EU Offers Tax Simplification Bills in Bid to Boost Business (1)

The European Commission proposed a sweeping overhaul of the bloc’s tax rules Wednesday to cut red tape and save businesses up to €8 billion ($9.1 billion) in annual compliance costs.

The proposed measures include ending withholding taxes for intra-EU dividends, interest, and royalty payments, streamlining financing rules, and removing overlapping reporting requirements. They are part of a broader push to make it easier to do business in the bloc and boost its industry.

The commission wants to reduce reporting obligations by 25% and 35% for small- and medium-sized enterprises, it says. The contents of Wednesday’s package were first reported by Bloomberg earlier this month.

The package, which includes a tax simplification bill and a revision of the bloc’s tax reporting and data-sharing rules, would generate about €3.3 billion in annual administrative savings and support cross-border investment within the single market, the commission said.

“Europe needs simpler rules to deliver better results,” Economy Commissioner Valdis Dombrovskis said in a statement.

Exempting companies from withholding taxes alone would deliver savings and benefits worth €5.3 billion annually, according to the commission’s estimates. With many EU countries relying on withholding taxes for revenue, the commission included an eight-year transition and adjustment period before the new rules would enter into force.

The proposals will now be sent to EU countries for approval. EU tax chief Wopke Hoekstra acknowledged that they may face difficulties during the negotiation process, which requires unanimity from the bloc’s 27 members.

“I hope and expect member states will look at this with an open view,” he said during a press conference. “I am adamant — and the commission is adamant — to move this forward.”

The package would also eliminate some reporting requirements on cross-border tax arrangements for large companies subject to the EU’s 15% corporate minimum tax regime.

Separately, reporting thresholds for online sales platforms would be raised, removing reporting obligations for more than 10 million private sellers, particularly those selling second-hand goods.

BDI, the trade association representing German businesses, reacted positively to the bills, including the provisions to exempt large companies from some existing tax rules and to expand withholding tax exemptions. “The member states are now called upon to advance the proposal ambitiously and avoid watering it down,” said Christian Kaeser of Siemens AG, BDI’s head of tax.

Oxfam was critical of the proposals, calling them a “euphemism for deregulation.” Julien Desiderio, the group’s tax policy expert, said the package “delivers another round of tax giveaways for large corporations while public budgets are at breaking point.”

The European Tax Adviser Federation, a trade association, called the proposals a “positive and necessary step towards a more coherent and workable” EU tax environment.