30 November 2022

Speech by Commissioner Gentiloni at the first EU Tax Symposium

Last year's historic global tax reform, agreed by 136 countries, will bring major improvements - making it fairer and better adapted to the modern economy. To reap the full benefits of this agreement, we must now ensure the implementation of both Pillars of that reform – in Europe and worldwide.

It is my great pleasure to welcome you to this first EU Tax Symposium. Let me thank the colleagues from DG TAXUD for organising this event.

We have traditionally looked at tax policy with something of a narrow approach, focusing on the specifics, on the technicalities. That is not bad per se, but we should complement it with a big picture approach. We must look more broadly at the new realities we are facing and at the long-term trends shaping our economies and societies. And we must reflect on the role that taxation can play in addressing these challenges and helping to deliver on our common objectives. That is in essence the goal of this symposium.

As you all know, the primary function of taxation is to generate revenues for governments. But taxation is of course much more than that.

Taxation can ensure that the resources collected for the State are levied in a fair and sustainable manner. It is a crucial tool to tackle inequality and ensure a fairer societal allocation of resources. And it can change production and consumption patterns – something that is particularly relevant when we think about the green transition.

These functions are worth bearing in mind as we consider how taxation can contribute to tackling climate change, or inequality, and how it can support our common goal of achieving sustainable and inclusive growth.

In recent years, we have made some headway in reforming our tax systems to address these pressing challenges.

Last year's historic global tax reform, agreed by 136 countries, will bring major improvements to the international tax landscape, making it fairer and better adapted to the modern economy. To reap the full benefits of this agreement, we must now ensure the implementation of both Pillars of that reform – in Europe and worldwide.

We remain fully committed to this crucial reform: step by step and piece by piece it must become a 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 in due time to provide a fairer and more stable global corporate tax system.

But while we press ahead in the EU, we must also ensure that all the parties to the agreement follow suit. I remain convinced that a swift implementation of this tax package is feasible. The Pillar Two Global Anti-Base Erosion (GloBE) Model Rules pave the way for a consistent implementation at global level. The new calendar for signing the Multilateral Convention on Pillar One is set for the first half of 2023.

At EU level, we have also been advancing an ambitious programme of tax reform. We have installed a world-class tax transparency framework. We have tightened our defences against tax abuse. And we are working to make both our direct and indirect tax systems fit for the digital age.

In the field of VAT for example, Member States lost 93 billion euros in VAT revenues in 2020. At a time when investment needs keep growing and public finances are constrained by high debt levels, these are losses we can ill afford.

Better use of IT is very promising in this field. Our analysis suggests that the introduction of e-reporting systems will allow Member States to recoup 11 billion euros more every year over the next ten years in currently uncollected VAT revenues. Next month we will put forward a proposal on this.  

And there is more to come before the end of this Commission mandate – not least new proposals to improve the business tax framework in the EU.

Next year, the Commission will propose a single set of tax rules for doing business in Europe – we call it BEFIT, which stands for Business in Europe: Framework for income Taxation.

BEFIT will take inspiration from the two-pillar reform at global level, but go further, to provide a new corporate tax system fit for our closely integrated single market. It will replace national corporate tax systems for the companies in scope, thus reducing compliance costs and barriers to cross-border investment.

BEFIT will have the key features of a simplified common tax base and the allocation of taxable profits between Member States. It will be another important step in the fight against harmful tax competition.

Our services are currently in the design phase so I strongly encourage all stakeholders to participate in the public consultation, which runs until the beginning of January.

When we reflect on the future of tax policy in the EU, we must bear in mind one inescapable truth: Europe is already the highest taxing region in the world. The tax-to-GDP ratio in the EU is around 40% compared with a 33% average in the OECD. So the scope to increase tax revenues further in the future might be limited. But what we can do is to consider how we can adapt our tax mix, to make it fairer, greener, more growth-friendly.

The EU's current tax mix relies heavily on labour taxes, which account for more than 50% of the overall tax revenue. Value added taxes (with more than 15% of total tax revenues) are the second largest component. Other tax bases contribute considerably less...

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