A simpler tax architecture to benefit EU firms and citizens  

This article is brought to you in association with the European Parliament.

• An EU Tax Data Hub to improve information sharing, eliminate double reporting
• Break down tax barriers to support innovation
• No simplification should undermine fighting tax fraud, avoidance or evasion
• Fiscal compliance costs SMEs 30% of what they pay as taxes

MEPs on Tuesday adopted suggestions for reforms to the tax architecture to boost competitiveness while continuing to address tax avoidance and evasion.

The report, drafted by Michalis Hadjipantela (EPP, CY), was adopted in the Economic and Monetary Affairs Committee by 46 votes in favour, 2 votes against and 11 abstentions. It will feed into the ongoing legislative work on legislative simplification, more particularly a dedicated Commission proposal expected in early 2026.

The report presents a host of ideas for simplifying tax compliance and eliminating administrative hurdles in the internal market. This would reduce the financial cost of compliance – notably for SMEs, which, the report says, is a cost of 30% of the taxes they pay.

The suggestions would also make it easier for governments to administer and collect taxes, contributing to reduced tax evasion and avoidance and mobilising more resources for states to invest elsewhere.

Tax simplification

The report urges the Commission to establish an EU Tax Data Hub to improve the automatic exchange of tax information and reduce administrative burden. This would also help identifying and eliminating all instances of duplicate reporting to relieve taxpayers of double reporting obligations. The Hub would also serve as a single access point for tax administrations across the EU.

In order to mobilise more of Europe’s savings lying on low-interest paying bank accounts, MEPs say that tax declaration procedures for savings and investment accounts should be simplified so that more people would feel encouraged to invest in the EU’s capital markets.

The adopted text also says that streamlining the use of the Tax Identification Number across member states could help administrative cooperation and reporting. Finally, the Commission is asked to assess and simplify the current VAT framework, the Directive on Administration Cooperation in Tax matters, and the Anti Tax Avoidance Directive.

MEPs stress that simplification alone will not be enough, as it is also important to invest in the capacity of tax authorities to ensure existing reporting obligations are used to their fullest potential.

Continue fighting tax fraud, avoidance and evasion

MEPs underline that any simplification exercise must not undermine fighting tax fraud, avoidance or evasion. They say further tax coordination between member states in tackling tax evasion and avoidance is important to facilitate cross-border economic activity.

Specifically, the report calls for enhanced collaboration between the European Public Prosecutor’s Office and Eurofisc to strengthen intelligence-sharing, coordinated enforcement efforts and cross-border investigations.

Tax barriers

MEPs ask the Commission to survey existing tax related obstacles for the single market and present an action plan to tackle them. Particularly, they invite the Commission to assess the benefits and drawbacks of a single set of EU-wide rules for innovative companies (the so-called 28th regime), which would also provide a single set of tax laws.

Finally, MEPs call for measures to deal with the tax issues facing trans-frontier workers and digital nomads, as well simplifying the R&D tax incentive schemes.

Quote of the rapporteur

“This Report is calling for a simpler, more transparent and predictable EU tax framework that reduces complexity, administrative burden and increases our competiveness. With rising economic pressures and global competition, a simpler tax framework is vital. The report urges simplification, clearer rules, removal of inefficiencies, while upholding standards against tax evasion and aggressive tax planning. To boost competiveness, we call for thorough impact assessments, greater use of digital tools to reduce compliance costs, standardised templates, improved coordination among Member States, and revision of unnecessary rules that burden especially SMEs. A fair and business-friendly system is crucial for SMEs, which are the backbone of the European economy and essential for growth across Member States, especially in smaller economies, like my country Cyprus. This will help ensure a competitive, resilient, and inclusive Single Market for all.”

Background

Although not part of an official legislative procedure, this “own initiative report” provides political signalling regarding the EP’s political priorities in anticipation of legislation which would soon be proposed by the Commission. In this case, a legislative proposal on tax simplification is expected in early 2026.