass es auch das ist, was die Europäerinnen und Europäer durch die Bank als wichtigstes Thema sehen. Wir haben in Deutschland gerade, Bundesfinanzminister hat einen neuen Plan gegen Steuervermeidung und Steuerflucht vorgelegt.
Das ist, geht in die richtige Richtung. Wir sehen aber gleichzeitig, dass wir einen Steuer-Omnibus jetzt vorliegen haben, der zur Vereinfachung dienen soll. Das ist auch richtig und nachvollziehbar. Aber er darf natürlich nicht zum Einfallstor werden für Deregulierung. Das ist eine völlig andere, völlig andere Zwecksetzung.
Und ich befürchte, so wie die Kommission das vorgelegt hat, dass wir eben unter dem Deckmantel der Vereinfachung wieder Steuervermeidung leichter machen. Und das wollen die Menschen in Europa nicht. Deswegen meine Frage an die Europäische Kommission insbesondere: Wie vermeiden wir denn, dass der Text-Omnibus eben zu dieser Steuervermeidung führt, dass sie wieder leichter wird und dass diejenigen, die Steuern gestalten können, das dann einfach machen? Und zweitens: Wie hoch sehen Sie eigentlich die potenziellen Ausfallkosten des Steuer-Omnibus? Das habe ich immer noch nicht gehört, was geht uns dadurch eigentlich verloren?
Lotte Taylor
Yes, let's see if I caught the translation correctly, let's say. Indeed, the shift to or the heavy reliance on labor and how it's in the immediate short term is not foreseen to change. I noted also the chair referring to an upcoming study looking ahead at what the impact of AI and etcetera, there's a big, big debate opening up there. And I'd like to say that this is has been now the repeated repeated theme of our tax symposium, the annual tax symposium looking ahead to 2050 and the tax mix, what would be the right tax mix. It may be that we need to have that right a lot sooner than 2050.
But indeed, as as the honorable member also mentioned, it's delicate. It's not there's no easy solution to simply shift across to consumption. That raises another set of redistributive questions, which we also look into. Let's say we do look at the redistributive effect of be it reduced VAT rates and we have plenty more information on this. But it's it's a complex calculation in the end and many, many trade-offs.
I'm very happy to elaborate also further. But coming to the the omnibus and the simplification and this should not become a case of deregulation through the back door. I I hesitate to come into the discussion much right here right today. I'm not the leading on this. There's ongoing discussions in the council.
So I would prefer if I can give you a brief written reply on that. But and similarly that would give me the occasion to give you a number on to the extent that I can do so on some fiscal impacts of the proposal.
Michael Jäger
Ja, in Deutschland direkt auch. Ja, die das aber der Faktor Arbeit so hoch besteuert ist, wir sehen das ja mit dem Steuerzahlergedenktag Belastungsbarometer, das ist unstrittig. Der Ansatz aber in der Umverteilung, dass man sagt, wir müssen Vermögen höher besteuern, da müssen wir uns trefflich auch streiten, ob das Sinn macht oder nicht, weil natürlich wir ja allein die Unternehmen schon 30 % plus Soli zahlen für den Gewinn, wenn sie erwirtschaften. Und dann hast du als als Anteilseigner noch mal 25 % plus Soli. Das heißt, die Gesamtbesteuerung ist bei über 58 %.
Und das muss man sich überlegen, ob das ausreicht oder nicht. Wir sind der Meinung schon. Und es wird ja eine Diskussion geben, die nicht wir beeinflussen, sondern das Verfassungsgericht, auch was Erbschaften angeht. Und man muss natürlich bei solchen Sachen, ich hatte das auch gesagt, Impact Assessment, die Gesetzesfolgenabschätzung. Es bringt nichts, wenn ich jetzt Substanz besteuere.
Und da werden wir nicht zusammenkommen, wenn Sie sagen, ich möchte Substanz besteuern, wenn Unternehmen Anteile haben. Wir sind gegen eine Substanzbesteuerung. Wir wollen Gewinne besteuern. Wir wollen Gewinne besteuern, da können wir immer drüber reden, das ist eh schon sehr hoch, aber eine Substanzbesteuerung lehnen wir ab. Aber das ist halt auch meine Aufgabe, Sie haben da eine andere Rolle.
Aber man muss halt immer die Gesetzesfolgenabschätzung machen, was da am Schluss passiert. Und Kapital, sag ich immer, ist so scheu wie ein Reh. Wenn Sie es zu hoch besteuern, werden die Unternehmen gehen. Und wir müssen genau umgekehrt jetzt den Weg gehen. Wir müssen dramatisch die Steuern senken, die Entlastung.
