BETA


2021/2010(INI) Digital taxation: OECD negotiations, tax residency of digital companies and a possible European Digital Tax

Progress: Procedure completed

RoleCommitteeRapporteurShadows
Lead ECON SCHWAB Andreas (icon: EPP EPP), HLAVÁČEK Martin (icon: Renew Renew) FUGLSANG Niels (icon: S&D S&D), CARÊME Damien (icon: Verts/ALE Verts/ALE), DONATO Francesca (icon: ID ID), JAKI Patryk (icon: ECR ECR), SCHIRDEWAN Martin (icon: GUE/NGL GUE/NGL)
Committee Opinion BUDG FERNANDES José Manuel (icon: EPP EPP), HAYER Valérie (icon: Renew Renew) Younous OMARJEE (icon: GUE/NGL GUE/NGL), Hélène LAPORTE (icon: ID ID), Elisabetta GUALMINI (icon: S&D S&D)
Lead committee dossier:
Legal Basis:
RoP 54, RoP 57

Events

2021/09/27
   EC - Commission response to text adopted in plenary
Documents
2021/04/29
   EP - Decision by Parliament
Details

The European Parliament adopted by 549 votes to 70, with 75 abstentions, a resolution on digital taxation: OECD negotiations, tax residency of digital companies and a possible European Digital Tax.

Challenges arising from the digitalisation of the economy

The resolution highlighted that current international corporate tax rules are based on principles which were developed in the early 20th century and that taxing rights are mainly based on the physical presence of companies. These rights are no longer suited to an increasingly globalised and digitalised economy, thus enabling numerous harmful tax practices that undermine public finances and fair competition.

Parliament has repeatedly called for a reform of the international corporate tax system in order to combat tax evasion, tax avoidance and the challenges of taxing the digital economy.

A fairer allocation

On average, digital businesses face an effective tax rate of only 9.5 %, as opposed to 23.2 % for traditional business models. Given that the demand for digitalised services has exploded due to the obligation to operate many tasks remotely in the COVID-19 context, providers of such digitalised services have been placed in a more favourable position than traditional businesses, especially SMEs.

Stressing the need to address the under-taxation of the digitalised economy, Members called for a new and fairer distribution of taxing rights for highly digitalised multinationals and a review of the traditional concept of permanent establishment.

Parliament recalled in this respect its position on the Common Consolidated Corporate Tax Base (CCCTB) aimed at creating a virtual permanent establishment, taking into account where value is created and based on the value and profits generated by users of online platforms. These should be taken into account when defining a new tax nexus to provide an effective remedy against aggressive tax planning and tax evasion.

According to Members, new solutions for taxing the digital economy should preferably tax profits, not revenues.

A global multilateral agreement

Parliament called for an international agreement aiming for a fair and effective tax system. They welcomed the efforts in the G20/OECD Inclusive Framework (IF) to reach a global consensus on a multilateral reform of the international tax system to address the challenges of continued profit shifting and the digitalised economy.

Regretting, however, that the original deadline of the end of 2020 for the conclusion of the international agreement was not met, Parliament called for an early agreement by mid-2021.

Members welcomed the new momentum given to the negotiations by the US administration's recent proposals on a ‘strong incentive for nations to join a global agreement that implements minimum tax rules worldwide’. These proposals include an increase in the minimum tax on global intangible low-taxed income (GILTI) to 21 %.

Parliament called on the Commission and the Council to intensify the dialogue with the new US administration on digital tax policy with the aim of finding a common approach in the framework of the G20/OECD IF negotiations before June 2021.

A call for immediate EU action

Members considered that the tax challenges stemming from the digitalised economy are a global issue and that an agreement at the level of the G20/OECD states is urgently needed to make international coordination possible. An ambitious and harmonised international solution is preferable to a patchwork of national or regional digital taxes bearing potential risks and is significantly more likely to find unanimous support in the Council.

The resolution insisted therefore, that regardless of the progress of the negotiations in the G20/OECD IF, the EU should have a fall-back position and stand ready to roll out its own proposal for taxing the digital economy by the end of 2021.

A digital levy as a new EU own resource

Parliament welcomed the Interinstitutional Agreement of 16 December 2020 (IIA) between Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, including a roadmap towards the introduction of new own resources.

