On July 1, 2024, Hungary will assume the six-month rotating presidency of the Council of the European Union from Belgium. This transition comes at a time when the relationship between tax policy and Europe’s competitiveness is under close scrutiny.
During its presidency, Belgium prioritized measures to curb tax evasion, tax avoidance, aggressive tax planning, and harmful tax competition. This included tackling tax abuse related to withholding taxes, propelling initiatives to decrease compliance costs for cross-border investors, and updating the EU’s list of non-cooperative jurisdictions.
In May 2024, the Council reached an agreement on the FASTER Directive, aimed at boosting cross-border investment and combating tax abuse. This Directive introduces a common EU digital tax residence certificate and two fast-track procedures that complement the current refund procedures in each Member State. Member States will need to transpose the Directive into national legislation by December 31, 2028, and apply the rules starting January 1, 2030.
However, the VAT in the Digital Age (ViDA) proposal, another focus of Belgium’s presidency, failed to reach an agreement due to concerns about deemed supplier rules. Until these issues are resolved, unanimity appears unlikely. Furthermore, this file is not mentioned as a priority under the Hungarian presidency, which could mean the proposal is on hold until further notice.
As Hungary takes over the presidency, it will have to balance political and technical work. Hungary’s key priorities include tax evasion, legal certainty for taxpayers, and supporting the EU’s international engagement. Hungary views taxation as a tool to enhance the competitiveness of European businesses through digitalization, efficient use of information, and simplification.
With many unresolved issues with the tabled proposals, Hungary will have to prioritize the files and focus on resolving the concerns of Member States, such as double taxation and the non-neutrality of the ViDA proposal, if it wishes to reach unanimity.
As the Hungarian presidency considers a plan to manage these tax-related files, it should consider principled tax policy. For example, while improving value-added tax (VAT) compliance can generate revenue, focusing on the actionable VAT policy gap—the additional VAT revenue that could realistically be collected by eliminating reduced rates and certain exemptions—would be even more beneficial to EU and national budgets, as it can more than triple revenues from the compliance gap.
As an honest broker, Hungary is expected to steer negotiations on these proposals among Member States to reach unanimity. But holding the rotating presidency carries significant responsibility, especially as intra-EU dynamics change in a post-election semester. As such, principled tax policy should continue to be viewed as an important tool for a more competitive European Union.
For more information on this topic, visit https://taxfoundation.org/blog/hungary-eu-presidency-tax-files/.