04/2024 EXECUTIVE SUMMARY Reducing the deterrent effects from EU and Member State laws in three key cross-sector policy areas – competition policy, business taxes and VAT, and digital policies – could significantly enhance the business environment within the Single Market and boost the EU’s attractiveness to both domestic and foreign investors. [...] THE STATE OF INVESTMENT AND IMPLICATIONS FOR THE EU’S FUTURE COMPETITIVENESS In an increasingly interconnected and innovation-driven global economy, commercial investments in business operations (e.g., infrastructure and staff) and research and development (R&D) serve as the cornerstone for sustaining and enhancing future competitiveness. [...] 6 Comparing the economic performance of the EU to the US provides a valuable means of evaluating the EU’s economic development and competitiveness. [...] Reducing the deterrent effect from EU and Member State laws in three key horizontal (cross- sector) EU policy areas – competition policy, business taxes and VAT, and digital policies – could significantly enhance the business environment within the Single Market and increase the EU’s attractiveness to both domestic and foreign investors. [...] The Need for Policy Re-Evaluation EU merger regulation effectively limits the ability of Member States to interfere and gives an exclusive competence to the Commission to intervene and block the ones they think would impede competition in the market, and the test for merger review is based on competition considerations only.36 While it is generally beneficial to have merger competence at the EU le.
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Table of Contents
- EXECUTIVE SUMMARY 2
- EU Competition Policy in Support of Scale and Productivity 2
- Reassessing Taxation in Support of Economic and Technological Change 2
- EU Digital and Technology Policy to Support Technology Adoption and Diffusion 3
- Political Ambitions 3
- 1. INTRODUCTION 4
- 2. THE STATE OF INVESTMENT AND IMPLICATIONS FOR THE EUS FUTURE COMPETITIVENESS 5
- 2.1. Technology-intensive Investments Benchmarking the EU against the US 6
- 2.2. The EUs Attractiveness to Foreign Investors 9
- 2.3. EU Regulations Undermining Public RD Incentives 12
- 3. REGULATION AND THE DETERRENT EFFECTS ON INVESTMENTS 14
- 4. EU COMPETITION POLICY 20
- 4.1. How Large Firms Drive Innovation and Productivity in the EU 21
- 4.2. The Need for Policy Re-Evaluation 25
- 4.3. The Need to Introduce Urgency and Proportionality Checks 28
- 4.4. Proportionality in EU Merger Policy 30
- 4.5. Key Changes to Consider for a Pro-Productivity EU Competition Policy 33
- Harmonising the Enforcement of Competition Policies 33
- Investigations and Enhanced Institutional Capabilities 34
- Urgency and Proportionality Checks 34
- 5. TAXATION OF SALES LABOUR AND CORPORATE INCOME 34
- 5.1. Complex and Legally Fragmented Taxes on Sales and Labour 35
- Sales Tax Complexity and Legal Fragmentation 35
- Legal Fragmentation and Complexity of EU Social Security and Labour Tax Laws 37
- 5.2. Corporate Tax Code Complexity 38
- Systemic Ignorance of the Corporate Tax Incidence 40
- Less Effective Tax Incentives 41
- 5.3. The Case for Abandoning Corporate Taxes 41
- Alternative Revenue Sources 43
- Alternatives to Tax Incentives 44
- 6. TECHNOLOGY POLICY AND DIGITAL TRADE 44
- Addressing Regulatory Barriers in Non-Digital Sectors 45
- Addressing the Complex Nature of Digital Ecosystems 45
- 6.1. Need to Draft Innovation-Friendly Digital Policies 47
- 6.2. Key Changes to Consider in EU Digital and Technology Policy 48
- Promoting a Unified Digital Market 48
- Global Digital Integration and Free Flow of Data 48
- Reconsidering Artificial Intelligence Policies 49
- Encouraging Advanced Cloud Computing Integration 50
- 7. CONCLUSIONS AND POLICY RECOMMENDATIONS 50
