EBF Tax Conference 2024

The European Banking Federation held a landmark conference bringing together leading experts and policymakers to discuss the evolving EU tax landscape. Speakers explored the role of banks in tax processes in the digital era and discussed key policy questions ahead of the next EU legislature.

As Chair of the EBF Fiscal Committee, Camille Seillès shared his thoughts on a panel discussion on how to strike the right balance between the fight against tax evasion and data protection. He went on by delivering the closing address, which we reproduce below, outlining a tentative roadmap ahead of the forthcoming EU legislature.

The past…

The past decade has been a fascinating period for anyone interested in tax policy.

We have witnessed once-in-a-generation changes to the global tax framework. All these changes had a common goal: to restore taxation in a number of instances where income would otherwise go untaxed.

Comprehensive standards have been crafted as part of the OECD Action Plan on Base Erosion and Profit Shifting and now ensure effective taxation of corporate profits.

In parallel, access to bank information for tax purposes is widely granted to tax authorities around the Globe and has dealt a decisive blow to cross-border tax evasion.

Banks have been instrumental in the implementation of the latter, and have de facto become auxiliaries to tax authorities by performing extensive due diligence and reporting on clients and other counterparties.

As we stand today, robust safeguards are effectively in place to secure tax revenues and effective tax collection by public authorities.

… and the future

With this background in mind, let’s have a look at the future.

A strong Europe needs a strong banking sector. An enabling tax framework allowing banks to fully play their role in financing the European economy is part of this equation.

Specific levies on the banking sector should be avoided. Such levies negatively impact banks’ profitability and hence their resilience and ability to provide credit in hard times.

Banks are contributing to the cost of their potential failing via significant contributions to dedicated resolution funds and cover the cost of their supervision.

Also, we believe that the recent flurry of windfall taxes on bank profits is an unwise move bearing potentially detrimental impacts on financial stability. The recent surge of banks’ profits due to elevated monetary policy rates would swiftly dissipate should asset quality deteriorate.

At a time when the EU is working to develop its financial and capital markets to meet its economic needs, specific levies on financial transactions / activities should be avoided too. It is demonstrated that such levies put a strain on the liquidity and efficiency of financial markets.

Current tax obstacles to the completion of a single market for capital should be addressed in due course. This should be in our view a priority of the next EU legislature. We welcome the Commission’s initiative to create new rules to make withholding tax procedures in the EU more efficient and secure. We believe, however, that the current FASTER proposal should be reviewed to yield genuine simplifications for investors and financial intermediaries.

An evergreen on the agenda is the modernization of the VAT treatment of financial services. With rules dating back to the late 1970s, a full review is required to achieve greater neutrality and to remove barriers to economic efficiency. The current VAT cost for banks is a factor of competitive distortion with new entrants and needs to be addressed urgently after unsuccessful attempts in the past two decades.

Banks in Europe are doing their part in the fight against tax evasion under the automatic exchange of information. 10 years on, the time is ripe for an assessment of the current framework to make sure that obligations are well-calibrated, clearly framed and coordinated. Before considering any further extension to the legal framework, potential data protection implications should be tested to strike a balance between tax disclosure and privacy rights that is sustainable in the longer term.

Last but not least, EU initiatives in the field of corporate taxation should remain consistent with OECD standards and need to take into account specific features of the banking model. Distortive outcomes with significant shifts in profit allocation between EU Member States as compared to today should be avoided.

To conclude, future EU initiatives in the field of taxation should focus, in our view, on administrative simplification as opposed to the creation of new layers of complexity.

And taxation shall be a lever of competitiveness and qualitative growth to incentivize the massive investments needed to achieve the digital and green transitions, which are very much at the heart of our reflection and action.