Combating tax fraud and evasion: Exec prepares action plan
By Tanguy Verhoosel | Wednesday 27 June 2012
Improving national tax collection, strengthening administrative cooperation between tax authorities at European level and implementing a “carrot and stick” policy with third countries are the broad outlines of a genuine EU strategy to fight tax fraud and evasion, presented in a communication adopted by the European Commission, on 27 June. The executive even makes concrete suggestions in this context.
The communication was drafted at the request of the European Council, which will meet on 28-29 June. In March, EU leaders invited the Commission and the 27 finance ministers to “rapidly develop concrete ways to improve the fight against tax fraud and tax evasion, including in relation to third countries, and to report by June 2012”. This text prefigures the Commission’s presentation of a detailed action plan towards the end of 2012 (see
In its communication, the EU executive sketches the outlines of this plan, which will focus on three areas: improving the tax collection system (especially VAT) at national level; enhancing administrative cooperation between member states’ tax authorities at European level; and adopting a “clear and coherent policy” towards third countries, particularly “tax havens,” at international level.
As the Union continues to grapple with a serious economic crisis, the cost of tax fraud and evasion is staggering (one trillion euro a year in the EU, according to certain estimates). It is consequently urgent to act on these three fronts, commented Taxation Commissioner Algirdas Semeta. “Let’s face it: tax evaders pick the pockets of ordinary citizens and deprive member states of much needed revenue. […] We must stamp out this activity. The political will to intensify the battle exists. Now is the time to translate it into action. As a Union of 27, we have a powerful advantage: strength in numbers.”
The Commission does not simply insist on the pressing need for the 27 to improve their tax collection systems (it has already made recommendations in this respect as part of the ‘European semester’), agree on revision of the Savings Taxation Directive and the ensuing agreements with certain third countries, Switzerland among them (for the executive, only application of automatic exchange of information is effective and it intends to promote it on the largest scale possible), strengthen the European code of conduct for business taxation, etc. It also announces – or rather confirms – that it will launch new initiatives on taxation in the near future.
The executive will propose, for example, to establish a quick reaction mechanism on VAT fraud (in principle in July) and to extend the Eurofisc network to direct taxation. It is also considering introducing a European tax identification number for all EU citizens and a taxpayers’ charter and putting in place minimum rules and sanctions harmonised at EU level against fraudsters of all kinds.
In parallel, the Commission confirms that it will come forward with measures, by the end of 2012, to counteract “artificial tax planning” and unfair competition against the EU by tax havens, defined by the OECD as jurisdictions that are “uncooperative” on tax transparency, including on business taxation.
With the goal of creating a “favourable taxation environment” at the Union’s borders, the EU executive will propose to apply against tax havens (of which no list is drawn up) a “carrot or stick” strategy building on a “combination of defensive measures or sanctions […] against countries that practice unfair tax competition and incentives for those that cease such practices”.