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.
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.
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.
The agreement represents a major change for tax competition, and many countries will be rethinking their tax policies for multinationals in light of it. However, with both the U.S. and EU hitting roadblocks in their respective legislative processes, it is unclear when or even if the agreement will be implemented. If implementation fails, a return to a world of distortive European digital services taxes and retaliatory American tariffs could be on the horizon.
As policymakers shift their focus away from tax rates and look to harmonize the EU’s corporate tax base, they should understand the benefits of full expensing.
When it comes to EU-level tax policy ideas, competitiveness seems to be less of a priority than raising revenue or pursuing social objectives.
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.
While some temporary policies can help in a crisis, policymakers should focus their efforts on sustainable policies that support growth and the resilience of businesses (and government coffers) over the long term.
Our recent policy conference brought together academics and political leaders to present research on some of the most pressing issues in global tax policy and to discuss solutions that can unlock genuine global growth.