The European Election and Tax Policy: Mapping Tax Policy Visions across European Political Groups
4 min readBy: ,Note: This is part of a series on the upcoming European election highlighting the most important educational taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. topics for voters while examining reform options for policymakers going forward.
Every five years, political groups in the European Parliament adopt manifestos outlining their priorities for the European election. These documents are meant to inform voters, establish policy positions, and serve as a roadmap for the group’s legislative agenda.
With one month to go until the polls open, it’s important to understand how the seven political groups in the European Parliament define their vision, values, and priorities on economic and tax policy. The appendix table presents the groups’ main ideas and priorities regarding select economic themes, based on the content of their election manifestos.
In short, economic priorities vary from fostering economic growth and innovation to promoting social justice and sustainability. The deeper question for candidates is how their groups intend to use tax policy to achieve their broader economic policy goals.
Visions for European Tax Policy
When it comes to tax policy, the divergence in priorities is clear. While some groups place a premium on using the tax system to redistribute income and environmental sustainability, others prioritize competitiveness and economic efficiency in the tax system. These differences underscore the complexity of tax policy and its implications for shaping the economic landscape of Europe.
For the public, understanding these varying priorities is essential for informed voting. For policymakers, future tax policies should include principled revenue-generating solutions to address the continent’s pressing challenges, such as financing the green transition or repaying the COVID-19 recovery package NextGenerationEU.
The table below shows each group’s visions on tax policy:
Visions for European Tax Policy across Political Groups for the 2024 EU Parliament Election
| Group | Tax Proposals |
|---|---|
| ECR | - Advocates for efficient and effective EU spending, considering every penny spent as taxpayers' money. |
| - Prioritizes cutting suffocating regulations and ensuring efficient implementation of EU policies to maximize the effectiveness of taxpayers' money. | |
| - Supports protecting whistleblowers to report misuse of European funds and promotes a speak-up culture to address financial abuse. | |
| EPP | - Emphasizes delivering a tax-friendly and business-supportive Europe to enhance competitiveness and ensure fair contributions to society. |
| - Advocates for legislation addressing tax evasion and corruption alongside economic growth and competitiveness. | |
| - Highlights the importance of rewarding everyday heroes in tax systems to tackle the cost of living crisis. | |
| ALDE | - Proposes new EU resources from various mechanisms to support the sustainable, resilient, and digital transition without solely filling gaps in the general budget. |
| - Supports equal opportunities for companies in taxation while simplifying tax reporting and administration for cross-border businesses. | |
| - Endorses the implementation of the Common Consolidated Corporate Tax Base (CCCTB) for a fairer and simpler corporate tax system. | |
| Greens-EFA | - Advocates for a fair tax system that shifts the burden away from workers and small businesses onto polluters, multinationals, and the ultra-rich. |
| - Calls for measures such as establishing a minimum level for capital gains tax, closing tax loopholes, extending carbon border taxes, and introducing EU-wide wealth and financial transactions taxes. | |
| - Promotes regulation of financial services to encourage long-term investment in a green and social future. | |
| PES | - Prioritizes tax justice for social justice to strengthen the European social model and support investments in economies and public services. |
| - Calls for large corporations, big polluters, and the ultra-rich to pay their fair share through effective taxes. | |
| - Advocates for fighting tax fraud, tax havens, and extending qualified majority voting in specific tax matters. | |
| - Aims to eliminate gender discrimination in tax systems. | |
| The Left | - Proposes regulations to dismantle the SUV economy, impose taxes on excessive profits, introduce taxes on wealth and financial transactions, and combat tax evasion and fraud. |
| - Calls for measures such as a European tax on the wealthy, a windfall tax on energy companies' profits, and a progressive cloud tax on digital platform revenues. | |
| - Advocates for ending tax havens within the EU and implementing a withholding tax on multinational profits. |
Sources: Political groups' manifestos (2024-2029).