Und auch wenn wir Transformation wollen, energetische Sanierung, dann bringt das nichts, wenn ich an der anderen Seite an der Stellschraube drehe. Wir müssen auch Einsparungen, aber das ist ein anderes Thema. Wir können uns da würde gerne in Diskurs gehen, weil das ist so substanziell, dass es nicht singulär mit einer Antwort getan ist. Man muss es komplett betrachten. Ich habe auch mal operative Planung studiert, insofern habe ich einen anderen Blick auf die Dinge als andere Leute.
Danke.
Pasquale Tridico
I will make sure we are working very much on that. We are not trying simple question. We are making so many hearings, study reports and so on and so forth. By the way, Pascal, actually was involved as well. Pascal, do you want to add something?
Pascal Saint-Amans
Yes, absolutely. Thank you for for asking. That's what I tried to to highlight, right? We've had an anti-avoidance agenda, which went pretty far. And is there a need to declutter?
Probably yes. But we need to be very careful of of this swing of the pendulum, moving from one extreme to another one. We were at one extremity before the BEPS agenda where companies could do whatever they wanted. And that's what I tried to highlight in the paper which we issued a couple of weeks ago, saying that the the the possibility to do tax avoidance allowed companies to do investment where they wanted because they sheltered the profit in low tax countries. We've put an end to that.
Countries therefore are more sensitive or companies will be more sensitive to the tax differences. And that's why the European Union needs to respond. But we always need to be careful to combine the two policies. We shouldn't forget about the tax avoidance when promoting tax competitiveness, but we also need to promote tax competitiveness. Now, to get back to the taxation of capital, I think that's a a pretty complex challenge we have.
There are inequalities. There are ultra-high net worth individuals which who don't contribute. There is no work on trying to regulate the tax competition and not the sound competition to attract the rich. And and they benefit from too many advantages. And we need to find to be on the narrow path to better tax capital while not disincentivizing investment.
And that's the challenge I think that the European Union will be facing in the coming years.
Jussi Saramo
Thank you, Mr. Chair, and thank you all the experts. It was very interesting to hear you talk about digitalization. Of course, it's a very important and good tool. I'm from Finland and we have one of the easiest systems to pay taxes and it means more revenue. It means when it's easy, not all the grey economy in the small scale operations, it's not only because people don't want to pay taxes, but it's if it's very complicated, it's easier not to do it.
And if you have a very good digital systems, then you also get more fair market. But digitalization, it's of course, it's like the main change in our economy nowadays, that we have these digital giant companies, mostly coming from the United States. And in this new economy, these companies are gathering huge profits from European Union, but they don't pay almost any taxes here. And so we know that there are countries like Spain, France, some other countries who are trying to collect real revenue from the digital, some kind of digital service taxes. And we think that maybe we should have an European system so we could make it the base, that it would work better in European level than in the smaller the countries are, the weaker they are in front of these huge giant companies.
So I would like to ask how much is the structural change in the economy already reflected in overall taxation and in general, and if there are already visible differences between countries that are collecting DSTs and the ones that are not. Thank you.
Lotte Taylor
Thank you. The last is a very interesting question, which I don't have an answer to, but I would put that into the next report. I think that's a good research question. And indeed, we follow your narrative very closely. The digitalization is a boon.
It's a great asset when especially if it can help both tax administrations and taxpayers. There's a lot of talk about seamless taxation of integrating tax collection with the company's regular procedures and own IT systems. Of course, that comes with its own challenges and risks. And it's far beyond the Commission's competence to go into this, but we're very happy to facilitate the exchange of experiences amongst Member States to make this happen. Now, specifically on the digital services tax, indeed, Pascal may complement with the whole history on Pillar One and why it isn't so easy.
I will limit myself to saying that the Commission is following the European Council President's call to look at the Parliament's proposal for a digital own resource. And in that context, of course, we're also digging into the experience of those countries that have a digital services tax. I'd say that's where most of our work is at currently. And then as I said, the research question and how it affects the economy structurally, I think we'll need a bit more of a deep dive to answer.
Pasquale Tridico
Thank you. Pascal, I will give you the floor since I learned that you are going to leave in a while.
Pascal Saint-Amans
Thank you.