Members recalled the Commission's legally binding commitment to present a legislative proposal for a European digital levy as an own resource by June 2021. They also recalled the commitment by Parliament, the Council and the Commission to follow the steps set out in the roadmap for its introduction by 1 January 2023.

Parliament affirmed that the revenue from the EU digital levy will be part of a basket of new own resources whose proceeds will at least be sufficient to cover, through the EU budget, the future repayment costs (principal and interest) arising from the Recovery Instrument’s grants component.

Documents
2021/04/29
   EP - End of procedure in Parliament
2021/04/28
   EP - Results of vote in Parliament
2021/04/28
   EP - Debate in Parliament
2021/03/30
   EP - Committee report tabled for plenary
Details

The Committee on Economic and Monetary Affairs adopted the own-initiative report by Andreas SCHWAB (EPP, DE) and Martin HLAVACEK (Renew, CZ) on digital taxation: OECD negotiations, tax residency of digital companies and a possible European Digital Tax.

Challenges arising from the digitalisation of the economy

The report highlighted that current international corporate tax rules are based on principles which were developed in the early 20th century and that taxing rights are mainly based on the physical presence of companies. These rights are no longer suited to an increasingly globalised and digitalised economy, thus enabling numerous harmful tax practices that undermine public finances and fair competition.

A fairer allocation

On average, digital businesses face an effective tax rate of only 9.5 %, as opposed to 23.2 % for traditional business models. Given that the demand for digitalised services has exploded due to the obligation to operate many tasks remotely in the COVID-19 context, providers of such digitalised services have been placed in a more favourable position than traditional businesses, especially SMEs.

In this regard, Members call for new and fairer allocation of taxing rights for highly digitalised multinationals and a revision of the traditional concept of permanent establishment, as it fails to cover the digitalised economy. They stressed that users of online platforms and consumers of digital services are now central elements in value creation by highly digitalised businesses, and that they cannot be shifted outside a jurisdiction in the same way as capital and labour and should therefore be taken into account when defining a new tax nexus to provide an effective remedy against aggressive tax planning and tax avoidance.

According to Members, new solutions to taxing the digital economy should preferably tax profits, not revenues. There is a need to tax multinational corporations on the basis of a fair and effective formula for the allocation of taxing rights between countries according to the report.

A global multilateral agreement

Members called for an international agreement aiming for a fair and effective tax system. They welcomed the efforts in the G20/OECD Inclusive Framework (IF) to reach a global consensus on a multilateral reform of the international tax system to address the challenges of continued profit shifting and the digitalised economy. However, they regretted the fact that the deadline for an agreement, fixed for the end of 2020, was missed.

Negotiations within the IF need to be finalised as quickly as possible till mid-2021 in order to create a consensus among the 137 participating states for having a fair share of taxing the digital economy (pillar 1) and to agree on a global minimum tax that would address the remaining issues of base erosion and profit shifting (BEPS) (pillar 2).

The report called on the Commission and the Council to intensify the dialogue with the new US administration on digital tax policy with the aim of finding a common approach in the framework of the G20/OECD IF negotiations before June 2021.

A call for immediate EU action

It is regrettable that the failure of the G20/OECD Inclusive Framework (IF) to find a solution in October 2020 has prolonged the under-taxation of the digitalised economy.

The COVID-19 pandemic has largely benefited digitalised businesses, mostly those that were able to scale up their operations, while many other businesses, notably SMEs, have suffered, and that it has accelerated the transition to a digitalised economy, thereby further emphasising the need to find multilateral solutions to reform the current tax system in order to ensure that the digitalised economy makes a fair contribution.

Members stressed that tax challenges stemming from the digitalised economy are a global issue and that an agreement at the level of the G20/OECD states is urgently needed to make international coordination possible. They considered that an ambitious and harmonised international solution is preferable to a patchwork of national or regional digital taxes bearing potential risks and is significantly more likely to find unanimous support in the Council.

The report insisted therefore, that regardless of the progress of the negotiations in the G20/OECD IF, the EU should have a fall-back position and stand ready to roll out its own proposal for taxing the digital economy by the end of 2021.

