After being re-elected for a second mandate in July 2024, EU Commission President Ursula von der Leyen has now announced the Commissioner-Designates who should sit in her new College of Commissioners subject to the European Parliament’s approval.
To oversee EU taxation policy, von der Leyen has proposed Wopke Hoesktra, the Dutch Conservative Commissioner for climate action since 2023, who will also retain his current responsibilities over climate, net zero and clean growth. Hoekstra’s priorities on taxation policy are neatly set out in the Mission Letter provided by President von der Leyen.
When tax meets climate change
Bundling together responsibilities on climate and taxation is a novel approach from the Commission. It seems to prelude a shift away from corporate tax as main focus area and underscores the Commission’s ambition to leverage taxation to drive forward climate protection goals.
In this respect, Commissioner-Designate Hoesktra has confirmed in his written answers to the European Parliament that concluding long-stalled negotiations on the revision of the Energy Taxation Directive (ETD) is of utmost importance in order to “promote the use of more sustainable or renewable fuels” and to increase EU’s energy independence by moving from imported fossil fuels to energy that can be produced in the EU such as renewables. The revised ETD would support this by taxing more polluting products more heavily and allowing Member States to reduce the tax on electricity supplied to electric vehicles, for example.
Hoekstra specifically outlines the importance of taking actions in the aviation and maritime sectors which are currently exempted from fuel taxation – something that he wants to abolish in line with his previous commitments to MEPs in 2023 where he referred to “the most absurdity in my view: the lack of taxation on aviation fuel”, adding “Which European thinks it would make sense not to act in accordance with the polluter pays principle in the case of kerosene?” Hoekstra will also explore how to further green the VAT system, which may include a revision of the zero VAT rates for international air and maritime passenger transport.
He also confirmed that work on behavioural taxation will play an important role in incentivising “green” consumptions and products. He did not commit to specific policy instruments at this stage however, saying that it may “be soft-law measures such as recommendations or more ambitious measures, for instance introducing EU minima for environmental taxes other than energy taxes.”
Removing tax barriers to the Savings and Investment Union
There is also a special emphasis on financial services for which Hoekstra will have to “identify innovative solutions for a coherent tax framework […] that helps further integrate the EU’s financial sector, facilitate cross-border operations and foster digitisation and innovation.” This is not a surprise given that a major priority of this new term is the completion of the banking and capital markets unions (renamed a Savings and Investment Union) to finally provide European companies with access to financing similar to what exists in the US.
Hoesktra announced in an unexpected move that he will try to revive negotiations on DEBRA – a proposal aimed at addressing the debt equity bias which is currently on hold in the Council. Hoekstra also commits to review the “patchwork of non-harmonised sectoral taxes, including Insurance Premium Taxes, financial institution levies, special payroll taxes and financial transaction taxes” as well as the VAT exemption for financial services, which is “in some respects, outdated”. The Commission has apparently “already initiated a study to look into possible ways of taxing the financial sector.”
In line with the recommendations of the Letta report, Hoekstra announced that he will explore options to incentivise the mobilisation of investments towards innovative start-ups and scale-ups.
Corporate tax agenda: (some) work in progress
Other aspects of his Mission Letter relates to more traditional priorities on corporate taxation. In a vaguely worded priority, Hoekstra is tasked with “continu[ing] the work on the reform of corporate taxation”. The Commissioner-Designate has given some more insights to MEPs on what this may entail. BEFIT – aimed at creating a common corporate tax framework in the EU – is for instance mentioned as a “long-term project” which “will continue to be a priority”. Hoekstra commits to “look at this proposal through the lens of our experiences with Pillar 2, which has already begun to alter the international tax landscape”, which should be welcomed by tax authorities and industry alike seeking more consistency of the EU legal tax framework.
Overall, Hoekstra embraces the need to simplify and declutter the EU tax legislation in order to foster competitiveness. He promises to undertake a “stress-testing of the EU acquis to identify and address inconsistencies”, such as “overlaps, contradictions or out-of-date rules” – something that the Commission started doing with the evaluations of ATAD and DAC.
Interestingly, the Mission Letter still mentions the need to keep “the highest level of ambition in fighting tax fraud, tax evasion and tax avoidance.” This can appear surprising for a Commission President that has made competitiveness, the return of growth and the fight against red tape the number one priority of her new term, but it is certainly a way to demonstrate that the Commission remains committed to what constituted the bulk of its tax work until now. Politically, it might also be a way to ensure the support of left-leaning political groups for Hoekstra’s appointment. In his written answers, the Commissioner-Designate does not foresee any concrete legislative proposal but rather recommends “to support tax administrations by sharing best practices and developing rigorous methodologies for calculating tax gaps.” He also pays tribute to the work of the Code of Conduct Group on the so-called backlist of tax havens. He also notes that “the Commission continues its wider efforts to address aggressive tax planning, for example through UNSHELL proposal, which is pending in Council since 2021” without taking any firm commitment to try and unblock it, however.
Last but not least, the Mission Letter specifically mentions the implementation of Pillar 2 Directive, which seems to show that its ambition has not decreased despite pushback in other parts of the world. Hoesktra remains indeed firmly committed to it, calling it “a historic milestone”. However, he recognises that UTPR is essential “to ensure that the rules will not operate to the detriment of implementing jurisdictions.” To make sure it can be implemented, he sees his role as a kind of honest broker, especially with the US, promising that he “will keep encouraging all committed jurisdictions to implement the rules or to swiftly cooperate in effective exchange of information”.
The elephant in the room is the fate of Pillar 1, which is not mentioned in the Mission Letter. In his answer to MEPs, Hoekstra remains very prudent falling short of promising any EU-wide way forward, such as the previously-tried Digital Services Tax (DST) Directive, if there is no agreement on Amount B “a challenging […] but not an impossible task”.
Interestingly and unlike some of his predecessors, Hoekstra does not promise to reform the unanimity rule for decision-making on taxation. While he recognises that it is a “challenging feature”, he believes that it “remains relevant to Member States in maintaining sovereignty over matters directly affecting their economies and exchequers” – a position which is probably not too surprising for a former Finance Minister.
Next steps
Wopke Hoekstra, like all his fellow Commissioner-candidates, will need to get the backing of a majority of MEPs to be officially sworn in. On 7 November, he will be grilled for 3 hours in the European Parliament by 6 different committees including the ECON and FISC committees responsible for taxation matters.
If everything goes smoothly, the new College of Commissioners could already be approved by MEPs week commencing 25 November and take office on 1 December. However, difficult hearings could delay the start date of the new Commission to the new year.