Thank you, thank you very much, Chair. Yes, I I think we we have an issue there on taxing the so-called digital economy, or more fundamentally, on the way taxing rights are allocated between countries when the largest companies have a rent, whether they are digital company, whether they are in the semiconductor system or in pharmaceutical actually. And and the the past 15 years have demonstrated that there was consensus among all the countries, including the US, to say that the existing rules are no longer fit for purpose, in particular for the digital companies, because the nexus no longer works, the traditional permanent establishment. And there has been work and there has been an agreement and we're back to square one now with the US saying, oh, after all, we're not so sure that there is a problem. We all know there is a problem and it's time to address it.
Now, the best, the first best solution is a multilateral solution, but it would require two-thirds of the American Senate to ratify it. Good luck, not possible. So there should be a backup. And and I think it's urgent for the EU to reflect on that because AI, artificial intelligence, will just multiply the issue. And not only it will multiply the size of the issue, but by undermining our social model, by triggering social expenses, it it will increase the need for the governments to get the money to be able to tax the profits which will be derived by Chinese companies, by American companies for the use of AI by our European companies.
So I think it's urgent. I know that everybody fears trade sanctions, trade war, but the trade war is here, the trade sanctions are here, and it's probably time for Europe to act. Thank you.
Pasquale Tridico
Thank you as well for your clarity. And now we move to the last question, Mr. Droese, please.
Siegbert Frank Droese
Thank you, Chair, I will speak German. Ja, es ist gut, dass die Steuerfragen in erster Linie auf nationaler Ebene geklärt werden und das sollte auch so bleiben. Also ich verstehe natürlich einige sozialistische Kollegen hier im Ausschuss, die das gerne zentralisieren würden, aber die Geschichte hat gelehrt, dass eben gelehrt, dass Sozialismus, Steuersozialismus eben nicht gut ist für die Völker Europas. Meiner Gruppe, der ID-Gruppe, der Alternative für Deutschland, meiner Partei, liegen die kleinen mittelständischen Unternehmen besonders am Herzen. Die KMU leiden ja bekanntermaßen seit Jahren unter der enormen Bürokratie, gerade hier aus dem Brüsseler Kosmos.
Meine Frage bezieht sich dann auch auf diese KMUs. Unternehmen sind sowohl durch eigentliche durch eigentliche Steuerbelastung als auch durch erhebliche Kosten für Steuererklärung, Dokumentation, Berichtspflicht belastet. Wo sehen Sie denn bei der Steuerpolitik derzeit das beste Kosten-Nutzen-Verhältnis bei niedrigen Steuersätzen, gezielten Investitionsanreizen und auch bei Abbau von Compliance- oder Berichtspflichten? Welche konkreten Maßnahmen hätten aus Ihrer Sicht den größten Effekt auf Investition und Wachstum? Die Frage würde insbesondere an Michael Jäger gehen.
Vielen Dank.
Michael Jäger
Ja, danke für die Frage, auch das klare Statement. Das ist natürlich schon so, dass die direkten Steuern in dem Fall in der nationalen Souveränität sind und Steuern sind ja auch ein Standortwettbewerb. Also insofern das wäre jetzt ein Paket aus den Maßnahmen, was Sie beschrieben haben. Es ist natürlich die Steuerbürokratie und wir sind im Austausch, also in Bayern zumindest mit dem Finanzministerium, wenn es um die Digitalisierung geht. Da sind unglaubliche Chancen drin, aber es sind auch Risiken mit drin.
Und ein Beispiel möchte ich da kurz nennen. Wenn Sie heute digital alles abgeben müssen, ich habe auch selber ein Unternehmen, ist das ja alles super. Man muss es erst mal fassen, muss es schicken. Dann frage ich mich, warum ich die gleichen Unterlagen noch zehn Jahre physisch aufheben muss. Das sind Dinge, die auch schwierig sind.
Dokumentationspflichten. Wenn ich digitalisiere, muss ich auch dann einfach dann sagen, dann gehe ich das, wenn es einmal anerkannt ist, dass Dokumentationspflichten wegfallen, dass es halt digital erfasst ist. Das wäre jetzt so ein Thema. Auch die Geschwindigkeit mit Rückerstattungen und auch der Austausch. Das finde ich schon wichtig.
Auch übrigens der Austausch zwischen den Ländern, weil ich habe jetzt noch mal nachgeschaut, es gibt ja unterschiedliche Schätzungen. Vielleicht weiß was Sie ja auch etwas ein bisschen mehr, dass Lotte was dazu sagt. Schätzung bei Mehrwertsteuerbetrug in der EU 30 bis 80 Milliarden pro Jahr. Und das kann es auch nicht sein. Also wir sind nicht der Bund der Steuerhinterzieher, sondern der Bund der Steuerzahler.
