CFE’s Tax Top 5 – 30 June 2025

The G7 has issued a Statement that could significantly reshape the global minimum tax framework developed under the OECD/G20 Inclusive Framework. The statement sets out that recent discussions of the G7 have centred on analysing both the current U.S. tax regime and proposed legislative changes, including those contained in the Senate’s amendment to H.R.1, the One Big Beautiful Bill Act (OBBBA).

Following these discussions, G7 members have announced they have now reached a shared understanding that US-parented multinationals will be exempt from the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) in recognition of existing US minimum tax rules in respect of both domestic and foreign profits. Importantly, it also entails a commitment to address any substantial risks to the level playing field or risks of BEPS that may arise under such a system.

The US Treasury Secretary stated this exemption could save US companies $100 billion in foreign tax payments over the next decade, while the G7 framed it as a means to stabilise the international tax system and preserve countries’ tax sovereignty.

The implementation of a side-by-side system would be pursued alongside material simplifications to the Pillar 2 administration and compliance framework. Discussions will also consider changes to the treatment of substance-based non-refundable tax credits to ensure greater alignment with refundable tax credits. This dual-track approach aims to deliver stability and facilitate constructive dialogue on broader issues such as digital taxation.

The G7 in the Statement recognises the relevance of these developments to a wider group of jurisdictions and states it intends to progress this understanding within the Inclusive Framework to achieve an acceptable and implementable solution. Notably, the removal of section 899 from U.S. legislation is seen as crucial to maintaining a stable environment for these ongoing negotiations.

Critics argue the agreement undermines the landmark 2021 global minimum tax accord. The Tax Justice Network described it as a “hasty cave-in” that risks rendering the minimum tax ineffective if US multinationals are largely exempted. Nobel laureate Joseph Stiglitz similarly criticised the accord as prioritising multinational interests over citizens and small businesses. Meanwhile, the OECD has stressed that the G7 statement is non-binding, noting any change will require agreement from all 147 Inclusive Framework members.

The European Parliament’s ECON Committee last week submitted questions to the European Commission regarding the taxation of large digital platforms, emphasising that global challenges require global solutions. The Commission has also been asked whether it intends to reassess its 2018 proposals on digital taxation, their geopolitical and economic implications, and how it plans to avoid fragmentation among EU Member States.

In the coming weeks, attention will focus on whether the OECD can deliver a stable, inclusive outcome amid competing national interests and growing legislative pressures in both the EU and US.

Future-Proofing EU Tax Policy: Insights from the EU Commission 2025 Annual Taxation Report

The European Commission’s Annual Report on Taxation 2025 was published last week, providing a detailed analysis of recent developments in taxation across EU Member States. The report highlights the economic context of modest EU economic growth forecasts of 1.1% in 2025 and 1.5% in 2026 amid persistent fiscal challenges and an ageing population. It underscores how ageing will place increasing demands on pension expenditure, potentially constraining public finances for other priorities such as competitiveness, defence, and housing, particularly in countries like Spain, Portugal, and Italy.

The report sets out that the EU’s tax-to-GDP ratio fell to 39% in 2023, its lowest since 2011, mainly due to lower revenues from environmental and property taxes alongside strong nominal GDP growth. Labour taxes continue to represent over half of tax revenues across the EU, with capital taxes gaining a slightly larger share in recent years. Recent tax policy initiatives at EU level include the adoption of the Faster and Safer Tax Relief of Excess Withholding Taxes Directive and the VAT in the Digital Age package, alongside proposals such as BEFIT and the Head Office Tax System to simplify corporate taxation.

A significant focus is placed on tax gaps, with the EU-wide VAT compliance gap estimated at EUR 89 billion in 2022. The report highlights how compliance gaps in personal and corporate income taxes remain underexplored, while aggressive tax planning and profit shifting by multinational enterprises result in substantial revenue losses. To address this, Member States are encouraged to strengthen tax administration capacities, leverage digitalisation, and improve data sharing under frameworks like Eurofisc and the Fiscalis programme.

Finally, the report examines the progressivity of EU tax systems and the challenges of fairly taxing high net-worth individuals. While most EU Member States operate progressive income tax systems, wealth remains highly concentrated, with limited use of net wealth taxes following their abolition in most countries. The Commission stresses the need for future-proof tax mixes that support growth and fairness while ensuring fiscal sustainability in light of demographic and geopolitical pressures.

OECD Publishes New BEPS Action 14 MAP Peer Review Reports

The OECD has released 36 new peer review reports under BEPS Action 14, which focuses on improving the effectiveness of Mutual Agreement Procedures (MAP) for resolving treaty-related tax disputes. The reviews cover jurisdictions participating in the Inclusive Framework on BEPS, all of which have committed to implementing the Action 14 minimum standard. This standard is designed to enhance the resolution of cross-border tax disputes through more effective and timely MAP processes.

