Changes from report parliamentary committee draft to plenary report

Added9. Stresses that removing tax barriers to cross-border investment through coherent EU-level rules would reduce compliance costs, improve market efficiency, increase legal clarity for cross-border capital flows and strengthen the competitiveness of EU financial services, while simultaneously curbing tax evasion and aggressive tax planning; stresses the need for a coherent set of rules for the EU financial sector, while respecting Member States’ tax sovereignty and the principle of subsidiarity; stresses that taxation of financial services should help sustain the competitiveness of the financial sector;

Added10. Notes that, according to the Commission’s 2026 European Macroeconomic Report9, 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 framework in retaining investment; calls on the Commission to assess how tax measures can encourage investment to flow towards the EU; underlines the importance of discouraging financial outflows towards countries on the EU list of non-cooperative jurisdictions;

Added11. 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;

Added12. 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;

Added13. 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;

Added14. 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;

Addressing the VAT regime for financial services

Change 7

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Change 8

Removed8. Regrets that repeated Commission initiatives, including its 2007 proposals and the 2020 inception impact assessment, did not result in a reform of the VAT exemption for the financial sector; notes that most recently the Commission intended to publish amendments to the VAT Directive5 in early 2023; observes that these plans were stalled, leaving this essential reform still pending;

Added16. Observes that the exemption does not necessarily constitute an advantage for financial institutions, as it prevents them from recovering VAT; takes the view that the status quo perpetuates market distortions, can create a lack of transparency and increase costs on consumers, reinforces the self-supply bias in the financial sector and creates competitive disadvantages compared with institutions from non-EU countries;

Removed9. Notes that, due to the failed reform efforts, the VAT Directive lacks specific provisions for emerging financial instruments, including crypto-assets, decentralised finance and fintech; notes that this has led to divergent national interpretations of VAT rules, legal uncertainty for service providers and uneven treatment between traditional and new financial services and has hindered innovation;

Added17. Stresses that VAT exemptions are often granted to activities of general interest in recognition of their essential social function; underlines that certain core financial services – notably payment services, deposit-taking and basic credit provision – can perform a comparable quasi-public utility function by safeguarding savings, enabling economic exchange and ensuring that people and businesses can participate safely in the economy;

Removed10. Emphasises that, despite the use of VAT grouping and cost-sharing arrangements in some Member States, the outdated VAT exemption, combined with differing compensatory national tax rules, creates a complex, fragmented and incoherent tax landscape, making tax compliance costly and increasing firms’ operating expenses; stresses that clear VAT definitions and simplified rules are needed to reduce these burdens, ensure consistent application of rules across the EU, and support innovation;

Added18. Notes that repeated Commission initiatives, including its 2007 proposals and the 2020 inception impact assessment, did not result in a reform of the VAT exemption for the financial sector because Member States failed to reach a unanimous agreement; notes that the Commission most recently intended to publish amendments to the VAT Directive10 in early 2023; observes that these plans were stalled, leaving this essential reform still pending;

Removed11. Stresses that the VAT exemption, especially for clearly identifiable financial charges such as fees and commissions, is no longer fit for purpose; underlines that taxing such charges, unlike margin-based services, can reduce distortions without creating disproportionate administrative complexity;

Added19. Notes that, under Article 11 of the VAT Directive, VAT grouping remains optional for Member States and is limited by territorial constraints, creating legal and practical obstacles for cross-border groups active in financial services;

Removed12. Calls on the Commission to publish a proposal to reform the VAT rules for the financial sector and address the distortions caused by the VAT exemption; emphasises that this reform should take into account distributional consequences, mitigate costs for retail consumers and ensure that the financial sector makes a fair contribution;

Added20. Emphasises that, despite the use of VAT grouping and cost-sharing arrangements in some Member States, the VAT exemption, combined with differing compensatory national tax rules, like insurance premium taxes, creates a complex and fragmented tax landscape, making cross-border tax compliance costly and increasing firms’ operating expenses; stresses that clearer VAT definitions and simplified rules are needed to reduce these burdens, ensure consistent application of rules across the EU, facilitate cross-border activity and support innovation;

RemovedEnsuring that the financial sector makes a fair contribution

Added21. Notes that VAT grouping, which can reduce administrative burdens for, and improve the efficiency of, financial institutions, is currently applied unevenly across Member States and generally limited to entities established within a single Member State; highlights that greater convergence in the application of VAT grouping could reduce fragmentation and legal uncertainty in the internal market and facilitate cross-border financial services activity;

Removed13. Recalls that the EU faces a significant investment gap of EUR 750 to 800 billion annually to meet its climate, digital and strategic autonomy objectives; recalls the commitment of the Member States and the EU to substantially increase European defence investment; emphasises that fair taxation of the financial sector could mobilise revenue for public investment;

Added22. Calls on the Commission to encourage Member States to implement VAT grouping in a consistent manner and to explore options for a clearer legal framework, including the possibility for cross-border VAT grouping; stresses that broader use of VAT grouping for financial and insurance services must be in line with corporate tax rules, notably those on transfer pricing, and must be accompanied by binding anti-abuse safeguards to prevent fraud and tax avoidance, intra-group VAT leakage and cost-sharing abuse;

Removed14. Recalls the 2020 agreement between Parliament, the Council and the Commission on a roadmap for the introduction of new own resources, including an FTT; notes that at that time, an FTT with 10 participating Member States would have produced around EUR 3.5 billion per year in public revenue; notes that this figure would have risen to EUR 31 to75 billion with the participation of all the Member States;

