Remarks by Commissioner Hoekstra at the European Parliaments Extraordinary meeting Subcommittee on Tax Matters during a joint ECON/FISC meeting

Thank you very much, Chair.

Ladies and Gentlemen, I highly appreciate the opportunity to have this exchange.

On a serious note, I fully understand why the letter with the Commissions conclusion feels rough and maybe unfair. I feel your pain because I understand why many of these proposals were put on the table before as well as their merit.

Were talking indeed about financial transaction tax, transfer pricing, UNSHELL, allowing qualified majority voting on technical or non-sensitive VAT issues, and debt equity bias reduction allowances (DEBRA).

Each of these initiatives emerged out of a need to address critical economic and taxation issues, affecting the Unions fairness, effectiveness, and the way it operates in the domain of taxation.

And in my view, and that is probably where we very much agree, each and every one of the underlying principles and logic is still very much valid.

However, what is the sobering reality?

First, clearly, the geopolitical climate, has changed significantly. The economic climate has also changed significantly, and we have to face reality with Member States.

And in preparing this years work programme, the Commission carefully examined all pending proposals. That is first done centrally, and then there is a proposal made regarding how many files can actually be taken off the table.

The initial list was of course a lot longer and the assessment that is made by the Commission every single time is: do files have at least a bit of a chance of seeing the light of day? That is the reality check.

For the five proposals were talking about today, we have also especially looked at adoption dates, at progress or lack of progress and the absence of discussion in the Council.

Let me just go through them one by one just to give you a bit of an overview.

First, the FTT.

12 years on the table.

Look at where we are. No realistic prospect of reaching a unanimous agreement, to use an understatement. And even a coalition of the willing, enhanced cooperation, did not see the light of day.

Now, as you know, creating a coherent tax framework for the EUs financial sector is a priority. To achieve this, we first need a thorough understanding of the tax landscape. We have now launched an external study to provide an analysis on how we can make this applicable.

Parliament, and especially the FISC subcommittee, is an important stakeholder in this exercise, with your planned own initiative report. This will help us to inform the public policy debate.

But the reality simply is – and I recall that from when I had a different role – there is zero chance that we can advance this. Its just a reality.

On Transfer pricing:

No appetite in Council, zero, or very close to zero.

And if the Council questions whether binding EU rules are the right way forward and opposes harmonised EU rules on transfer pricing, I think we just need to rethink the situation.

On UNSHELL:

The Council discussed our approach without success. They also discussed an alternative approach, but there was insufficient political support to move forward on either.

Now, we strongly support the principle of fighting tax abuse and avoidance and are currently looking into whether we can integrate these principles and concepts into future workstreams.

VAT:

You know Im very much attached to that. Thats something I personally would have loved to champion.

Here, in December 2020, the Commission presented a proposal for qualified majority voting on technical implementation. Technical implementing value-added tax issues, not what we typically tend to think of.

Attempts by the Commission to unblock the discussions were unsuccessful. Member States favoured improving the existing system. Discussions ended in deadlock and VAT is simply very sensitive.

DEBRA:

We proposed DEBRA in May 2022 to create a level playing field for tax purposes between debt and equity.

Also, very sensible from an economic and from a company perspective. This is exactly what we would, or we should, aim for.

A large number of Member States questioned our proposal, the fundamentals of it. Council put it on hold.

Again, I see no use in insisting on a proposal that simply doesnt have their support.

And the dilemma then is: what do you do?

Ladies and Gentlemen,

I think we are all, on the one hand, very much intellectually engaged with the files that we have on the table. So am I.

But we also have to face reality and look at where can we have impact. We can spend all the time that we have together only once. Thats the reality. And therefore, I would want to go forward with many of the other files we have on the table.

The work we have done, and you have done, to me certainly shouldnt go to waste.

Were currently looking closely at all the conclusions and where we can potentially include them in further proposals. Were also looking at this through the lens of other work in the pipeline, such as the omnibus.

But again, this is the reality, and Ive experienced that again with the Energy Taxation Directive, where a common approach and a compromise seemed possible just a good number of months ago. And it was blocked by quite a number who said, no, we want to dilute it further.

That was what happened in November / December under the Swedish presidency, who have done an excellent job in pushing it forward. But frankly speaking, the common denominator just moved further down, and the one thing we thought maybe nine months ago that would be viable, not acceptable but viable, today no longer is possible.

Because theres always a Member State who is basically saying, No. Or, I want to have something in return. That is then such a big price that others will not accept.

So that is where we are.

Im being as open and as straightforward with you as I can, because I dont think theres any point in sugarcoating it.

I very much appreciate that some would argue, ok but can you then please keep them on the table and wait for a better day: thats absolutely what weve done with these files, what we continue to do with all the files we still have on the table.

But here weve basically decided: ok maybe its better to just call it quits than continue to chase a fantasy and apply the rule that hope dies last.

Thank you for your attention.