In a recent survey regarding companies’ barriers to conducting business in the EU single market, VAT ranked first. Policymakers should invest in reforming VAT systems to close both compliance and policy gaps in ways that improve the overall efficiency of their tax systems.
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As the third-largest economy in the world, with an influential voice within EU policymaking, and the United States among its most important trading partners, Germany’s next government will play a particularly important role in deciding the direction of European tax, trade, and transatlantic policy.
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In a recent speech at the Davos Economic Forum, European Commission President Ursula von der Leyen announced plans to create a single set of rules for corporate law, insolvency, labor law, and taxation, under which companies could seamlessly operate across the European Single Market.
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More than 175 countries worldwide—including all major European countries—levy a value-added tax (VAT) on goods and services. EU Member States’ VAT rates vary across countries, though they’re somewhat harmonized by the EU.
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The flawed design of these windfall profits taxes has created problems in countries that implemented them.
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The agreement represents a major change for tax competition, and many countries will be rethinking their tax policies for multinationals.
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A few European countries have made changes to their VAT rates, including the Czech Republic, Estonia, Switzerland, and Turkey.
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The EU Tax Observatory has taken an extreme view in assessing the global minimum tax. The rules were not meant to immediately reduce the stock of shifted profits or align profitability levels more closely with employment costs. The rules do change incentives for multinationals, but profits may continue to remain in low-tax jurisdictions for many years.
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While existing carbon taxes are a step towards the right direction in addressing climate change and incentivizing reductions in emissions, there is considerable room for improvement to reach the ideal theoretical carbon tax model.
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The OECD recently released a trove of new documents on a draft multilateral tax treaty. The U.S. Treasury has opened a 60-day consultation period for the proposal and is requesting public review and input.
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For many Italian banks, there hasn’t been a significant “windfall” to tax. The profit margins of Italian banks have been lower compared to other industries for the past two decades.
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The EU’s recent VAT reform is an example of a win for governments, consumers, and companies. Charting a new path toward a more successful tax system.
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As the EU pursues massive changes in public policy as part of its green transition, expect fuel taxes to be central to any policy discussions.
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The European Commission proposed a new source of revenue as part of its second basket of own resources: a “temporary statistical own resource based on company profits.” This is an attempt to bolster the EU’s budget as it repays its debt.
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Given that wealth taxes collect little revenue and have the potential to disincentivize entrepreneurship and investment, perhaps European countries should repeal them rather than implement one across the continent.
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It’s unlikely these implemented and proposed windfall taxes will achieve their goals of raising additional revenues without distorting the market. Instead, they would penalize domestic production and punitively target certain industries without a sound tax base.
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Permanent full expensing is an efficient and neutral tax policy that will allow markets to allocate private investment effectively while moving the economy towards the climate goals of the EU.
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In our latest report, we consider several theoretical arguments for carbon taxes and the evidence from carbon taxes implemented around the world related to emissions, economic growth, distribution and revenue recycling options, other environmental taxes, green subsidies, and environmental regulations.
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When it comes to EU-level tax policy ideas, competitiveness seems to be less of a priority than raising revenue or pursuing social objectives.
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The Carbon Border Adjustment Mechanism (CBAM) is a key aspect of the EU’s broader Fit for 55 package which aims to cut 55 percent of net greenhouse gas (GHG) emissions in the EU by 2030. The growing number of competing climate policies between the EU and U.S., such as tax provisions in the Inflation Reduction Act, could present policymakers on both sides of the Atlantic an opportunity to work together.
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