Wir wollen die Belastung erträglich halten, aber eigentlich muss man da mal ansetzen. Und natürlich gehört da auch der Mut dazu. Es gibt Themen wie die Erbschaftssteuer, die bundesweit geregelt wird, aber den Ländern zusteht. Spezielle für Deutschland, da wären wir für eine Regionalisierung, um auch hier für mehr Gerechtigkeit zu sorgen, weil es sind schon Unterschiede von den Werten in den einzelnen Teilen von Deutschland, allein von Deutschland. Also insofern one size fits it all auch für Europa halte ich für unglaublich schwierig, weil du so unterschiedliche Rahmenbedingungen hast und gerade in den Regionen.
Also insofern da gibt es Dinge, können wir uns aber auch gerne mal austauschen. Aber ich sehe hohes Potenzial in der Digitalisierung und in einem gemeinsamen Konzept, den Umsatzsteuerbetrug wirklich konsequent zu bestrafen, konsequent zu bestrafen.
Pasquale Tridico
Thank you. So we finish this session. It was very interesting. Thank you to all the colleagues for the question, for the interaction. Thank you to our distinguished speaker for their answer.
Now we move to the session if you want just 20 seconds of break for giving our speaker the time to leave. In 20 minutes Mr. Pampi will be ready. In 20 seconds basically.
Thank you. So we can start, please. We have the consideration of amendment based on the report of VAT reverse charge mechanism led by Mr. Pierre Pampy. We do have the shadow here, some of them they are replaced, but anyway we do have all the groups, well, most of the groups covered. Pierre, you have four minutes to introduce the for the exchange of view for your introduction, and then we hear our colleagues for up to two minutes each of them.
The floor is yours.
Pierre Pimpie
Très bien. C'est donc en français que je vais faire cela. Nous examinons les amendements sur le rapport relatif au donc mécanisme d'autoliquidation de la TVA. Je remercie les rapporteurs pour leur travail et les échanges commencent dans un esprit favorable. Plusieurs amendements ont déjà été intégrés au texte et vont renforcer certains points de poids comme la sécurité juridique, la prise en compte des PME, les coûts de conformité, le suivi de la fraude et l'articulation avec ViDA.
Mais il faut garder en tête l'esprit technique de ce rapport. Nous examinons un outil précis, le mécanisme d'autoliquidation et son avenir après 2026. L'article 199a doit être prolongé, mais cette prolongation doit rester encadrée. Le mécanisme doit rester ciblé, proportionné, fondé sur des risques réels et appliqué là où il apporte une vraie valeur ajoutée. Sur l'article 199b, le constat est simple : le mécanisme de réaction rapide existe, mais il n'a jamais été utilisé.
S'il est maintenu, cela requiert une procédure plus simple, des critères plus précis, des délais réalistes et des garde-fous. Notre sujet ici, c'est la fraude. Elle doit être combattue fermement, mais sans complexifier inutilement la vie des acteurs honnêtes. Le travail de compromis devra donc préserver cet équilibre : prolonger l'article 199a, clarifier son application, réduire les charges inutiles, rendre le QRM opérationnel et accompagner la transition vers ViDA. J'espère que nous pourrons avancer de manière constructive.
Le texte final doit rester efficace, lisible, proportionné et respectueux des compétences des États membres.
Je vous remercie.
Pasquale Tridico
Thank you. Thank you very much, Pierre, for your introduction. Now I will give the floor to Fernando Navarrete, who replaces Mr. Dorfmann, for up to two minutes.
Fernando Navarrete Rojas
Thank you, Chair. I'm speaking on behalf of Mr. Dorfmann, who cannot be with us today. So first, a certain number of amendments have been taken up in these compromises, ours from EPP and from others. That is visible in the text and we appreciate the way this file has been handled so far. Since this is an implementation report, our task is to assess whether one specific instrument works on the basis of the evidence available.
This is not the place to reopen how tax decisions are taken in the Council or to settle debates that belong to other files. There are still elements to fix in the first draft of the compromises that was circulated to the shadows. If we stay focused on evidence-based results, this report can carry the support of every group in this room, which would make it considerably more useful. Another point that matters to us is the scrutiny role vis-à-vis the Commission. Some of our amendments sought to highlight that Parliament asked in 2022 for an assessment of the reverse charge mechanism before any further extension, and that the last assessment dates back to 2018.
