European Council conclusions: Fairness, efficiency, and conforming to the digitalization as key areas of European tax policy

18.12.2020

The European Council has adopted conclusions (27.11.2020) expressing its latest views on tax policy of the European Union. The conclusions express the importance of fair and efficient taxation in the economic recovery during and after COVID-19, the challenges posed by digitalization, as well as the significance of enhancing good governance and cooperation in the field of taxation. 

The Council has emphasized the importance of well-functioning and efficient tax systems in the economic recovery from challenges posed by COVID-19 pandemic, as well as the need for tax systems which will generate revenue for the budgets of Member States and the EU. 

One of the key issues is the challenge of digitalization and digital economy. The Council has expressed its concerns on phenomena linked to digitalization such as tax base erosion and profit shifting, which has created an urgent need for tax systems able to address such issues. For example, the Council recalls its previous actions to establish a new system in a form of so-called digital tax, if an OECD-level consensus will not be reached by mid-2021.

The Council has also highlighted the recent development in good governance and cooperation regarding the tax field in the European Union. Enhancement towards extensive cooperation between both Member States and Member States and third countries has been brought up as a much-welcomed development, which has led to improved control in areas such as tax evasion and tax avoidance. As an example of the recent development in the area of cooperation, Member States have already agreed upon the DAC7 Directive, entering into force in January 2023, which will create a system of automatic exchange of information between tax authorities of Member States enabling the authorities to detect better situations of low or no-taxation.