The role of simple tax rules and tax fragmentation in European competitiveness
This European Parliament report examines how complex tax rules and tax fragmentation in the EU impact the continent's competitiveness and economic growth. The report highlights that overly complicated tax systems create obstacles for businesses, particularly small and medium-sized enterprises (SMEs), leading to legal uncertainty, double taxation, and difficulties in claiming refunds, which discourages cross-border economic activity. It calls for simplified and predictable tax rules to make compliance easier for taxpayers and administration more efficient for governments, aiming to foster a business-supportive environment where companies can thrive. The report also emphasizes the need for better tax cooperation among Member States to reduce fragmentation and complexity, while respecting national competences and promoting a level playing field.
Analysis
Tax policy fragmentation and complex tax design create obstacles like legal uncertainty, risk of double taxation, and difficulties claiming refunds, discouraging cross-border activity.
What changes
- The FASTER Directive on faster and safer relief of excess withholding taxes has entered into force, aiming to modernize and streamline cross-border tax procedures.
- The VAT in the Digital Age (ViDA) package, including the EU Digital Reporting Requirement, is noted as a tool to enhance transparency and reduce fraud.
- The report reiterates the EU's commitment to implementing the OECD/G20 two-pillar approach, specifically Pillar Two, ensuring a global minimum tax level for multinational groups.
Expected impact
- Divergent tax rules across the EU are identified as a significant hurdle to achieving a true single market, impacting competitiveness.
- Tax compliance costs impose an additional financial burden on companies, diverting resources from potential investment opportunities.
- The complexity of tax regulations and fragmented tax systems impose high administrative burdens and compliance costs on SMEs, hindering their growth and innovation.
Limitations
- The document is a resolution and does not contain specific quantitative data on the impact of all proposed measures.
- Detailed implementation plans or timelines for all mentioned initiatives are not provided.
- The document focuses on the role of tax rules and fragmentation, not on specific legislative proposals beyond referencing them.
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