Six jurisdictions – Belgium, Canada, Croatia, Estonia, Liechtenstein, and the United Kingdom – underwent the full peer review in this cycle, with the OECD noting their continued adherence to the minimum standard. Notably, these countries have signed and ratified the Multilateral Instrument, issued MAP guidance and profiles, and improved the efficiency of their competent authorities in resolving MAP cases within or closer to the targeted 24-month timeframe. The updated Assessment Methodology for Action 14 includes both a full peer review process and a simplified process. Jurisdictions with ‘meaningful MAP experience’ undergo the full review, while those without such experience follow the simplified route to help establish robust MAP programmes in anticipation of future cases.

A further 30 jurisdictions, including Andorra, Armenia, Azerbaijan, Bahamas, Bermuda, and several others, were reviewed under the simplified process. The results showed that most are actively establishing or have committed to establishing policy frameworks and operational MAP programmes to ensure the timely and effective resolution of disputes. Many have updated their treaties via the Multilateral Instrument or bilateral negotiations, issued MAP guidance, and strengthened their competent authorities in line with the Action 14 minimum standard.

EU Council Progresses Custom Framework Reform

The Council of the European Union has agreed a partial negotiating mandate on a fundamental reform of the EU customs framework. The reform aims to modernise the customs system to address rising trade volumes, particularly in e-commerce, an increasing number of standards requiring border checks, and evolving geopolitical challenges. It is expected to enhance the EU’s ability to block non-compliant or unsafe goods, improve the efficiency of customs duty collection, and strengthen border controls without imposing excessive burdens on traders or customs authorities.

A key element of the reform is the establishment of a decentralised EU Customs Authority. This agency will coordinate EU-level risk management by supporting national customs authorities and managing a new EU customs data hub. The data hub will serve as a single online platform where businesses can submit customs information just once, with the option to reuse data for multiple consignments. This centralised system is designed to improve data integrity and enable authorities to respond more quickly and effectively to emerging risks.

The proposal also introduces enhanced simplifications for trusted traders through a new ‘trust and check traders’ category. Businesses meeting strict transparency and compliance criteria will benefit from streamlined customs obligations, and in some cases, be able to release goods into circulation without active intervention. Existing Authorised Economic Operator (AEO) arrangements will be retained to continue supporting thousands of SMEs in meeting their customs responsibilities under simplified processes.

Finally, the Council’s mandate amends the Commission’s proposal to clarify certain customs procedures and introduces a new handling fee for small consignments entering the EU via distance selling. Negotiations with the European Parliament on the core aspects of the reform will now commence, while discussions on specific elements, including the seat of the EU Customs Authority, simplified tariff structures, and the design of the handling fee, will follow in due course. The reform forms part of efforts to ensure the EU customs framework remains effective, secure, and fit for purpose in a changing global trade environment.

EU Adopts New State Aid Framework to Drive Clean Industry Transition

The European Commission has adopted a new State aid framework to support the Clean Industrial Deal, known as the Clean Industrial Deal State Aid Framework (CISAF). This framework enables EU Member States to advance clean energy development, industrial decarbonisation, and clean technology deployment. It replaces the Temporary Crisis and Transition Framework (TCTF) and will remain in place until 31 December 2030, providing long-term certainty for both governments and businesses.

The framework simplifies State aid rules in five key areas: rolling out renewable energy and low-carbon fuels, offering temporary electricity price relief for energy-intensive users, decarbonising existing production facilities, developing clean tech manufacturing capacity, and de-risking investments in clean energy and the circular economy. It introduces fast-track procedures to facilitate renewable energy schemes and low-carbon fuels such as hydrogen, alongside flexibility measures and capacity mechanisms to integrate intermittent renewable sources into the energy supply.

The framework also allows Member States to reduce electricity costs for energy-intensive users exposed to international trade pressures, in return for their commitment to decarbonisation investments. Further, it offers flexible support for a wide range of decarbonisation technologies including electrification, hydrogen, biomass, and carbon capture. Aid can be granted based on predefined amounts, funding gaps, or competitive bidding processes, with higher aid intensities permitted for less advantaged regions to support cohesion.

Additionally, the framework permits Member States to stimulate demand for clean technology products through tax incentives, enabling accelerated deductions of clean technology investments from taxable income. It also facilitates measures to de-risk private investments in eligible projects, including energy infrastructure and circular economy initiatives, through instruments such as equity, loans, and guarantees. This framework sits alongside other EU State aid rules, including the Climate, Environmental protection and Energy Aid Guidelines, and continues to ensure that public support does not distort competition within the internal market.

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