Changes from report parliamentary committee draft to plenary report

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

▸8 unchanged paragraphs

on a coherent tax framework for the EU's financial sector

(2024/2117(INI))

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),

Added– having regard to Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/19371,

– having regard to the Commission’s inception impact assessment of 22 October 2020 on a review of the VAT rules for financial and insurance services,

Changed– having regard to the study requested by Parliament’sCommission Subcommitteeproposal onof Tax12 MattersSeptember entitled2023 ‘Theon taxationestablishing ofa theHead EU’sOffice financialTax sector’,system publishedfor bymicro, itssmall Directorate-Generaland formedium Economy,sized Transformationenterprises, and Industry inamending JuneDirective 20251,2011/16/EU,

Changed– having regard to theCouncil InterinstitutionalDecision Agreement(EU, Euratom) 2020/2053 of 1614 December 2020 betweenon the Europeansystem Parliament,of theown Councilresources of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction ofrepealing newDecision own2014/335/EU, resources2,Euratom2,

Changed– having regard to its resolutionthe ofCommission 10communication Mayof 202322 onDecember own2021 resources:entitled a‘The newnext startgeneration forof EUown finances,resources afor newthe startEU forBudget’ Europe3,(COM(2021)0566),

Added– having regard to the study requested by Parliament’s Subcommittee on Tax Matters entitled ‘The taxation of the EU’s financial sector’, published by its Directorate-General for Economy, Transformation and Industry in June 20253,

Added– having regard to the Court of Justice of the European Union’s case law on the VAT exemption for financial and insurance services,

Added– having regard to the Interinstitutional Agreement of 16 December 2020 between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources4,

Added– having regard to its resolution of 10 May 2023 on own resources: a new start for EU finances, a new start for Europe5,

– having regard to the report by Enrico Letta of April 2024 entitled ‘Much more than a market – Speed, Security, Solidarity: Empowering the single market to deliver a sustainable future and prosperity for all EU citizens’ (Letta report),

– having regard to the report by Mario Draghi of 9 September 2024 entitled ‘The future of European competitiveness’ (Draghi report),

– having regard to the Commission communication entitled ‘Savings and Investments Union: A Strategy to Foster Citizens’ Wealth and Economic Competitiveness in the EU’ (COM(2025)0124),

Added– having regard to the Commission Recommendation (EU) 2025/2029 of 30 September 2025 on increasing the availability of savings and investment accounts with simplified and advantageous tax treatment6,

Added– 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,

Changed– having regard to the report of the Committee on Economic and Monetary Affairs (A10-0000/2025),(A10-0169/2026),

Change 1

ChangedA. whereas, in herthe Commission President’s 2024 mission letter to the Commissioner responsible for taxation, Wopke Hoekstra,the Commission President Ursula von der Leyenis tasked the Commission with identifying innovative solutions for the taxation oftaxing the EU’s financial sector to support the further integration of the sector, cross-border activityactivity, digitalisation and innovation; whereas the Commission has launched a study on taxation of the financial sector in the EU;

Change 2

ChangedB. 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 ‘irrecoverableso-called irrecoverable VAT problem’;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;

Change 3

RemovedC. whereas the VAT exemption dates back to 1977 when taxing financial services was technically unfeasible; whereas technological advances now make such taxation viable and several jurisdictions worldwide have revised similar exemptions;

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

RemovedD. whereas both the Letta and Draghi reports underline that tax fragmentation in the single market obstructs economic growth, trade and cross-border business; whereas EU internal barriers effectively impose a near 100 % tariff on financial services;

AddedD. 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;

RemovedE. whereas the taxation of financial services in the EU remains highly fragmented, with diverging national approaches to 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;

AddedE. 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;

RemovedF. whereas FTTs and bank levies were discussed after the financial crisis in 2008 and 2009; whereas these measures sought to ensure that the financial sector contributes to public budgets, and to offset the costs of the crisis and curb the negative effects of speculative or high-risk financial activity;

AddedF. 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;

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

AddedG. whereas, according to Eurostat data, the financial sector is a significant component of the EU’s economy, generating around EUR 0.9 trillion in value added in 2022, employing nearly 5 million people and recording a net turnover of approximately EUR 2.4 trillion; whereas the sector contributes to public finances through corporate taxation, payroll taxes and sector-specific levies; whereas the EU financial sector plays a central role in financing the real economy, supporting innovation and facilitating investment;

RemovedH. 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;

AddedH. whereas recent initiatives such as Council Directive 2025/50 of 10 December 2024 on faster and safer relief of excess withholding taxes7 (FASTER Directive) have made significant progress in reducing administrative burdens and facilitating cross-border economic activity in the EU, and similar efforts should continue in order to further strengthen the integration and efficiency of the single market;

AddedI. whereas the Council has been delaying a decision regarding the Commission proposal for a Directive establishing a Head Office Tax system for micro, small and medium sized enterprises, and amending Directive 2011/16/EU, while Parliament already approved a legislative resolution on 10 April 20248;

AddedJ. 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;

AddedK. 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;

AddedL. 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;

AddedM. 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;

AddedN. 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;

AddedO. 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;

AddedP. 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

Change 4

Changed1. Notes that the EU-wide VAT exemption for financial services has resulted in a substantial VAT policy gapgap; andhighlights athat highlyin fragmentedthe landscapeabsence of VAT revenues from financial services, Member States have introduced 91 sector-specific taxes acrossto tax the Memberfinancial Statessector toand mitigate these revenue losses;losses, resulting in a highly fragmented tax landscape; notes that this fragmented tax landscape makesgenerates complianceadditional moreoperational challengingand administrative costs and increases structural barriers to the cross-border expansion of financial services providers, thus weakening the EU’s financial sector and its investment capacity and undermining the objectives of the Savings and Investments UnionSIU and the Banking Union;

Change 5

Changed2. Highlights that fragmentation offragmented tax rules across Member States and the high mobility of the financial sector’s tax base create significant opportunities for regulatory arbitrage and capital and profit shifting;shifting, hinder cross-border activities of financial institutions and reduce the efficiency and resilience of the EU’s banking and capital markets;

Change 6

Removed3. 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;

Added3. 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;

Removed4. Stresses that removing tax barriers to cross-border investment through coherent EU-level rules would reduce compliance costs, improve market efficiency, enhance legal clarity for cross-border capital flows and strengthen the competitiveness of EU financial services, while simultaneously curbing tax evasion and aggressive tax planning;

Added4. 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;

Removed5. Notes that, according to the Commission’s 2026 European Macroeconomic Report4, the EU household saving rate remains well above the average of the countries of the Organisation for Economic Co-operation and Development; regrets that around one third of these savings are invested outside the EU, which shows the shortcomings of the EU financial and tax framework in retaining investment;

Added5. 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;

Removed6. Calls for the tax rules for the financial sector to be clarified to improve capital allocation and strengthen the sector’s competitiveness, while maintaining a high level of consumer protection; calls on the Commission to follow through on its commitment to propose innovative solutions for the taxation of the sector and for further integration at EU level;

Added6. 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;

Added7. 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;

Added8. Emphasises that the insufficient data on the effective tax burden across the EU financial sector obstructs evidence-based policymaking and the assessment of policy impacts on market behaviour, competition and financial stability; underlines the need for improved transparency and data collection as a prerequisite for coherent reform of financial sector taxation;