The European Parliament is pushing for a simpler tax system across the EU, approving reforms designed to cut red tape and support small businesses amid mounting economic pressures and global competition.
MEPs backed the proposals in early October, with the Economic and Monetary Affairs Committee approving the report by 46 votes in favour, two against and 11 abstentions. Cypriot MEP Michalis Hadjipantelas drafted the report, which includes input from Cypriot organisations to account for the needs of smaller economies.
The report focuses heavily on supporting small and medium-sized enterprises (SMEs), which form the backbone of the European economy, and calls for substantial measures to reduce bureaucracy and increase transparency.
Key proposals
The reforms call for clearer rules and the elimination of gaps whilst maintaining anti-tax evasion standards.
Hadjipantelas, who belongs to the centre-right European People’s Party, told philenews that the measures seek to boost competitiveness through thorough impact assessments, increased use of digital tools to cut compliance costs, standardised templates, better coordination between member states and a review of unnecessary rules that disproportionately burden SMEs.
The report also demands a 35% reduction in reporting requirements.
Hadjipantelas told philenews that simplification does not mean laxity but rather promotes fewer and clearer rules, stronger administrative cooperation between member states and more effective collection.
The text ensures that simplification does not come at the expense of fighting tax evasion or fraud, strengthening both fairness and competitiveness simultaneously.
The proposals help governments improve tax collection and enhance member states’ attractiveness as investment destinations, promoting sustainable economic growth.
EU tax data hub
The report calls on the European Commission to create an EU tax data hub, a union-wide platform to improve the automatic exchange of tax information. The system would allow member states to share and analyse data with unified standards in real time.
Building on existing systems such as VIES and EMCS, the hub would eliminate duplicate data submissions, reduce overlaps, allow member states to identify fraud risks faster, cut bureaucracy and administrative workload, and increase the effectiveness of authorities for the benefit of transparency and legitimate business.
The hub would serve as a single access point for tax authorities across the EU.
Harmonised tax identification numbers
The approved text notes that harmonising the use of tax identification numbers across all member states could contribute to administrative cooperation and data submission, reducing friction, delays and discrepancies in cross-border cases.
For taxpayers, this would ensure simpler identification, fewer errors and easier procedures when operating or investing across borders.
MEPs now expect the Commission to present a plan for proper harmonisation, which they will examine in detail and propose improvements if needed.
Other measures
The committee also calls on the Commission to assess the benefits and drawbacks of a single set of EU-level rules for innovative start-ups, the so-called 28th regime, which would provide a unified set of tax laws and facilitate innovative businesses wishing to operate in the EU market.
The Commission is also urged to adopt measures addressing tax issues faced by cross-border workers and digital nomads, as well as simplifying R&D tax incentive schemes.
Benefits for Cyprus
According to Hadjipantelas, the proposed reform is expected to bring reduced administrative costs and clearer rules to strengthen the competitiveness of Cypriot businesses.
Proposals from Cypriot organisations were incorporated to account for the specificities of Cyprus’s small and open economy, enhancing predictability and Cyprus’s attractiveness as an investment destination.
This will facilitate service exports and work positively in attracting investment in key sectors such as financial services, shipping and digital services.
Implementation timeline
The text was adopted by the plenary on 9 October 2025, giving momentum to the Commission to bring forward binding proposals.
According to the MEP, the report consolidates the European Parliament’s political priorities ahead of the European Commission’s expected legislative proposal on tax simplification, which is scheduled for submission in early 2026.
The voted text forms the basis of Parliament’s position on the expected legislative proposal. The timing of the text’s approval is extremely important, Hadjipantelas added, as it gives the Commission the necessary time to absorb and include Parliament’s position in its expected proposal.
