I am pleased to be with you today for this exchange of views on taxation. This exchange of views was initially intended to mark FISC’s first anniversary. It is never too late, so let me wish you a belated happy anniversary and congratulate and thank you for being such an important actor in the fight against tax evasion and avoidance.
The year ahead of us is going to be very demanding. We will soon enter the second half of this Commission’s mandate and we need to work at speed on many fronts:
First, making the recent global achievements on tax fairness operational;
Second, continuing our fight for tax fairness, with a number of proposals;
And third, and very important, working with our allies on tax fairness and on our climate goals: The COP26 ended two weeks ago with some real deliverables that the EU fought hard to achieve. Now we need to see a swift adoption of our proposals for a Carbon Border Adjustment Mechanism and a revised Energy Taxation Directive. And even our proposal to reform the system of VAT rates, where we are now almost at the finishing line following a three-year negotiating marathon, will serve our climate ambitions. While it will provide more flexibility for Member States to set their own rates, it will do so while respecting core environmental policy objectives.
Let me now say a bit more about some of the milestones that are the most relevant to your mandate.
First, the Inclusive Framework agreement reached in October and then endorsed by the G20. Of course, implementation is now crucial and I would say it is now my number one priority in the area of taxation.
We have collectively committed to an implementation roadmap. The Pillar 1 and Pillar 2 rules are due to come into effect in 2023.
Once the OECD has finalised the technical details of the agreement, the so-called Model Rules – which we hope will happen in the coming days – the Commission will move very quickly to put it into practice in the EU.
On Pillar 2, to ensure the timely entry into force of the rules in all Member States, we plan to propose an EU directive still this year.
This proposal will be fully consistent with the final version of the OECD Model Rules. It will provide legal certainty and ensure that the Pillar 2 rules are implemented in a manner that is fully compatible with EU law.
I expect that a first discussion at ministerial level will take place at the January ECOFIN, with a view to reaching a swift agreement during the French presidency.
Receiving swiftly the European Parliament’s opinion will be crucial in ensuring timely formal adoption and in this way meeting the globally agreed deadline – very ambitious deadline – of 2023 for the entry into force of the rules.
On Pillar 1. According to the agreed implementation roadmap, the text of the multilateral convention will be stabilised in spring next year, signed by June and ratified before the end of next year. Once work on the text of the multilateral convention is sufficiently advanced, we will have more clarity on the EU’s way forward. Also on the tools to adopt this convention.
The decision to put on hold the digital levy proposal for a possible own resource remains valid. As I said in other opportunities, the Commission considers the implementation of the OECD global agreement to be the number one priority in the area of corporate taxation.
Next year will be rich in new proposals to strengthen further our framework to tackle harmful tax practices.
We need no complacency with those who exploit the rules to pursue tax evasion, avoidance or money laundering.
The Commission will soon adopt a key initiative to tackle the use of shell companies. The envisaged proposal is aimed at ensuring that legal entities in the EU that have no or minimal substantial presence and no or minimal real economic activity will not benefit from tax advantages.
We are also reflecting on proposing to Member States a more robust approach for zero tax jurisdictions in the context of the EU list of non-cooperative jurisdictions.
I am pleased to note that this issue has been taken seriously also in the international fora and we expect an international response from the OECD Global Forum on harmful tax practices and from the OECD Inclusive Framework. The EU is keen to lead by example, but of course a consensus-based solution remains in our view the optimal solution.
Turning to more domestic fronts, we both – the European Commission and the European Parliament – agree that an urgent reform is needed to broaden the mandate of the Code of Conduct Group. And I warmly thank you, the European Parliament, for your support there.
What is currently on the table will help – once adopted – in fighting measures that lead to double non-taxation, or double or multiple use of tax benefits.
We are working hard together with the Slovenian Presidency to bring Member States to an agreement. However, two Member States still oppose the revised mandate and are thus blocking the agreement, despite the compromise that we are working on. Hopefully, we can come to a result still this year.
I trust I can rely on the European Parliament’s initiatives and action in keeping up the public pressure for this reform for this initial reform of the Code of Conduct Group.
Last but not least, we will continue pushing for higher standards of transparency. In 2022, the Commission will table a proposal to improve public transparency around the effective tax rate paid by large companies in the EU. The calculation of the effective tax rate will make use of the methodology agreed for the purposes of the Pillar 2 global solution on minimum effective taxation – once this is agreed at international level. So this proposal is quite timely because it comes when the Pillar 2 agreement is near to being implemented.
The Commission will also propose a revision of the directive on administrative cooperation, by expanding the scope for exchanges of account information that involves crypto-assets and making the existing exchanges more effective. As you know, the exchange of information is crucial and necessary for tax transparency and fairness.
At a time when each euro counts, protecting the financial interests of the EU and its Member States is more than ever a priority. But there is more that taxation can do to help us leave the economic downturn behind and transition towards a greener, more digitalised, economy.
Because we will require new technologies and innovation and this will imply large investments. And breakthrough technologies often require equity financing due to their risk structure.
The current “debt-bias” induced by most EU tax systems not only leads to higher debt levels, which make companies more fragile and economies more vulnerable to crises. It also hinders the development of equity financing which is crucial for innovation.
So in the first half of 2022, the Commission will make a proposal for a debt-equity bias reduction allowance: DEBRA. It will help redress the current imbalance, by ensuring a better balance between the treatment of debt and equity for tax purposes.
This measure is only a starting point for a broader reform of the EU business tax system. In 2023, as you know, the Commission will put forward a proposal for a holistic EU business tax framework fit for the decades to come, what we call BEFIT.
The contribution of the European Parliament will be particularly valuable in this regard. The Tax Symposium will be a particularly important event for BEFIT and will serve as an excellent opportunity to describe our way forward.
In conclusion, shaping tax policies that work for people and for the economy is a commitment that features high on the political agenda of this Commission. This year we have taken a historic step forward with the global tax agreement. Next year we will be moving forward to implement this agreement and on multiple fronts to deliver fairer, more transparent and more sustainable taxation systems for the benefit of all Europeans.
That is our vision and we are counting on the European Parliament to strengthen it and help us turn it into reality.
Thank you, Chair.