For companies operating across the EU, these developments merit close attention. Not only because of the measures under discussion, but also because they signal a broader recalibration of how tax policy is expected to support EU objectives in practice.  

Simplification in focus: a pragmatic turn in EU tax policymaking

The European Commission continues to advance its regulatory simplification agenda, with an omnibus package on direct taxation expected by the end of June 2026. Following earlier omnibus initiatives in the digital and sustainability fields, the tax package reflects growing recognition of the need to address accumulated complexity in the EU corporate tax framework. Two legislative proposals are anticipated.

The first would introduce simplification measures across core elements of EU corporate taxation, including the Interest and Royalties Directive, the Parent‑Subsidiary Directive, the Tax Merger Directive, the Anti‑Tax Avoidance Directive (ATAD) and the Tax Dispute Resolution Mechanisms Directive. The proposal is expected to focus on clarifying legal concepts, reducing overlaps and streamlining compliance requirements. Particular attention is likely to be paid to interaction issues, including between ATAD’s controlled foreign company rules and the OECD/G20 Pillar Two minimum tax framework.

The second proposal would recast the Directive on Administrative Cooperation in the field of taxation (DAC) into a single legal instrument. Since its entry into force in 2011, DAC has been amended eight times. While a 2025 Commission evaluation confirmed its effectiveness in combatting tax fraud, evasion and avoidance, it also highlighted the growing complexity of the framework and the resulting need for consolidation. A central element is expected to be the integration of the former proposal to prevent the misuse of shell entities (“Unshell”, also referred to as ATAD III) into the DAC framework.

Despite broad political support in 2025 for the principle of tax “decluttering”, adoption of both proposals will require unanimity in the Council of the European Union. Given that taxation remains a sensitive national competence, negotiations are likely to be challenging, and the eventual level of ambition of the tax omnibus will rest with the Member States.

Retrenchment by design: withdrawing proposals without a path to unanimity

In parallel with its simplification efforts, the Commission has signalled a more selective approach to tax legislation. In 2025, it announced its intention to withdraw several tax proposals where political consensus proved unattainable, including initiatives on enhanced cooperation for a financial transaction tax, Unshell, the Debt‑Equity Bias Reduction Allowance (DEBRA) and EU transfer pricing rules.

Although this move attracted criticism from the European Parliament, Commissioner Wopke Hoekstra defended the decision on the basis that the proposals had no realistic prospect of securing unanimity. While formal withdrawal remains subject to publication in the Official Journal of the European Union, the broader message is clear: policy focus is shifting from legislative ambition to achievability.

Digital taxation: renewed pressure and unresolved fundamentals

The future of digital taxation has re‑emerged as a key issue following the publication of the OECD ‘Side‑by‑Side’ Package on Pillar Two in January 2026. Attention has subsequently turned to the fate of Pillar One and, in its absence, the likelihood of renewed momentum behind an EU‑level Digital Services Tax (DST).

At the EU Tax Symposium in Brussels in March 2026, OECD Secretary‑General Mathias Cormann reaffirmed the importance of multilateral tax cooperation, while acknowledging the need to re‑engage constructively on the taxation of the digital economy. Speaking at the same event, US Treasury Deputy Assistant Secretary for International Tax Affairs Rebecca Burch emphasised that progress would require revisiting fundamental questions, including whether and how the digital economy should be taxed.

Since the start of its mandate in 2024, the Commission has consistently stated that its preference remains a multilateral solution, while reserving the option of unilateral EU action. In his closing remarks at the EU Tax Symposium, Commissioner Hoekstra warned against “wasting another five years”. In a panel discussion later that month, Gerassimos Thomas, Director‑General for Taxation and Customs Union, indicated that the Commission expects clarity on the fundamental way forward by the end of 2026.

The continued availability of the EU’s 2018 DST proposals underlines the Commission’s readiness to act should multilateral efforts stall, in particular to prevent fragmentation of the internal market through divergent national DSTs. Any such step, however, would need to be weighed carefully against broader EU‑US relations and the risk of retaliatory measures.

Financing EU ambitions: own resources under scrutiny

Debate on EU tax policy is also closely linked to negotiations on the EU’s next Multiannual Financial Framework (MFF) for 2028–2034. In 2025, the Commission presented an ambitious budgetary package of almost EUR 2 trillion, aimed at increasing flexibility and impact. These proposals face significant constraints, including resistance from fiscally conservative Member States and the obligation to begin repaying borrowing under the NextGeneration EU programme from 2028.

As discussions progress, questions about the size of the EU budget and its priorities are inseparable from the debate on how EU ambitions should be financed. The Commission and the European Parliament have consistently argued for expanding the EU’s own resources to reduce pressure on national contributions.

To that end, the Commission has proposed a package of new own resources, including revenue linked to the EU Emissions Trading System (ETS), the Carbon Border Adjustment Mechanism (CBAM) and a proposed corporate resource (CORE), based on a lump‑sum contribution from companies operating in the EU. Initial reactions from Member States suggest a cautious approach, with concerns about the reallocation of national revenues and the potential impact of EU‑level levies on European competitiveness.

What this means for businesses

Taken together, these developments indicate that EU tax policy is entering a phase in which pragmatism, coherence and political feasibility are taking on greater importance. For companies operating across borders, the key challenge will be to assess where simplification initiatives deliver meaningful reductions in complexity, and where new tax instruments, particularly in the digital and budgetary context, may introduce fresh uncertainty.

Early engagement with both the technical detail and the policy direction of these initiatives will be essential for businesses seeking clarity and predictability in an increasingly interconnected law and tax environment.

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