A digital levy as a new EU own resource

Parliament has restated its commitment to the introduction of an EU digital levy as an own resource with large majorities in a series of reports and resolutions. The revenues of the EU digital levy would be intrinsically linked to the open borders of the single market and the ‘digital union’ and would therefore constitute a highly suitable and genuine basis for an EU own resource.

The report maintains that the revenue of the EU digital levy will be part of a basket of new own resources whose proceeds will at least be sufficient to cover, through the EU budget, the future repayment costs (principal and interest) arising from the Recovery Instrument’s grants component, expected to be around EUR 15 billion per year on average and a maximum of EUR 29.25 billion per year from 2028 until 2058, while avoiding a reduction in expenditure for EU programmes.

Lastly, the European Council is urged to endorse a resolute leadership role for the EU in the worldwide endeavour towards fairer taxation by taking swift and determined steps towards introducing a digital levy as an own resource in the course of 2021.

Documents
2021/03/23
   EP - Vote in committee
2021/03/17
   EP - Committee opinion
Documents
2021/02/26
   EP - Amendments tabled in committee
Documents
2021/02/11
   EP - Committee referral announced in Parliament
2021/02/11
   EP - Referral to associated committees announced in Parliament
2021/02/04
   EP - FERNANDES José Manuel (EPP) appointed as rapporteur in BUDG
2021/02/04
   EP - HAYER Valérie (Renew) appointed as rapporteur in BUDG
2021/01/26
   EP - Committee draft report
Documents
2020/10/28
   EP - SCHWAB Andreas (EPP) appointed as rapporteur in ECON
2020/10/28
   EP - HLAVÁČEK Martin (Renew) appointed as rapporteur in ECON

Documents

Activities

Votes

Fiscalité de l'économie numérique: négociations au sein de l’OCDE, résidence fiscale des entreprises numériques et une éventuelle taxe européenne sur le numérique - Digital taxation: OECD negotiations, tax residency of digital companies and a possible European Digital Tax - Besteuerung der digitalen Wirtschaft: OECD-Verhandlungen, Steuersitz digitaler Unternehmen und eine mögliche europäische Digitalsteuer - A9-0103/2021 - Andreas Schwab, Martin Hlaváček - Am 1 #

2021/04/28 Outcome: +: 574, 0: 79, -: 48
FR DE IT ES RO PL AT PT BE EL CZ NL BG SE FI DK SK LT HR LV SI LU CY EE ?? IE MT HU
Total
79
96
72
59
33
52
19
21
21
20
21
29
17
21
14
14
14
11
12
8
8
6
6
7
1
13
6
21
icon: PPE PPE
174

Denmark PPE

Against (1)

1

Latvia PPE

2

Luxembourg PPE

2
2

Estonia PPE

For (1)

1

Malta PPE

2

Hungary PPE

Abstain (1)

1
icon: S&D S&D
145

Greece S&D

2

Czechia S&D

For (1)

1

Lithuania S&D

2

Latvia S&D

2

Slovenia S&D

2

Luxembourg S&D

For (1)

1

Cyprus S&D

Abstain (1)

2

Estonia S&D

2
icon: Renew Renew
97

Italy Renew

2

Austria Renew

For (1)

1

Sweden Renew

Abstain (1)

3

Finland Renew

3

Slovakia Renew

2

Lithuania Renew

1

Croatia Renew

For (1)

1

Latvia Renew

For (1)

1

Slovenia Renew

2

Luxembourg Renew

2

Estonia Renew

3

Ireland Renew

2

Hungary Renew

2
icon: Verts/ALE Verts/ALE
73

Spain Verts/ALE

3

Poland Verts/ALE

For (1)

1

Austria Verts/ALE

3

Portugal Verts/ALE

1

Belgium Verts/ALE

3

Czechia Verts/ALE

3

Netherlands Verts/ALE

3

Sweden Verts/ALE

3

Finland Verts/ALE

3

Denmark Verts/ALE

2

Lithuania Verts/ALE

2

Latvia Verts/ALE

1

Luxembourg Verts/ALE

For (1)

1

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2
icon: ID ID
73
3

Czechia ID

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2

Netherlands ID

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1

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2

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1

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icon: The Left The Left
39

Belgium The Left

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1

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1

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icon: NI NI
37

Germany NI

2

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1

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1

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NI

1
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63

Germany ECR

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1

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Abstain (1)

