CFE’s Tax Top 5 – 31 March 2025

The 30th Session of the United Nations Committee of Experts on International Cooperation in Tax Matters took place last week from 24 to 27 March 2025 at the UN Headquarters in New York. The Committee, composed of 25 members nominated by governments and appointed by the UN Secretary-General, functions in their individual expert capacities and aims to provide practical guidance on tax policy and administration, with a strong focus on the priorities and capacities of developing countries, as well as promoting sustainable development and combatting tax abuse and illicit financial flows.

Key topics on the agenda included: the update of the Manual for the Negotiation of Bilateral Tax Treaties, the Sustainable Development Goals, and capacity building efforts. The session also addressed dispute avoidance and resolution mechanisms, digitalisation of tax administration, and transparency initiatives. Additionally, the Committee reviewed a toolkit for evaluating crypto tax risks and considered the development of a provisional agenda for its 31st session. Discussions were supported by a range of papers by subcommittees and coordinators, which can be accessed online.

The Committee’s current work programme for the 2021–2025 period covers a broad range of technical and policy areas. These include updates to the UN Model Tax Convention, guidance on transfer pricing, environmental and health taxation, extractive industries, and indirect taxes. Emerging issues under consideration include taxation of the digitalised and globalised economy, crypto-assets, and wealth and solidarity taxes, as well as the interaction between tax and trade or investment agreements. The Committee’s work continues to play a significant role in shaping international tax cooperation, particularly for developing countries seeking to enhance domestic resource mobilisation.

US Imposes New Tariffs on EU Automobile & Auto Parts Imports

On 26 March 2025, the White House issued a proclamation reimposing tariffs on imports of automobiles and certain automobile parts from the European Union and other trading partners, citing ongoing national security concerns under Section 232 of the Trade Expansion Act.

Under the new action, a 25% tariff will apply to covered automobile imports starting 3 April 2025, and to automobile parts no later than 3 May 2025, unless otherwise specified in the Federal Register. The tariff will apply in addition to existing duties. A special process will allow importers of vehicles qualifying under the USMCA to apply the tariff only to the non-US content of the automobile, subject to verification by US Customs and Border Protection (CBP). Misstatements of US content may result in the tariff being applied to the full value of all imports of the affected model by the same importer, retroactively and prospectively. The proclamation also sets out a process to expand the scope of tariffs to additional auto parts, subject to monitoring and adjustments by the Secretary of Commerce.

While not specifically targeted at the EU, the move is expected to add strain to transatlantic trade relations, which are already under pressure due to the United States’ continued tariffs on EU steel and aluminium. In March, the European Commission announced countermeasures in response to the United States’ decision to impose tariffs on EU steel and aluminium imports. The EU’s response follows a two-step approach: first, allowing the suspension of previous 2018 and 2020 countermeasures to lapse on 1 April, and second, introducing additional tariffs on US imports by mid-April to match the economic impact of the US measures. The EU is considering its options under Regulation (EU) No 654/2014, which provides a framework for rebalancing trade concessions when the EU’s interests are impacted by third-country measures.

The Commission will finalise its countermeasure proposals based on stakeholder input and consultations with Member States, aiming to have legal measures in place by mid-April. President Ursula von der Leyen has emphasised the importance of transatlantic trade and the need to avoid unnecessary economic burdens, stating that the EU remains committed to seeking a negotiated resolution with the US. However, she has made clear that the EU will act decisively to protect its businesses and consumers.

European Court of Auditors Issues Report on VAT Fraud on Imports  

The  European Court of Auditors has issued a report setting out the findings from its audit on VAT fraud risk on simplified customs procedures. The report concludes that the EU’s financial interests are insufficiently protected against VAT fraud under two simplified import customs procedures—Customs Procedure 42 (CP42) and the Import One Stop Shop (IOSS). The Court of Auditors found that these mechanisms, designed to facilitate trade by exempting certain imports from upfront VAT, are vulnerable to abuse. The report reveals significant weaknesses in the EU’s regulatory framework, as well as inconsistent enforcement and oversight across Member States.

The auditors identified loopholes that allow exploitation of the differences in national rules for tax representatives, sanctions, and VAT identification procedures. Many Member States were found to fail to validate the true identity of importers or to systematically check transport evidence or recapitulative statements for intra-EU transactions. As a result, VAT is not properly collected in a substantial number of cases. In addition, the IOSS scheme suffers from poor data reliability and a lack of meaningful post-import controls, making it difficult to detect undervaluation or abuse of VAT exemptions.

The Court recommends a legislative overhaul to harmonise rules on tax representatives, strengthen controls at importation, and enable more effective cross-border cooperation. It also calls for the European Commission to monitor national implementation more closely, improve data sharing, and expand the role of Eurofisc in preventing VAT fraud. The report underlines the need to strike a better balance between trade facilitation and safeguarding the EU’s revenue base.

OECD Updates Investment Tax Incentives Database for 2024

The OECD has released the 2024 update of its Investment Tax Incentives Database (ITID), offering a detailed overview of corporate income tax (CIT) incentives for investment across 70 economies, with a particular focus on emerging and developing countries. The report captures developments between 2022 and 2024 and highlights the growing use of CIT incentives, especially tax exemptions, which are now employed by nearly 90% of the surveyed economies. It also explores the increasing use of more targeted tools such as tax allowances and credits, and notes a rise in incentives aligned with sustainable development objectives—particularly in areas such as environmental impact, employment, and skills development.

The ITID provides insights into how tax incentives are designed, whom they target, and how they are governed. It finds that incentives often apply to specific sectors, regions, or investor behaviours, with many requiring projects to meet minimum investment sizes or employment thresholds. Over half of all incentives combine multiple eligibility conditions, which can improve targeting but may also add complexity. The governance of these incentives remains fragmented in most countries, with provisions scattered across various laws and agencies, limiting transparency and complicating policy evaluation.

Between 2022 and 2024, nearly half of the countries covered increased the number of tax incentives offered, reflecting continued policy interest in using tax tools to stimulate investment. The report also notes a gradual shift toward expenditure-based incentives—such as tax credits and allowances—that are considered more cost-effective and better aligned with policy goals. For tax advisers, the ITID offers a valuable resource to track evolving policy trends, assess the implications of the global minimum tax, and understand how incentives are being used to advance broader development priorities.

Upcoming FISC Meeting to Address Tax Policy’s Role in Green Transition & EU Competitiveness

The European Parliament’s Subcommittee on Tax Matters (FISC) is scheduled to convene its next meeting on Thursday, 24 April 2025, from 09:00 to 12:30 in Brussels. The session will commence with a public hearing titled “The role of tax in aligning the green transition and competitiveness”. This hearing aims to explore how tax policies can support environmental sustainability while enhancing the European Union’s economic competitiveness.

Following the hearing, Members of FISC will then deliberate on the draft report concerning “The role of simple tax rules and tax fragmentation in European competitiveness.” This discussion will focus on how streamlined tax regulations and addressing tax fragmentation can bolster the EU’s competitive edge in the global market.

The selection of the remitted material has been prepared by:
Aleksandar Ivanovski & Brodie McIntosh