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Remarks at ECON structured dialogue on taxation (26 September 2022).

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Thank you Chair and good afternoon to everyone. Honourable Members, I am pleased to be here today for our Structured Dialogue on taxation.

Since our last meeting, war has returned to Europe.

And so first of all let me say I'm proud that the EU tax and customs policies have played and are playing a strong role in supporting EU sanctions efforts. In particular with DG TAXUD's role in what we call the ‘seize and freeze' task force for sanctions.

Russia's aggression is leading to rising energy prices and we all know that this is putting households and businesses across the EU under pressure.

In response, the Commission adopted several initiatives. These initiatives were complemented a few days ago with an immediate and temporary measure: the regulation on an emergency intervention to address high energy prices. This proposal includes three strands:  first, measures to reduce demand; second, a temporary revenue cap on ‘inframarginal' electricity producers that are making exceptional revenues with the rise in prices of marginal producers; and third, and this is more related to our topics, a temporary solidarity contribution based on surplus profits made by the fossil-fuel sector in the fiscal year 2022.

This temporary solidarity contribution will redistribute abnormal surplus profits earned as a result of this crisis, to support those most in need. This measure answers repeated calls from the Parliament in this direction.

Regarding energy taxation, I provided guidance to Member States in my letter to ECOFIN ministers of 25 April 2022 to avoid an uncoordinated response that would be detrimental to the Single Market. Meanwhile the revision of the Energy Taxation Directive tabled last year, as part of the Fit For 55 Package, can also support our common objectives and strike the right balance between bringing energy taxation in line with our climate goals, and ensuring that this is done in a socially just way. And I hope we can overcome the freezing of this discussion, because I think this is very important and I regret that it was frozen, until I think March next year.

And of course, we continue to work constructively with the co-legislators to reach an agreement on the Carbon Border Adjustment Mechanism. This remains a key priority and an essential instrument for ensuring that our climate ambitions are not undermined by producers in jurisdictions with less exacting environmental standards. The trilogues are ongoing and we have a new meeting next week.

As you know, we are still working on the necessary aspects of the historic two-pillar global tax agreement. We remain fully committed to pressing ahead with this crucial reform to the global tax framework: step by step it must become reality. As you know, both Pillars are equally important to us. Both minimum taxation and the reallocation of taxing rights will have to be implemented to provide a fairer and more stable global corporate tax system.

You know that there is still one Member State opposing minimum taxation in the EU. But be reassured that, working with the Czech Presidency, we will not give up until we overcome that blockage.

We also continue to participate in the negotiations at the OECD on the multilateral convention on Pillar 1, which as you know are going on, with some delay. We stand ready to put forward a proposal for a quick and uniform implementation of Pillar 1 in the EU as soon as work at the international level is sufficiently mature.

As announced in our business tax communication in 2021, our plan is not only to implement the OECD tax deal, but also to draw inspiration from it, to build a new, modern and simple framework for business taxation in the EU – which we call BEFIT.

As President von der Leyen noted in her speech to the Parliament, BEFIT will make it easier to do business in the EU, by cutting red tape and improving access to the single market.

Let me turn now to the state of play of two of our tabled proposals.

First, DEBRA. Well-designed tax policies can help stimulate growth and investment. This is also the objective of our recent proposal for a Debt-Equity Bias Reduction Allowance. DEBRA, as we call it, aims to support the re-equitisation of companies by re-balancing the current asymmetric tax treatment of capital costs of debt and equity.

Second, the UNSHELL proposal, to address the misuse of shell entities for tax purposes within the EU. It will ensure that businesses which only exist on paper cannot benefit from tax advantages. This will be complemented with upcoming action in two areas as a follow-up to the Pandora Papers:

Firstly, an initiative to address the role of enablers in facilitating tax evasion and aggressive tax planning through the use of complex structures in third countries. Secondly, using the untapped potential of the EU listing process, in particular to tackle issues of beneficial ownership and the requirements for zero tax jurisdictions.

In conclusion, three proposals in the pipeline.

First, a proposal to bring VAT to the Digital Age and to reduce the VAT gap. While final policy choices still need to be made, my services' impact assessment estimates that this proposal could raise over 10 billion euros per year over ten years in additional tax revenue for the 27, while reducing compliance costs for businesses.

Second in the pipeline, a revision of the Tobacco Taxation Directive. Our intention is to prepare an ambitious proposal reviewing the minima rates for traditional tobacco products, but also looking at the harmonisation of tax regimes for new products and addressing the concern of the lack of control of movements of raw tobacco.

And third, a proposal to ensure greater tax transparency in crypto-assets, also known as DAC8. DAC8 will improve Member States' ability to detect and counter cross-border tax fraud, evasion and avoidance resulting from certain crypto-assets transactions.

In conclusion, honourable Members, we know we live in challenging times and in this regard, there is a useful initiative I would like to mention – the Tax Symposium on the ‘EU tax mix on the road to 2050'. This event, taking place on 28 November, will be an opportunity to reflect together on the long-term tax challenges we are facing and what tax policy mix will allow us to meet them. And the role of the Parliament will be key in this strategic reflection.

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