On Wednesday evening, MEPs adopted two texts on tax matters, one on the “EU.inc” 28th regime and another on a coherent tax framework for the EU financial sector.

Both texts were adopted by the Economic and Monetary affairs committee, 36 votes in favour, 18 against, 1 abstention for the report on the tax dimension of the “EU.inc” initiative, and 37 votes in favour, 6, 11 abstentions for the report on a tax framework for the financial sector.

Addressing the tax aspects of the “EU.inc” initiative

This report feeds into the ongoing legislative process on the 28th regime (“EU Inc.”). Specifically, it sets out in detail the position on the tax aspects of the 28th regime which could, in time, be incorporated into the negotiating position that the European Parliament negotiators will defend when they meet to member state representatives to hammer out a deal.

The report’s recommendations follow a modular approach, acknowledging that the first step should be a unified corporate law framework, with later modules possibly covering also taxation. On this potential tax module the report proposes targeted coordination measures, such as a consolidated corporate tax base, standardised tax returns, simplified VAT procedures, and streamlines withholding tax rules. The report also stresses that measures would need to also be put in place to ensure that the regime would not become a tool for tax avoidance, tax competition, or tax shopping. Thus, it proposes that access to the 28th regime be only granted to companies with genuine economic activity in the EU.

The report also proposes schemes aimed at improving attractiveness for innovative companies and allowing companies to scale-up easily in Europe. For example, it promotes employee stock option rules, simplified transfer pricing, and coordinated R&D tax incentives.

The rapporteur Ľudovít Ódor (Renew, SK) said. “While focusing specifically on taxation, this report supports the ultimate goal of the overall EU. Inc endeavour: to create an ambitious, yet still caring space for European talent in business, and future growth and prosperity.”

“Though sensitive, as taxes always are, I am glad we were able to formulate an ambitious wording on how taxation of the companies under 28th regime could look like, while not requiring any changes to the existing EU legal framework.

“There is still much work to do so that European companies may function, grow and flourish within the Single Market. But I am convinced that this report is a positive statement to companies and those who wish to invest in their growth because it helps simplify life for companies.”

A coherent tax framework for the financial sector

This report looks at financial sector taxation and the consequences of the VAT exemption for financial services, and explores how addressing these issues could lead to a more coherent and effective tax framework across the Single Market.

The report mainly seeks to open discussion on the need to reform or remove the antiquated EU-wide VAT exemption for financial services thus mitigating the highly fragmented and costly tax landscape this exemption has created. It therefore asks the Commission to review the impacts of the current system and consider policy options to address distortive impacts. More broadly, the report also stresses the need for a coherent set of rules for the EU’s financial sector, while respecting the principle of tax sovereignty.

The rapporteur, Matthias Ecke (S&D, DE) said, “This report highlights a simple contradiction: Europe wants deeper financial integration, but financial sector taxation remains fragmented. The VAT exemption for financial services has contributed to a patchwork of 91 sector-specific taxes across the EU, creating complexity, legal uncertainty and barriers within the Single Market.

“At a time when Europe is building a Savings and Investments Union, we need a more coherent framework that supports investment and cross-border activity. The question of how the financial sector contributes to financing our common priorities should be part of that debate, including through a reformed VAT framework, a Financial Transaction Tax or other European solutions.”