4

Bulgaria ECR

2
3

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1

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Abstain (1)

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2

A9-0103/2021 - Andreas Schwab, Martin Hlaváček - Am 2 #

2021/04/28 Outcome: +: 648, -: 33, 0: 20
DE FR IT PL ES RO NL CZ AT PT BE EL BG SE DK FI SK LT HR LV SI CY LU EE IE ?? MT HU
Total
96
79
72
52
59
33
29
21
19
21
21
20
17
21
14
14
14
11
12
8
8
6
6
7
13
1
6
21
icon: PPE PPE
174

Denmark PPE

For (1)

1

Latvia PPE

2
2

Luxembourg PPE

2

Estonia PPE

For (1)

1

Malta PPE

2

Hungary PPE

Abstain (1)

1
icon: S&D S&D
145

Czechia S&D

For (1)

1

Greece S&D

2

Lithuania S&D

2

Latvia S&D

2

Slovenia S&D

2

Cyprus S&D

2

Luxembourg S&D

For (1)

1

Estonia S&D

2
icon: Renew Renew
97

Italy Renew

2

Austria Renew

For (1)

1

Sweden Renew

Abstain (1)

3

Finland Renew

3

Slovakia Renew

2

Lithuania Renew

1

Croatia Renew

For (1)

1

Latvia Renew

For (1)

1

Slovenia Renew

2

Luxembourg Renew

2

Estonia Renew

3

Ireland Renew

2

Hungary Renew

2
icon: Verts/ALE Verts/ALE
73

Poland Verts/ALE

For (1)

1

Spain Verts/ALE

3

Netherlands Verts/ALE

3

Czechia Verts/ALE

3

Austria Verts/ALE

3

Portugal Verts/ALE

1

Belgium Verts/ALE

3

Sweden Verts/ALE

3

Denmark Verts/ALE

2

Finland Verts/ALE

3

Lithuania Verts/ALE

2

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1

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1

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2
icon: ID ID
73

Netherlands ID

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1

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2
3

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1

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1
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63

Germany ECR

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1

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1

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4

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1

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2
3

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1

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1

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2
icon: The Left The Left
39

Netherlands The Left

For (1)

1

Czechia The Left

1

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For (1)

1

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1

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1

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2
icon: NI NI
37

Germany NI

2

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1

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Against (1)

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2

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1

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2

NI

1

A9-0103/2021 - Andreas Schwab, Martin Hlaváček - Am 3 #

2021/04/28 Outcome: +: 529, -: 102, 0: 70
IT DE ES FR RO PL EL NL CZ BG PT BE AT SK LT HR SI FI CY LU LV EE ?? IE DK HU MT SE
Total
72
96
59
79
33
52
20
29
21
17
21
21
19
14
11
12
8
14
6
6
8
7
1
13
14
21
6
21
icon: PPE PPE
174
2

Luxembourg PPE

2

Latvia PPE

2

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For (1)

1

Denmark PPE

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1

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1

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2
icon: S&D S&D
145

Greece S&D

2

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1

Lithuania S&D

2

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2

Cyprus S&D

2

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For (1)

1

Latvia S&D

2

Estonia S&D

2
icon: Verts/ALE Verts/ALE
73

Spain Verts/ALE

3

Poland Verts/ALE

For (1)

1

Netherlands Verts/ALE

3

Czechia Verts/ALE

3

Portugal Verts/ALE

1

Belgium Verts/ALE

3

Austria Verts/ALE

3

Lithuania Verts/ALE

2

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3

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For (1)

1

Latvia Verts/ALE

1

Ireland Verts/ALE

2

Denmark Verts/ALE

2

Sweden Verts/ALE

3
icon: Renew Renew
97

Italy Renew

2

Austria Renew

For (1)

1

Slovakia Renew

2

Lithuania Renew

1

Croatia Renew

For (1)

1

Slovenia Renew

2

Finland Renew

For (1)

3

Luxembourg Renew

2

Latvia Renew

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1

Estonia Renew

3

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2

Hungary Renew

2

Sweden Renew

Abstain (1)

