The European Parliament has started its reflection on how to rethink a European tax system in the post-Covid-19 economy. MEP Claude Gruffat (Greens/EFA, France) published, in early March, his draft own-initiative report calling for a comprehensive reform of EU tax systems by correcting existing distortions, notably in the area of green taxes.
“Our taxation systems are no longer adapted to our times. This report outlines a roadmap for a comprehensive reform of the latter, and for an ecological and social tax system that serves the competitiveness of our SMEs. The next five years will be crucial for fiscal policy. The European Union and especially the Parliament must rise to the challenge and speak with one voice”, he said in a written statement to EUROPE on Monday 15 March.
Taxation for the ecological transition
The text highlights the potential of environmental taxes and calls on Member States to consider new ones, including taxes on natural resources, distance-based charges in the transport sector, fuel prices and taxation of deforestation, landfill, incineration, pesticides and fertilisers.
It welcomes the Commission’s forthcoming publication of the revision of the Energy Taxation Directive (see EUROPE 12439/17) and calls on the Commission to also present a proposal for a progressive European tax on kerosene.
Aware of the impact that environmental taxation can have on the poorest households, Mr Gruffat also calls for compensatory measures for these households, such as a reduction in income tax or social security contributions.
For a redistributive tax system
The health crisis has allowed some large multinational companies to make windfall profits while pushing the most vulnerable people into poverty, the rapporteur explains. Post-Covid-19 tax systems must therefore ensure a fairer redistribution of wealth.
The text thus calls on Member States to improve the yield of personal income tax, especially for the most affluent, as it is the most progressive tax. He also regrets the gradual abolition of wealth tax in Europe.
He advocates as well for the reduction of social contributions on labour costs in states with a competitiveness deficit.
Do not forget the SMEs
According to the rapporteur, SMEs are “the great forgotten ones of the pandemic” in particular through State Aid schemes. They are also particularly affected by the complexities of the tax system, he says.
For example, Mr Gruffat calls on the Commission to systematically assess the potential impacts of its tax proposals on SMEs, including with regard to the Common Consolidated Corporate Tax Base (CCCTB) and digital taxation.
The draft text also calls for a tax simplification package for SMEs, which should include measures to make tax returns less burdensome and encourage tax administrations to digitise their processes, including considering automatic returns for SMEs.
The draft report will be discussed for the first time in the Subcommittee on Tax Matters (FISC) on 22 March, before a vote in the Committee on Economic and Monetary Affairs (ECON) on 27 May. Political groups have until 13 April to present their amendments.
See the draft report: https://bit.ly/3lhfU8i (Original version in French by Marion Fontana)