EESC advocates for smarter tax rules to ease compliance and boost competitiveness

The European Economic and Social Committee (EESC) has adopted an opinion supporting the European Commission’s ambition to simplify tax reporting obligations across the EU, reduce administrative burdens, especially for SMEs, and improve the effective use of tax information by authorities. The EESC stresses that simplification must avoid creating loopholes or unfair tax shifts, while also calling for harmonised rules, clearer guidance and enhanced digitalisation.

In its ongoing drive to strengthen the EU's competitiveness, the European Commission has set ambitious targets to reduce the administrative burden by 25% for businesses overall and by 35% for small and medium-sized enterprises (SMEs) by 2029. This objective affects the tax agenda by calling for a wider agenda to ‘declutter’ tax rules and reporting obligations that have grown complex due to overlapping legislation and evolving global standards such as the OECD’s Pillar 2 global minimum tax framework. The Directorate-General for Taxation and Customs Union (TAXUD) leads the EU efforts to simplify taxation rules while maintaining robust compliance and enforcement.

Krister Andersson, EESC rapporteur, said: ‘Reduced administrative burden calls for simpler tax rules in general and for easier tax reporting in particular, especially for SMEs. We support the Commission’s goal for a fair, clear and effective tax system enhanced by digital systems to improve compliance and ensure a level playing-field.'

Harmonisation and legal clarity

In its opinion, the EESC calls for legal concepts and terminology to be aligned across various indirect taxes, such as VAT, excise duties and customs duties, in order to reduce fragmentation within the single market. The Committee emphasises the need for clear interpretative guidance on technical terms in directives, as variations in meaning across Member States add complexity and uncertainty for taxpayers and authorities alike.

Broad rules versus sectoral exceptions

Broad, uniform tax rules that apply consistently across sectors help reduce administrative complexity and increase predictability. The EESC warns that a proliferation of sector-specific exceptions can lead to distortions, fragmentation, discrepancies and higher compliance costs, undermining efforts to simplify tax reporting.

Impact assessments and competitiveness

According to the EESC, thorough impact assessments of new tax legislation are essential in order to properly evaluate the implications for taxpayers and businesses. The Committee stresses that competitiveness checks and a comprehensive assessment of the impact on administrative burden must be conducted, especially regarding SMEs, to ensure that new rules genuinely contribute to simplification and reduce administrative burden. Transparency in the methodologies used to measure these impacts is also necessary.

Advance rulings and judicial oversight

To provide legal certainty on complex tax matters, the EESC proposes establishing an EU-level court for advance rulings in tax matters relating to the interpretation of directives and their implementation. Such rulings would offer clarity on the interpretation of directives and regulations before disputes arise. The European Court of Justice should serve as the final arbiter if rulings are challenged by either Member States or taxpayers.

Joint transfer pricing forum

The Committee recommends setting up a new expert forum dedicated to transfer pricing issues. This forum would serve as a rule-making body and work in tandem with the proposed system of advance rulings to ensure consistent and binding guidance in this technical area of tax law.

Cross-border workers and investment refunds

With the rise in cross-border workers, and teleworking in particular, the EESC urges the Commission to create an accessible EU portal where employees can report the number of days worked in different countries. This would clarify wage withholding and income tax obligations. Similarly, the Committee highlights the need for an EU-wide platform to facilitate the reclaiming of withholding taxes on dividends by individual investors across Member States.

Reviewing anti-avoidance rules

The existence of multiple anti-avoidance rules at EU and national level often results in an unpredictable tax environment. The EESC calls on both the Commission and the Member States to review the effectiveness and consistency of these rules to eliminate overlap and confusion.

Effective use of tax information

The Committee underscores the importance of tax authorities making full use of the information provided by taxpayers and exchanged between Member States. The ongoing review of the directives on administrative cooperation (DAC) should ensure better coordination and use of this data to enhance tax enforcement and compliance.

Embracing digitalisation

Recognising the growing volumes of tax data and the burdens on taxpayers and authorities, the EESC strongly advocates accelerating the digitalisation of tax reporting and administrative processes. Modern IT solutions are essential in order to achieve simplification, reduce workloads – especially for SMEs – and support the Commission’s objectives of enhanced competitiveness.

The EESC’s opinion thus supports the Commission’s efforts to streamline tax reporting and reduce administrative burdens, while calling for a balanced approach that ensures fairness, legal clarity and the effective use of information, supported by digital innovation to modernise tax compliance in the EU single market.