Added23. Notes that the VAT Directive lacks specific provisions for emerging financial instruments, including crypto-assets, decentralised finance and fintech; highlights that in addition the Directive does not address the VAT treatment of derivatives and that the treatment of investment funds remains divergent across Member States; notes that this has led to diverging national interpretations of VAT rules, legal uncertainty for service providers and uneven treatment between traditional and new financial services and risks hindering innovation and competitiveness;

Removed15. Regrets that the Commission announced, in its 2026 work programme, the withdrawal of the FTT proposal; urges the Commission to ensure that any proposal for a coherent framework for taxing the EU financial sector presents a concrete plan to address the policy gap created by the withdrawal of the FTT proposal;

Added24. Emphasises that a modern tax framework should support innovation in fintech and digital finance and avoid creating regulatory disincentives for new market entrants; calls on the Commission to clarify the VAT treatment of emerging financial services in order to ensure technological neutrality and a level playing field across the EU;

Removed16. Emphasises that any forthcoming tax proposal should ensure that the financial sector makes a fair, sound and simple financial contribution under clear and predictable rules; stresses that these rules should safeguard market stability and competitiveness and mitigate costs for retail consumers;

Added25. Considers that a broad and undifferentiated VAT exemption for the entire financial sector raises questions regarding the overall consistency and balance of the tax system; underlines that a reform of the VAT exemption could reduce distortions and the level of irrecoverable VAT without creating disproportionate administrative complexity; notes that options for removing the VAT exemption could effectively remove the irrecoverable VAT by allowing financial corporations to fully reclaim the VAT that they pay on goods and services used in their operations; underlines that this would eliminate the current bias towards bringing services in-house rather than outsourcing them, which can limit a company’s ability to specialise, access external expertise, and innovate; recognises that this reform could also level the playing field as regards other jurisdictions and strengthen the international competitiveness of EU financial institutions;

Removed17. Highlights that coordinated temporary windfall taxes can complement long-term sector-wide taxation by providing short-term revenue in times of crisis without destabilising markets or distorting long-term commercial activity; stresses that such temporary taxes should be transparent and proportionate, strictly time-bound and apply only to profits arising from circumstances unrelated to productivity gains or surges in demand; calls on the Commission to bring forward a legislative proposal for the temporary taxation of exceptional profits in the financial sector, ensuring the sector makes a fair and coordinated contribution at EU level in periods of extraordinary macroeconomic circumstances;

Added26. Recalls that VAT is a harmonised tax framework at EU level, although Member States retain some scope for implementing it; recognises, therefore, that a reform of the VAT system for financial services should be addressed at EU level;

Added27. Calls on the Commission to review the impacts of the current VAT regime on the financial sector and to publicly share this analysis; calls on the Commission to consider policy options to address identified distortive impacts, like more effective VAT grouping and options for reforming the VAT exemption, with a view to bringing forward a proposal to reform the VAT rules for the financial sector; emphasises that any such reform should reduce irrecoverable VAT and the fragmented application of rules, improve legal certainty and tax fairness, and strengthen the competitiveness of EU financial markets, while safeguarding financial stability and minimising regulatory arbitrage between Member States; emphasises that any such reform must also safeguard consumers and continue to ensure that the financial sector makes a fair contribution to public revenues;

Added28. Notes that any proposal for revising the VAT framework should be based on an in-depth analysis at macroeconomic level and comprehensive mapping of national bank tax and levies; emphasises that such an analysis should take into account the administrative implications for financial services, the interaction between existing national bank taxes, financial sector levies and the VAT system, and the impact on the single market;

Added29. Underlines that any changes to the VAT treatment of financial services must carefully assess the impact on services provided to retail consumers, particularly low- and middle-income households, and avoid any extra overall costs;

Added30. Calls on the Commission, as part of a possible reform of the VAT exemption, to assess the feasibility of replacing national insurance premium taxes by means of fully integrating insurance services into the VAT system;

AddedPromoting a more coherent tax framework for the financial sector

Added31. Recalls that the EU faces a significant investment gap of EUR 750 to 800 billion annually as regards meeting its climate, digital and strategic autonomy objectives; recalls the commitment of the Member States and the EU to substantially increase European defence investment; emphasises that in order to respond to these challenges, fair and more coherent taxation of the financial sector, that reflects both value creation and negative externalities, could contribute to mobilising private capital, thus stimulating retail investment, and to strengthening European capital markets, while raising revenue for public investment for strategic priorities, and our social, climate and investment needs, therefore strengthening the EU’s competitiveness;

Added32. Recalls, in this regard, the 2020 agreement between Parliament, the Council and the Commission on a roadmap for introducing new own resources, including an FTT based on the results of an impact assessment;

Added33. Acknowledges the lack of progress made on the FTT proposal in the Council, despite extensive debate, both under unanimity and enhanced cooperation, and takes note of the Commission’s announcement about the withdrawal of the FTT proposal in its 2026 work programme;

Added34. Takes the view that regular assessments of the economic impacts and the continued relevance of tax policy in the financial sector are crucial, in order to avoid unintended or lasting distortions to financial markets; welcomes the fact that the Commission is carrying out a comprehensive analysis of the potential impact of overall financial sector taxation on market functioning, cross-border investment, and the competitiveness of EU financial markets;

Added35. Emphasises that tax rules for the financial sector should be simplified and ensure that the sector makes a fair and sound financial contribution, and should be clear, transparent and predictable in order to reduce fragmentation, enable investment and cross-border activity while guaranteeing a high level of consumer protection; stresses that these rules should improve efficiency and capital allocation, safeguard market stability and competitiveness, and mitigate compliance costs, particularly for retail consumers and small and medium-sized enterprises;

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36. Instructs its President to forward this resolution to the Council and the Commission.