EU Commissioner Hoekstra outlines EU taxation priorities for the next five years

Thank you Chair,

Ladies and Gentlemen,

Excellent to have the opportunity to be here. Thank you for the invitation and your kind words on our collaboration which I’m very much looking forward to.

Let’s tackle my job title right away. I have the longest job title I’ve ever had but indeed there is one important element missing and that is taxation. So be aware that I always add it when I have the opportunity because of the importance and relevance of the topic.

Taxes allow us to build better societies and to invest in the things that matter most: safety and security, quality education, roads and so on. So we must continue to focus on how we structure taxes in a way that advances our economies and first and foremost the well-being of our people.

Today I’ll mention a couple of things :

• First, on the competitiveness agenda;
• Second and closely tied to competitiveness, the role of tax in supporting the green transition;
• And third, how we should work on fairness and transparency in taxation.

First, on competitiveness.

As you know last week, we unveiled the Commission’s new roadmap for the next five years called the Competitiveness Compass. It identifies what we need to do to boost competitiveness, clearly highlighting the need for a competitiveness-driven approach to decarbonisation. Decarbonisation not only as a climate strategy but also as a clean growth strategy.

We’ll finalise the Clean Industrial Deal at the end of the month. Our goal is to present industry with a stronger business case for large climate neutral investments in energy intensive industries and clean tech.

So what does this mean for tax policy?

We’ll look into recommendations on immediate expensing and accelerated depreciation to encourage business to invest in clean tech production. We’ll also look into if and how we update the State Aid framework to ensure it’s fit for purpose. And we’ll continue to work on current legislative proposals such as BEFIT that will enhance EU competitiveness.

We’re also very much aware that high energy prices are a major challenge for businesses large and small across our Union. To address this, we’ll look into the role of levies, charges but also taxes.

On top of that, it’s clear that complexity and red tape –created at European level but also to the same degree at Member States level – needs to be tackled. Therefore we’re exploring in each and every domain what we can do, either ourselves as Commission or how we can incentivise Member States to do the same. For example we’re looking into streamlining the Anti-Avoidance Directive and improving overall exchange of information for tax purposes. Specifically, we’re examining ways to streamline the VAT reporting scheme for payment service providers, amongst other things. And we are also looking into simplifying CBAM.

Second, taxation can be a powerful and effective tool for driving progress on our climate goals.

In this respect, I hope to close negotiations on the Energy Taxation Directive, which if we manage to see this through, will further incentivise clean energy by taxing fossil fuels more than renewables. In my view, the text needs to be more ambitious in the aviation and maritime sectors and we do want to make sure we make progress on emission targets.

I’m also keen to explore other ways of pushing forward our clean transition agenda like for instance, greening VAT systems.

We saw how the 2022 VAT reform was an important first step in this process, bringing tangible benefits such as cheaper solar panels and heat pumps.

I’m interested in looking into further VAT reforms in key areas. These could include transport and tourism, the circular economy and not easy but very important the treatment of second-hand goods, the destruction of recyclable goods, and aviation and maritime.

Third big angle: we must ensure that our tax systems are equitable, simple, and designed to prevent fraud.

It’s of the utmost importance that these systems are fraud-proof when we build them.

Just last month, we published the latest report on the VAT gap. One figure in the report really stood out to me. In 2022, the VAT tax gap stood at EUR 89 billion for the 27 EU Member States.

You could argue that the number has gone done and we have done a good job in the past few years. But it’s such a huge amount for Member States who are almost without exception cash constrained. This is something we really need to look into it and we need to do more of.

We always talk about raising taxes, slashing spending or further increasing debt levels. Unfortunately the conversation is not often about how to boost productivity and how to close the tax gap. This is a missed opportunity in my view. How do we get the money we’re actually entitled to get.

Those are the main priorities.

There are a few more relevant points:

On E-commerce: 

I’m sure you saw yesterday’s Communication. If you look at these numbers, they’re truly staggering. We are getting more than 4 billion small parcels into the Union. It’s double what we got last year. And last year was double what we got the year before. It’s a huge workload. It means sorts of hazards in terms of safety and security  and we’re being flooded with plastic and paper that we need to get rid of. We really need to draw a line in the sand here and I’m glad we took a further step in this direction yesterday.

Finally on the international front, I’m sure it’s on the mind of many of you. I very much look forward to engaging with OECD partners. On the US executive order on the Global tax deal, of course, in my view, it’s a regrettable development.

The US and the EU have always shared the same interest in curbing profit shifting to low-tax jurisdictions. It’s in our common interest. We believe global tax problems require global solutions and remain committed to the obligations which we undertook in the OECD over the last years.

I’ll be looking for opportunities to engage constructively with the new US Administration on Pillar 1 and Pillar 2.

Last but not least, I would like to take this opportunity to commend the hard work that the Chair, Mr. Tridico and the FISC coordinators have put into organising the Tax Symposium that takes place on 18 March.  If it’s not yet in your calendar, please put it in there.

Thank you.