Filenews 22 October 2025 - by Ioanna Kyriakou
The European Parliament aims to introduce a simpler tax system, a reform that is considered vital in today's environment where economic pressures and global competition are increasingly increasing. The way was paved in early October, when MEPs approved proposals for tax reforms. The report, drafted by Cypriot MEP Michalis Hadjipantela, was approved in the Committee on Economic and Monetary Affairs with 46 votes in favour, 2 against and 11 abstentions.
It is worth noting that the report incorporated important proposals from organized bodies from Cyprus, ensuring that the particularities of small economies such as our country are taken into account. The report, which bears the stamp of Cyprus, places particular emphasis on supporting small and medium-sized enterprises, which are the backbone of the European economy, and provides for substantial interventions to reduce bureaucracy and enhance transparency.
What does the report provide?
The report proposes clearer rules and the elimination of shortcomings, while respecting anti-tax evasion standards. According to what DISY and EPP MEP Michalis Hadjipantela told Filenews, in order to boost competitiveness, thorough impact assessments, increased use of digital tools to reduce compliance costs, standardized templates, better coordination between member states and a revision of unnecessary rules, especially those that disproportionately burden small and medium-sized enterprises, while also calling for a reduction in reporting requirements by 35%. The MEP emphasizes that simplification does not lead to laxity, but promotes the establishment of fewer and clearer rules, stronger administrative cooperation between member states and more efficient collection. The text ensures that simplification does not come at the expense of the fight against tax evasion or fraud, strengthening fairness and competitiveness at the same time. The proposals make it easier for governments to improve tax collection and enhance the attractiveness of Member States as investment destinations, promoting sustainable economic growth.
Tax Data Hub
In addition, the report calls on the Commission to set up an EU tax data hub, an EU platform, to improve the automatic exchange of tax information. Essentially, it allows Member States to share and analyse data with uniform standards in real time. Building on existing systems such as VIES and EMCS, it will eliminate double reporting, reduce duplication, allow Member States to detect fraud risks faster, reduce bureaucracy and administrative burden, and increase the effectiveness of authorities in the interests of transparency and legitimate entrepreneurship. The hub will serve as a single point of access for tax authorities across the EU.
Harmonisation of tax identification numbers in all Member States
The adopted text also states that harmonising the use of the tax identification number in all Member States could contribute to administrative cooperation and reporting, reducing friction, delays and disputes in cross-border cases. For taxpayers, this will ensure simpler identification, fewer mistakes 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, proposing better arrangements if needed.
The Committee is also invited to:
- Assess the benefits and drawbacks of a single EU-wide set of rules for innovative start-ups, the so-called 28th regime, which would also provide a single set of tax laws and facilitate innovative businesses wishing to operate in our single market.
- Adopt measures to address the tax issues faced by cross-border workers and digital nomads, as well as to simplify R&D tax incentive regimes.
What are the benefits for Cyprus?
The proposed reform, according to Mr. Hadjipantela, is expected to bring about reduced administrative costs and cleaner rules to enhance the competitiveness of Cypriot businesses. In fact, proposals from Cypriot bodies were incorporated, in order to take into account the particularities of the small and open economy of Cyprus, enhancing the predictability and attractiveness of Cyprus as an investment destination. This will facilitate exports of services and have a positive effect on attracting investment in key sectors such as financial services, shipping and digital services.
The timetable for implementation
The text was adopted by the plenary on 9 October 2025, giving impetus to the Commission to bring binding proposals. The report, as the MEP said, summarizes the political priorities of the European Parliament in view of the expected legislative proposal of the European Commission on tax simplification, which is expected to be submitted in early 2026. The text adopted forms the basis of Parliament's position on the expected legislative proposal. The timing of the text is extremely important, he added, as it gives the Commission the necessary time to assimilate and include Parliament's position in its expected proposal.
