We all benefit from a tax system that is fair and efficient, as it enables governments to provide important infrastructure and services. However, EU countries struggle with issues such as international corporate tax avoidance, with losses of around €35 to €70 billion annually in the EU and €60 billion in lost value added tax (VAT) revenue.
Taxation is very complex, in particular for companies operating across the EU. The difficulty of having to comply with all the different national tax rules creates barriers preventing businesses from enjoying the full benefits of the single market, to the detriment of economic growth, job creation and consumer choice.
EU countries have exclusive power to set and collect taxes. As such, the European Parliament can only produce non-binding opinions on tax-related matters. However, in June 2020, it decided to set up a Subcommittee on Tax Matters (FISC). This was the European Parliament’s first permanent committee on tax affairs, focusing on all tax-related matters, particularly the fight against tax fraud, tax evasion and tax avoidance, as well as tax transparency.
Four years later, the subcommittee has established itself as a key forum to discuss EU tax matters. Members have engaged extensively with tax experts from academia, non-governmental organisations and businesses and organised meetings with national parliaments to enhance cooperation. More specifically, the subcommittee held hearings on the status and efficacy of the tax reforms countries committed to as part of their post-pandemic recovery programmes to access the EU’s Next Generation EU recovery funds.
The FISC subcommittee has also engaged actively with countries outside the EU. It has used fact-finding missions, for instance to Singapore and the United States, to promote good tax governance standards, encouraging countries to join the global agreement on international corporate tax reform.
In addition, the FISC committee has adopted a series of recommendations to shape the EU’s tax agenda and maintain pressure on both the European Commission and the Council to enable a fairer and growth-friendly tax system. For example, FISC has called for measures to further harmonise electronic invoicing, to simplify the withholding tax framework and to counteract the misuse of shell companies. Several legislative initiatives in this area are now being debated by the Member States.
Parliament thus used its oversight and scrutiny powers to put pressure on both EU countries and the institutions to ensure their tax systems are fair and efficient. Parliament’s powers fall broadly into six, often overlapping, domains: law-making, the budget, scrutiny of the executive, external relations, and, to a lesser extent, constitutional affairs and agenda-setting. This graphic shows more examples of areas where Parliament used one or more of its different powers to influence legislation:
For a fuller picture of the European Parliament’s activity over the past five years, take a look at our publication Examples of Parliament’s impact: 2019 to 2024: Illustrating the powers of the European Parliament, from which this case is drawn.
Comments are closed for this post.