What’s at Stake
The European Parliament has a limited legislative role in taxation as most decisions are adopted by unanimous vote in the Council of the European Union. However, the Parliament has a role to play in shaping the public perception of tax policy and discussions in the Council and Commission. It also has more legislative power to guide broader economic policy, so understanding each group’s tax and economic policy positions is essential.
By incentivizing innovation, ensuring long-term competitiveness, and supporting the transition to a sustainable economy, well-designed tax policies can help drive Europe forward.
With these objectives in mind, what are the most effective tax policies to achieve them? How can we make sure tax policy doesn’t stand in the way of Europe’s success?
Pro-Growth Reform Options
European tax policies should be simple, stable, transparent, and neutral while supporting greater economic growth and opportunity. The primary goal should be to raise government revenue while causing the least amount of economic distortions as possible.
Reform efforts over the next mandate will be crucial. Policymakers should focus on the possibility of promoting two key policies: full expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. and addressing the EU’s value-added tax (VAT) policy gap.
Full expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. Research has shown that it is particularly helpful to small and credit-constrained businesses that are trying to grow.
Full expensing offers a unique opportunity for Members of the European Parliament (MEPs) to advocate for a policy that transcends party lines. By promoting full expensing at the EU level, MEPs can address key priorities outlined in various political groupings’ manifestos that are particularly capital intensive, like the green transition. Revenue effects are usually negative in the short term, but they can improve over the long term as profitable investments lead to more revenues.
An efficient option to raise revenue is addressing the VAT policy gap. This gap refers to the difference between potential VAT revenue and actual collections, highlighting inefficiencies and vulnerabilities in the current system. France and Germany each have an actionable policy gap of €72 billion and €68 billion, respectively. This gap in France alone is so large that closing it would generate enough revenue to eliminate the income tax altogether. Consumption taxes like the VAT tend to cause the least amount of economic distortions while raising stable revenue over time.
The EU already has the ability to work on the VAT system and should therefore focus more effort on working with Member States to reduce exemptions and eliminate reduced rates.
Conclusion
As Europe stands at a crossroads, the decisions made in the upcoming elections will shape the trajectory of the continent for years to come. It is incumbent upon both voters and policymakers to engage in informed decision-making and collaborative efforts to develop tax policies that not only meet the diverse needs of European citizens but also foster a prosperous and resilient future for Europe.
Principled tax policies can drive Europe forward, but only if crafted with precision and purpose.
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Economic Priorities of 2024 EU Parliament's Political Groups Differ across the Board
| Economic Topics | ECR | EPP | Renew | Greens-EFA | S&D | The Left |
|---|---|---|---|---|---|---|
| Promotion of Economic Growth | Aims to promote economic growth by reducing barriers within the Single Market, facilitating buying and selling products within the EU, and upholding consumer rights. Emphasizes improving basic infrastructure and accessibility of transport sectors to enhance economic connectivity. | Promotion of economic growth through innovation, investment in research and development, and a favorable business environment | Emphasis on innovation, entrepreneurship, and a competitive market economy | Emphasizes the importance of sustainable economic development respecting cultural diversity. Advocates for a comprehensive green economic transformation prioritizing sustainability, social justice, and innovation. | Emphasis on sustainable economic growth prioritizing environmental protection, social justice, and quality job creation | Advocates for economic democracy, redistribution of wealth, and reduction of income inequality |
| Support for SMEs | Supports the development of a European industrial strategy to strengthen key sectors and ensure Europe's competitiveness in the global market. Prioritizes cutting suffocating regulations and mindless bureaucracy that hinder business growth, particularly for SMEs. It advocates for common sense policymaking and implementing competitiveness tests to ensure fair regulations. | Importance of supporting SMEs as the backbone of the European economy through reducing administrative burdens, improving access to financing, and fostering entrepreneurship | Support for policies that foster innovation, creativity, and new industries | Supports policies prioritizing local economies and small businesses over multinational corporations. Includes support for SMEs through access to financing, innovation support, and reducing administrative burdens. | Support for SMEs through access to financing, innovation support, and reducing administrative burdens | Supports policies that promote economic democracy, redistribution of wealth, and the reduction of income inequality |
