Working Group CFT Kicks Off 2025:
Competitiveness, Finance, and Taxes

On 27 May 2025, the SME Connect Working Group on Competitiveness, Finance, and Taxes (CFT) held its first meeting of the year, setting a proactive tone for shaping SME policy in the EU. The meeting underscored the vital role of SMEs in ensuring Europe’s economic strength and discussed how to better equip them to meet global challenges. Key themes included boosting EU competitiveness, simplifying tax systems, and improving access to finance – critical levers for unlocking the potential of Europe’s SMEs.

1. Enhancing SME Competitiveness Across the EU

A central theme of the meeting was the need to strengthen the competitive position of European SMEs. Overly complex regulatory environments and increasing operational costs are stifling innovation and reducing international competitiveness. Policy efforts must focus on removing these structural barriers, fostering innovation, and improving access to the single market, especially for small businesses operating across borders.

2. Rethinking Tax Systems for Growth

The group discussed the burden that fragmented and complex tax systems place on SMEs. It was noted that current VAT regimes, withholding taxes, and compliance obligations create major obstacles, particularly for small businesses engaged in cross-border activities. Participants expressed confidence that greater harmonization of tax rules and the adoption of SME-friendly digital procedures could significantly ease the path for growth-oriented companies

3. Financing Innovation and Expansion

Access to capital emerged as a significant challenge for SMEs, particularly for early-stage businesses or those attempting to scale. While public funding programs exist, the group highlighted how difficult they can be to access due to complex eligibility criteria and application processes. Proposals to promote risk-based lending, enhance cooperation with financial institutions, and optimize EU grant access were welcomed as opportunities to unlock innovation and competitiveness.

4. Building Transparency and Financial Literacy

The working group emphasized that improved transparency in taxation and public spending could significantly boost trust among SME operators. Participants argued that clearer communication from tax authorities, simplified tax documentation, and educational tools to build financial literacy would empower entrepreneurs to comply confidently and engage more actively with public institutions. These efforts would also contribute to a more informed and resilient SME community.

5. Strengthening Tax Morale Through Fair Policy

The issue of trust in tax authorities and the concept of “tax morale” were central to discussions. It was noted that SMEs are more likely to comply when tax systems are seen as just and proportionate. Unpredictable rule changes, excessive scrutiny, and lack of clarity were seen as demotivating factors. The group agreed that fostering a fair, stable, and predictable tax environment would reinforce long-term compliance and encourage business investment.

6. Tackling Overregulation and Red Tape

Participants expressed concern about the cumulative effect of overlapping EU and national regulations on SMEs. These layers of bureaucracy often lead to inefficiencies and discourage entrepreneurial activity. Streamlining administrative processes, conducting SME-specific impact assessments, and accelerating digital transformation were identified as important ways to reduce unnecessary burdens and free up capacity for growth.

7. Digitalization and Smart Compliance Tools

Digital transformation was seen as both a potential solution and a new source of complexity for SMEs. Participants emphasized the need for digital tax and compliance systems to be intuitive, multilingual, and adapted to the capacities of small businesses. They also advocated for involving SMEs in the design of such tools to ensure usability. Well-implemented digital solutions were seen as a key driver of efficiency and competitiveness.

8. Addressing Regulatory Inequality Between SMEs and Large Businesses

A recurring concern was the disparity in how large corporations and small enterprises are affected by regulation. While multinational firms have the resources to manage compliance, SMEs often face disproportionate costs and procedural delays. The group advocated for a more balanced approach to regulation that reflects the unique needs and capacities of smaller businesses.

9. Unlocking Cross-Border Potential in the Internal Market

Despite being a single market, the EU still presents many cross-border challenges for SMEs. Inconsistent VAT rules, country-specific interpretations of directives, and redundant reporting obligations continue to hinder SME expansion beyond national borders. Participants called for accelerated simplification and harmonization, stressing the huge potential of a more integrated market for small business growth.

10. Business Transfers and Succession Planning: Unlocking Generational Potential

The EU is in a crucial phase – it must actively tackle global competition, digital transformation, ecological change and other social and economic challenges. The new EU leadership must build on the progress made so far while creating a streamlined and forward-looking framework. Strong and sustainable entrepreneurship is needed to capitalise on the opportunities arising from the aforementioned points. A modern understanding of entrepreneurship includes not just new business creation, but also the continuity of successful enterprises through well-managed business transfers and succession planning.

A significant share of SMEs across Europe – over 20% – are at risk of closure in the coming years due to the absence of successors. Ensuring that viable businesses are passed on to new leadership is crucial for preserving jobs, regional vitality, and accumulated know-how.

Participants strongly supported EU and national efforts to simplify legal and fiscal frameworks, raise awareness, and offer targeted support for business transfers. Addressing gender-related barriers and promoting inclusive succession were also noted as essential. Business transfers should be viewed not as an administrative challenge but as a strategic opportunity to strengthen Europe’s economic continuity and competitiveness.

 Next Steps

The Working Group will continue developing a forward-focused package of recommendations covering SME taxation, financing tools, regulatory simplification, and business transfer frameworks.

Competitiveness will remain at the heart of these efforts – not only through structural reforms, but by promoting a culture that values entrepreneurship, risk-taking, and innovation. Competitiveness depends on people who are willing to take initiative, adapt to change, and build businesses that grow across generations. A vibrant entrepreneurial ecosystem will be central to securing Europe’s long-term prosperity and leadership.

Regular follow-up meetings and engagement with stakeholders will ensure that the group’s work remains responsive, impactful, and aligned with the needs of SMEs.

Contact  | t.viires@smeconnect.eu | Working Group Coordinator