3
icon: The Left The Left
39

Netherlands The Left

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1

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1

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4

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2

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4

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1

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1
icon: NI NI
37

Germany NI

2

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1

Slovakia NI

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2

Lithuania NI

1

Croatia NI

2

NI

1
icon: ECR ECR
63

Germany ECR

Abstain (1)

1

Romania ECR

Abstain (1)

1

Greece ECR

Abstain (1)

1

Netherlands ECR

Abstain (1)

4

Bulgaria ECR

2

Slovakia ECR

2

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1

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Abstain (1)

1

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2
3
icon: ID ID
73

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Fiscalité de l'économie numérique: négociations au sein de l’OCDE, résidence fiscale des entreprises numériques et une éventuelle taxe européenne sur le numérique - Digital taxation: OECD negotiations, tax residency of digital companies and a possible European Digital Tax - Besteuerung der digitalen Wirtschaft: OECD-Verhandlungen, Steuersitz digitaler Unternehmen und eine mögliche europäische Digitalsteuer - A9-0103/2021 - Andreas Schwab, Martin Hlaváček - Proposition de résolution #

2021/04/28 Outcome: +: 549, 0: 75, -: 70
FR IT DE ES RO PL CZ BG PT NL EL AT BE HR LT SK LV SI FI CY LU EE IE ?? DK HU SE MT
Total
79
73
93
59
32
52
20
17
21
29
19
19
20
12
11
14
8
8
14
6
6
7
13
1
13
21
21
6
icon: PPE PPE
173

Latvia PPE

2

Finland PPE

Abstain (1)

3
2

Luxembourg PPE

2

Estonia PPE

For (1)

1

Denmark PPE

Against (1)

1

Hungary PPE

Abstain (1)

1

Malta PPE

2
icon: S&D S&D
142

Czechia S&D

For (1)

1

Greece S&D

2

Lithuania S&D

2

Latvia S&D

2

Slovenia S&D

2

Cyprus S&D

2

Luxembourg S&D

For (1)

1

Estonia S&D

2
icon: Renew Renew
97

Italy Renew

2

Austria Renew

For (1)

1

Croatia Renew

For (1)

1

Lithuania Renew

1

Slovakia Renew

2

Latvia Renew

For (1)

1

Slovenia Renew

2

Finland Renew

For (1)

3

Luxembourg Renew

2

Estonia Renew

3

Ireland Renew

2

Hungary Renew

2

Sweden Renew

Abstain (1)

3
icon: Verts/ALE Verts/ALE
71

Spain Verts/ALE

3

Poland Verts/ALE

For (1)

1

Czechia Verts/ALE

3

Portugal Verts/ALE

1

Netherlands Verts/ALE

3

Austria Verts/ALE

3

Belgium Verts/ALE

2

Lithuania Verts/ALE

2

Latvia Verts/ALE

1

Finland Verts/ALE

3

Luxembourg Verts/ALE

For (1)

1

Ireland Verts/ALE

2

Denmark Verts/ALE

1

Sweden Verts/ALE

3
icon: The Left The Left
39

Czechia The Left

1

Portugal The Left

4

Netherlands The Left

For (1)

1

Belgium The Left

For (1)

1

Finland The Left

For (1)

1

Cyprus The Left

2

Ireland The Left

Against (1)

4

Denmark The Left

1

Sweden The Left

For (1)

1
icon: ID ID
74

Czechia ID

For (1)

Against (1)

2

Netherlands ID

Against (1)

1

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3

Finland ID

2

Estonia ID

Against (1)

1

Denmark ID

Against (1)

1
icon: NI NI
36

Germany NI

2

Netherlands NI

1

Croatia NI

Abstain (1)

2

Lithuania NI

1

Slovakia NI

2

NI

1
icon: ECR ECR
62

Germany ECR

Abstain (1)

1

Romania ECR

Abstain (1)

1

Bulgaria ECR

2

Netherlands ECR

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4

Greece ECR

Abstain (1)

1

Croatia ECR

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1

Lithuania ECR

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1

Slovakia ECR

2

Latvia ECR

2
3
AmendmentsDossier
296 2021/2010(INI)
2021/03/01 BUDG 296 amendments...