Changes from plenary report to adopted text

The European Parliament,

– having regard to the Treaty on the Functioning of the European Union, and in particular Articles 113, 114 and 115 thereof,

– having regard to the Commission proposal of 28 September 2011 for a Council directive on a common system of financial transaction tax and amending Directive 2008/7/EC (COM(2011)0594),

– having regard to the Commission proposal of 14 February 2013 for a Council Directive implementing enhanced cooperation in the area of financial transaction tax (COM(2013)0071) (FTT proposal),

– having regard to the Commission proposal of 28 November 2007 for a Council regulation laying down implementing measures for Directive 2006/112/EC on the common system of value added tax, as regards the treatment of insurance and financial services (COM(2007)0746),

– having regard to the Commission proposal of 28 November 2007 for a Council directive amending Directive 2006/112/EC on the common system of value added tax, as regards the treatment of insurance and financial services (COM(2007)0747),

– having regard to the World Bank working paper of May 2025 entitled ‘VAT Exemptions, Embedded Tax, and Unintended Consequences’,

– having regard to Rule 55 of its Rules of Procedure,

– having regard to the report of the Committee on Economic and Monetary Affairs (A10-0169/2026),

A. whereas, in the Commission President’s 2024 mission letter to the Commissioner responsible for taxation, the Commission is tasked with identifying innovative solutions for taxing the EU’s financial sector to support the further integration of the sector, cross-border activity, digitalisation and innovation; whereas the Commission has launched a study on taxation of the financial sector in the EU;

B. whereas financial services are generally exempted from value added tax (VAT) in the EU; whereas financial institutions cannot deduct VAT paid on their inputs because of that exemption, causing the so-called irrecoverable VAT problem; whereas this exemption could create a lack of transparency, increase costs on consumers and result in additional costs for financial institutions, influence organisation and outsourcing decisions, and lead to competitive disadvantages for smaller, digital and cross-border service providers;

C. whereas the possibility for financial institutions to opt into VAT is not provided consistently across Member States, leading to further administrative complexity;

D. whereas the VAT exemption dates back to 1977 when taxing such financial services posed significant technical and administrative difficulties; whereas the original technical justification for the VAT exemption could now be addressed through technological, digital and supervisory advances, including real-time data processing and improved reporting requirements;

E. whereas several jurisdictions worldwide have revised similar exemptions or have introduced alternative forms of taxation of financial services in order to address the unintended fiscal and competitive effects of irrecoverable VAT and to continue to ensure a fair and sound contribution of the financial sector to public revenues;

F. whereas both the Letta and Draghi reports underline that tax fragmentation in the single market, including administrative and tax barriers, obstructs economic growth, trade and cross-border activities; whereas EU internal barriers effectively impose a near 100 % tariff on financial services; whereas those barriers and regulatory hurdles are, according to Draghi, far more damaging to economic growth than any tariffs the US might impose;

J. whereas any future initiatives should reduce fragmentation in the single market and strengthen competitiveness by ensuring a coherent, predictable and neutral tax framework for financial services, while taking into account diverse business models and tax interactions across the EU financial sector;

K. whereas the taxation of financial services in the EU remains highly fragmented, with diverging national approaches to insurance premium taxes, financial transaction taxes (FTTs), bank levies, financial activity taxes and other profit-based taxes; whereas this fragmentation creates legal uncertainty and complexity, drives market distortions, encourages tax avoidance and reduces the EU’s competitiveness;

L. whereas the Savings and Investments Union (SIU) requires stronger incentives for people to save and invest in European capital markets; whereas the completion of the SIU requires a comprehensive approach to financial stability, market integration and investor protection; whereas ensuring that the financial sector makes a meaningful contribution to public finances, internalises the risks it generates and supports long-term sustainable investment is crucial for the SIU’s success and credibility;

M. whereas FTTs and bank levies were discussed after the financial crisis in 2008 and 2009; whereas these measures sought to offset the costs of the crisis;

N. whereas at least seven Member States currently levy an FTT; whereas these Member States have not coordinated their FTTs as regards their scope, rate or application; whereas no agreement has been reached on an EU-wide FTT, despite several legislative proposals from the Commission since 2011;

O. whereas Parliament has consistently supported the introduction of an EU-wide FTT, including as a possible own resource, most recently in its resolution of May 2023; whereas in its 2026 work programme, the Commission proposed to withdraw its previous FTT proposal due to a lack of consensus among Member States with no agreement reached;

P. whereas Member States continue to introduce temporary windfall taxes or solidarity levies on bank profits to address extraordinary increases in profitability driven by monetary policy;

Addressing the tax fragmentation of the financial sector and increasing its competitiveness

2. Notes that differences in national tax regimes reflect domestic policy choices; notes the ongoing work at an international level as regards profit shifting; calls for strengthened coordination at EU level, including in the implementation of the Pillar 2 Directive, robust anti-avoidance rules and transparency requirements, particularly in the field of public country-by-country reporting;

3. Notes that fragmentation of national tax regimes increases the risk of cross-border double taxation and, driven by administrative and legal complexity, can inhibit the growth of the EU’s financial sector and pose an obstacle to a deeper integration of EU financial markets; emphasises that avoiding double taxation and reducing administrative burdens should remain crucial; stresses, however, that simplification efforts must not result in deregulation or a race to the bottom in tax standards;

4. Stresses that differences in national procedures for withholding tax create administrative burdens and barriers to cross-border investment, as acknowledged in the Commission’s SIU strategy; welcomes the adoption of the FASTER Directive; calls for further progress towards a more coordinated and ambitious framework;

5. Calls on the Council to decide on the Commission proposal for a Council Directive establishing a Head Office Tax system for micro, small and medium sized enterprises, and amending Directive 2011/16/EU, duly taking into account Parliament’s legislative resolution of 10 April 2024;

6. Observes moreover that existing tax rules have not fully kept pace with the emergence of new financial products and market infrastructures; underlines that fragmentation is rapidly becoming more worrying with the success of neobanks, for example, digital-only banks, challenger banks or fintech banks; points out the significant increase in the share of cross-border deposits held by these banks in the last six years; underlines that differences in tax rules between banks and non-bank entities can create distortions;

10. Underlines the importance of advancing the SIU to mobilise savings for productive investments; considers reducing tax fragmentation and improving cross-border investment channels as key to mobilising European savings for investment within the EU;

11. Stresses that a tax framework for financial services should be designed alongside the SIU’s objectives, focusing on increasing efficiency, addressing market distortions, and fostering investment and long-term growth, while ensuring a balanced approach that also reflects broader economic and social considerations;

12. Notes that the taxation of the financial sector should be governed by the principles of simplicity, neutrality, fairness, economic, environmental and social sustainability, and legal certainty; notes that it should also reflect the cyclical dynamics of banks profitability linked to monetary policy and economic conditions;

13. Calls on the Commission to follow through on its commitment to propose innovative solutions for taxing the sector that reduce fragmentation, support further integration at EU level and help complete the SIU;