Claire Healy , Partner, Transfer Pricing, Forvis Mazars: The recommendations made by Accountancy Europe focus on issues encountered by all businesses trading across several member states.
Claire Healy
We particularly appreciate the relevance of the recommendations made to address the administrative burden and the complexity of tax rules (by proposing to assess and remove overlaps between ATAD, DACs and Pillar 2 rules or by pushing for upgrades in the IT systems of all Tax Authorities), the differing tax treatments and interpretations of directives (by harmonising the legislations for cross border employees and permanent establishments rules for example), and the mismatch in application and operation of VAT directives (by harmonising and simplifying the process for VAT refunds incurred in another Member State).
Simplifying the tax systems across all Member States, or at least bringing clarity and certainty on cross border matters, would be a significant improvement. While the EU guarantees the free movement of goods, capital and individuals, the complexity of the tax rules and systems creates informal barriers.
Simplifications should not come at the detriment of the efficiency of legislation previously adopted. In this context, improving the IT system to facilitate the exchange of information and avoid taxpayers having to provide similar data multiple times appears particularly pertinent.
However, a major limitation for legally binding EU guidance on tax matters is the impact this would have on the sovereignty of Member States over their own domestic taxation and fiscal rules. Member States have always been attached to this fundamental principle. In Ireland, it has enabled the government to maintain the 12.5% corporate tax rate. A change to that principle would mark a significant shift, requiring all Member States to agree unanimously on the guidance, with the risk of vetoes and paralysis, or the risk that the imposition of EU rules over domestic legislation in respect of tax matters could be used politically.
Deirdre Barnicle
: As noted in the above briefing paper, there is an increasing tax compliance burden for businesses doing cross-border trade within the EU. Taxpayers face inconsistent rules, duplicate requirements, and mismatched reporting obligations across member states, undermining the efficiency and competitiveness of the single market.
The European Council has recognised the need for increased harmonisation of the EU tax system with the approval of the tax simplification and decluttering agenda in March this year. The agenda includes aims to revise the Directive on Administration Cooperation (DAC), the common VAT system, and withholding tax on dividends and interest. The agenda joins other legislative efforts to simplify the EU tax system like the Faster and Safer Tax Relief of Excess Withholding Taxes Directive and ViDA (discussed in further detail above.)
However, it is important to note that the EU must perform a fine balancing act between harmonisation and standardisation. Under the Treaty on the Functioning of the European Union (TFEU), the power to levy and collect taxes is reserved for member states. While the EU can adopt provisions for the harmonisation of national taxation legislation (through Article 113 or Article 115), it requires unanimous approval from member states and must be done through a special legislative process. While the EU must work to maintain the integrity of the single market, it must do so within the limits of its competences conferred by the TFEU and without eliminating the chance for member states to position themselves as globally competitive.
Colin Farrell
: Additional EU guidance on interpretative matters is needed to provide clarity on several tax issues. Guidance is helpful in providing an interpretative code that assists national legislators, judges and tax administrations in delivering the objectives of EU Directives and Treaties.
For taxpayers operating in multiple Member States, guidance could eliminate the need for opinions or rulings from several jurisdictions on the same transaction. The areas where guidance would be most helpful include; VAT issues not currently dealt with via Regulations (due to increasing complexity of local legislation), the public country-by-country reporting rules (specifically the meaning of “commercially sensitive”) and various aspects of the Directive of Administrative Cooperation (DACs 1- 9).
This article appeared in the October 2025 edition of the Irish Tax Monitor.