We should keep, at least in part, the passages where we stress that the Commission should deliver on this. On the extension of the mechanism, regardless of any specific duration, we would tie it to the point where ViDA is demonstrably effective as a transitional period. This is important to keep in the report, sorry. We hope we can continue to work constructively and vote on this report in the autumn. Thank you very much.
Pasquale Tridico
Thank you, Fernando. And now we give the floor to Matthias Ecke, who replaces Bruno Gonçalves.
Matthias Ecke
Thank you, Chair, and on behalf of Bruno Gonçalves and S&D group, I want to remind that according to the most recent study from the Commission, the 27 member states combined are losing up to 128 billion euros per year due to gaps in VAT compliance. So it's not just a number, I mean, it's also resources for public services and so on. Experience points to the VAT reverse charge mechanism being an effective tool at curbing tax fraud and also for that reason our view is favorable towards the temporary extension of such a tool. But since the mechanism also overexposes the VAT chain to evasion in the last transaction, it should not become the norm nor replace structural solutions including the VAT in the digital age package, the ViDA package that was mentioned. S&D group tabled a couple of amendments that seek to improve the draft report in a meaningful way, particularly regarding EU-level action, because we know that through harmonization to simultaneously simplify and to improve effectiveness of the VAT system in Europe, that is possible and there is room for that.
And the recent Eurobarometer study with responses from more than 12,000 SMEs, they pointed to taxation and value-added tax as the most prevalent barrier that prevents enterprises from scaling in the single market. And also another survey with 25,000 participating citizens shows that a majority voted for the EU to have combating tax avoidance and evasion as a main priority in the field. We just discussed that in the previous hearing. So with that in mind, while supporting the extension of the reverse charge mechanism, S&D tabled amendments that address the following two core issues. First, the lack of a definite VAT system that prevents fragmentation from becoming loopholes for fraud.
And second, the need to rethink our voting methods since unanimity is protecting governments who are less committed to this cause. This does not mean qualified majority for everything, but in specific cases, facilitating the harmonization of procedures and definitions or cooperation of tax authorities can truly make the difference in combating fraud. And this is something that we have put forward in our amendments. Thank you for the time and consideration.
Jussi Saramo
Thank you, Mr. Chair, and very shortly, thank you for all the rapporteurs and all the amendments. We have done some also, but everybody has to admit that we have huge problems with the collection of VATs and this criminality around it. It's not only about how much money we can collect. It's not just economical, not about markets, but it's linked to very traditional criminality with human trafficking, drugs trafficking and so on. So I think we have to be very cautious that we are not just letting things go as they used to, but we have to do everything we can to fix the problems with VAT and I look forward to this process.
Thank you.
Siegbert Frank Droese
Ja, danke, Chair. Ich werde Deutsch sprechen. Also, ich danke dem Kollegen Vimke, dass er sich den Bericht sozusagen vorgenommen hat. Wir werden das natürlich auch wohlwollend begleiten. Wir haben ja doch in der Steuerpolitik eine ganze Reihe Gemeinsamkeiten identifiziert.
Also ich wünsche ihm viel Erfolg dafür, mehr kann ich eigentlich aktuell nicht sagen. Danke.
Pasquale Tridico
Thank you very much. Thank you to Pierre for your relation, for your report, sorry. You have one minute to reply for to the comments.
Pierre Pimpie
Alors, alors donc je pense que je vais prendre en compte les propos qui ont été dits. Je pense, enfin comme j'ai pu le dire, que c'est un rapport qui n'est pas de droite, qui n'est pas du centre, qui n'est pas vert. Donc en fait, je pense que nous pouvons tous nous rassembler sur le fait qu'il faut lutter contre les fraudes fiscales et là c'est un point qui est assez saillant. Et j'aurai donc à cœur de prendre en compte l'ensemble des avis, l'ensemble des groupes. C'est ce que j'ai fait jusque-là et je pense que nous allons vers la bonne voie.
Voilà.
Pasquale Tridico
Thank you. Just thank you very much to all of you. Just to remind that tomorrow actually will take place the first shadow meeting and it is scheduled at half past ten, from half past ten to twelve o'clock. So good luck for this meeting. Eleven.
So I was, eleven, Pierre. There was a change in the meeting, not half past ten but eleven, just to give you a correct information. So thank you to all of you for being here. We start in few minutes, in two minutes, the coordinator reports. Thank you.
The coordinator meeting, sorry, yeah.
Okay, colleague, we can start. Please take place. Okay, thank you. As just requested to the CCC on