| Digitalization and Innovation | Supports embracing digitalization and innovation to drive economic growth and competitiveness. Emphasizes the importance of technologies like artificial intelligence (AI) and big data in fostering innovation and economic development. | Advocates for embracing digitalization and innovation to drive economic growth and competitiveness | Supports policies that encourage digital innovation, entrepreneurship, and development of new industries | Supports policies that encourage digital innovation, entrepreneurship, and development of new industries | Advocates for significant investment in the green transition, including renewable energy, energy efficiency, and sustainable infrastructure projects | Advocates for investments in renewable energy, energy efficiency, and public transport infrastructure |
| Fiscal Responsibility | Emphasizes the importance of fiscal responsibility, including managing the Eurozone effectively and respecting Member States' decisions regarding the Euro. Calls for transparency and accountability in EU institutions' economic policies. | Emphasizes fiscal responsibility, sustainable public finances, and sound fiscal policies | Promotes fiscal responsibility and sound public finances | Prioritizes sustainable and equitable economic investment and transparency in public spending | Highlights the importance of fiscal responsibility and sustainable public finances | Promotes combatting inequalities and advocates for progressive tax reforms |
| Tax Policy | Advocates for a fair and competitive taxation policy that supports economic growth while ensuring social cohesion. Promotes fair tax competition, combating tax evasion and avoidance, and simplifying tax systems. | Promotion of economic growth through innovation, investment in research and development, and a favorable business environment | Advocates for a fair and transparent tax system promoting economic growth and social justice | Supports progressive taxation policies ensuring the wealthy and corporations pay their fair share | Calls for tax justice measures to ensure wealthy individuals and corporations pay their fair share | Advocates for progressive tax reforms ensuring the wealthy and corporations pay their fair share |
| Investment in Infrastructure | Emphasizes the importance of investment in infrastructure, including transportation, energy, and digital infrastructure, to support economic development and connectivity across Europe | Emphasizes the importance of investment in infrastructure (transportation, energy, and digital) to support economic development and connectivity across Europe | Advocates for investment in research and development, digitalization, and sustainable technologies to drive economic growth | Calls for investment in renewable energy, green infrastructure, energy transition, sustainable agriculture, and environmentally friendly infrastructure projects to create green jobs and stimulate economic growth | Advocates for investment in green infrastructure, energy transition, and sustainable agriculture to create green jobs and stimulate economic growth | Champions the development of high-quality transport links to promote economic growth and employment opportunities. |
| European Green Deal | Supports initiatives aimed at environmental sustainability but may have reservations or offer alternative approaches to specific aspects of the European Green Deal. | - Supports the European Green Deal as a framework for transitioning to a sustainable and climate-neutral economy | Proposes the adoption of a Green New Deal for Europe to address the climate crisis and economic inequalities | - Calls for a Green New Deal for Europe to address the climate crisis and economic inequalities | Supports a Green New Deal for Europe to address the climate crisis while creating green jobs and promoting sustainable development | |
| Trade Policy | Supports open trade policies to create more jobs, business opportunities, and cheaper goods for consumers. Emphasizes the importance of international agreements to break down trade barriers and ensure that free trade benefits everyone. | Advocates for open and fair trade policies promoting international cooperation and economic growth | Emphasizes the benefits of free trade and globalization for economic growth, job creation, and consumer choice | Align trade policy with the principles of global food sovereignty and climate-friendly agriculture. Advocates for rewriting unjust trade rules to promote fairness and equality globally | Emphasizes international solidarity and cooperation to address global challenges, including supporting Member States in times of crisis | Advocates call for rewriting trade rules for global fairness, rejecting neoliberal free trade agreements |
Sources: Political groups' manifestos (2024-2029). Share this article