On 20 May 2021, the European Banking Federation (EBF) published an action plan for a fairer and more efficient European tax framework. The report, which follows the European Commission’s Communication on Business Taxation in the 21st Century, contains 10 concrete policy recommendations around the following four pillars:
- A harmonised approach to reporting tax-related information and combating tax evasion, with further alignment between FATCA, CRS and DAC2 is needed. This would strengthen the overall approach to the tax reporting framework and ensure a level playing field and the effectiveness of the fight against tax evasion.
- Regarding the existing complexities of withholding tax procedures, governments should take steps to implement a standardised and harmonised system of tax relief at source and simplified tax refund procedures.
- Greater legal certainty and neutrality of the VAT regime applicable to financial institutions.
- The report also highlights the problems associated with digital taxation and stresses the need for an exemption of banking services. This timely contribution presents a number of forward-looking proposals to ensure tax certainty and proportionality for banks across the EU, while removing administrative barriers to cross-border investment.
At the ABBL, we welcome the publication of these EBF recommendations. A modernised European tax framework is an important step towards more integrated capital markets and will strengthen the ability of European banks, including those based in Luxembourg, to compete globally.