Richard Cornelisse

Posts Tagged ‘fraud’

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A ‘European Taxpayer’s Code’ – European commission

In Uncategorized on 17/05/2013 at 5:56 pm

A ‘European Taxpayer’s Code’

Title

Consultation on a ‘European Taxpayer’s Code’ [short-name: TPCODE]

Policy fields

Taxation

Target groups

All citizens and organisations are welcome to contribute to this consultation. Contributions are particularly sought from individual citizens, businesses, tax practitioners, academics, intergovernmental, non-governmental and business organisations, tax administrations.

Period of consultation

From 25.02.2013 to 17.05.2013

Objective of the consultation

The Commission adopted on 27th June 2012 a Communication on the fight against tax fraud and tax evasion. An Action Plan which details concrete proposals to strengthen the fight against tax fraud and tax evasion was adopted on 6th December 2012.

One of the 34 measures contained in the Action Plan is the development of a European Taxpayer’s Code which is described as follows (action 17):

“In order to improve tax compliance, the Commission will compile good administrative practices in Member States to develop a taxpayer’s code setting out best practices for enhancing cooperation, trust and confidence between tax administrations and taxpayers, for ensuring greater transparency on the rights and obligations of taxpayers and encouraging a service-oriented approach.

The Commission will launch a public consultation on this at the beginning of 2013. By improving relations between taxpayers and tax administrations, enhancing transparency of tax rules, reducing the risk of mistakes with potentially severe consequences for taxpayers and encouraging tax compliance, encouraging Member States’ administrations to apply a taxpayer’s code will help to contribute to more effective tax collection.”

The Commission services are launching this public consultation in order to collect the opinions of all interested stakeholders on the development of a European Taxpayer’s Code. The questions first aim at assessing the knowledge about and the concrete experience with national taxpayer’s codes (when they exist). Stakeholders are then invited to give their views on the general and procedural principles to be considered in the context of the development of a European Taxpayer’s Code. Finally, contributions are asked on additional topics which could be seen as a natural extension of the fundamental principles, rights and obligations of a Taxpayer’s Code.

The views expressed by the contributors will be used by Commission services to identify the appropriate content of a European Taxpayer’s Code and develop the appropriate policy response. The contributions may also be used in the preparation of possible impact assessments in relation to the Action Plan and more generally the policy area concerned.

How to submit your contribution

We welcome contributions from citizens, organisations and public authorities. Please click here  to submit your contribution.

Received contributions will be published on the Internet. It is important to read the specific privacy statement attached to this consultation for information on how your personal data and contribution will be dealt with.

Please ensure that with the exception of Part III of the questionnaire where your contact details are included your contribution includes no name or personal data either from you or any other person. Otherwise your contribution will not be published nor will, in principle, its content be taken into account.

View the consultation document and questionnaire

Consultation paper(161 Kb)

View the questionnaire

Questionnaire

Reference documents and other, related consultations

COM(2012)351 : Communication from the Commission to the European Parliament and the Council on concrete ways to reinforce the fight against tax fraud and tax evasion including in relation to third countries.

COM(2012)722 : Communication from the Commission to the European Parliament and the Council including an Action Plan to strengthen the fight against tax fraud and tax evasion.

Contact details

via A ‘European Taxpayer’s Code’ – European commission.

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EUROPA – Press Release – Preparation of Economic and Finance Ministers Council, Brussels, 5 March

In EU development, Uncategorized on 03/03/2013 at 9:32 am

The EUs Council of Economic and Finance Ministers will take place on Tuesday, 5 March at 10.30. The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, Michel Barnier, Commissioner for Internal Market and Services and Algirdas Šemeta, Commissioner for Taxation and Customs Union. A press conference is expected to take place after the meeting.

Revised Capital Requirements rules CRD IV SDR

On 28 February, an informal trilogue reached a compromise on the elements of a legislative package to strengthen the regulation of the banking sector. The compromise has now to be submitted to the ECOFIN and the European Parliament for final approval. One more political trilogue may be necessary to endorse a final text which should be prepared in light of further work by a technical group. The proposed package would replace the current Capital Requirements Directives 2006/48 and 2006/49 with a Directive and a Regulation that would constitute another major step towards creating a sounder and safer financial system.

The Directive governs the access to deposit-taking activities while the Regulation establishes the prudential requirements that banks need to respect see ( IP/11/915).

The compromise that was reached in the informal trilogue required an effort from all sides in order to reach agreement. It includes provisions on capital and liquidity, with specific measures for systemically important financial institutions; the disclosure by banks on profits and taxes paid by country; and it regulates bonuses with a cap in relation to fixed salaries 1:1. Shareholders can increase this cap to 2:1. The regulation of bonuses is according to Commissioner Barnier key “to avoid unjustifiable and unjustified remuneration which has encouraged excessive risk-taking”.Commissioner Barnier will call upon ECOFIN to approve the elements of the political agreement that was reached.

More information

VAT Fraud: Quick Reaction Mechanism – Reverse Charge Mechanism (ET)

The Council will have a state of play discussion on anti VAT fraud measures including the Commission’s proposal for a Quick Reaction Mechanism (QRM) (see IP/12/868).The QRM is one of the key actions of the Commission’s plan to fight against tax fraud and evasion of 6 December 2012 (see IP/12/1325). The proposed QRM would significantly improve the chances of Member States to effectively tackling complex fraud schemes, such as carrousel fraud, and to reducing otherwise irreparable financial losses.

Economic Governance – “Two Pack” (SOC)

On 20 February the European Parliament and the Council reached an agreement during the “trilogue” on two new Regulations to further strengthen surveillance and coordination of economic and budgetary policy in the euro area (the so-called “Two-Pack”). Ministers are expected to endorse this agreement.

The Two-Pack builds on the Six-Pack set of EU laws which entered into force at the end of 2011 and which strengthens EU economic governance. The first Regulation aims to enhance budgetary coordination and ex-ante budgetary surveillance for all euro area Member States. To ensure budgetary deficits are corrected in a timely way, it also reinforces the monitoring of Member States under the Excessive Deficit Procedure. It is also a concrete way to enshrine some of the commitments of the Treaty on Stability, Coordination and Governance into EU law.

The second Regulation sets out explicit and simplified rules for enhanced surveillance for euro area Member States facing severe difficulties with regard to their financial stability, for those receiving financial assistance, as well as for Member States in the process of exiting such assistance.

Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro recently said: “The trilogue agreement on the Two-Pack should pave the way for a completion of the legislative process in the next few weeks so that these two key Regulations can swiftly enter into force. This will mean that the euro area can already benefit from a more integrated and effective policy-setting framework for the 2014 budgetary cycle. The rebuilding and reinforcement of our Economic and Monetary Union is underway.”

European Semester – discussion of thematic issues – Report on quality of public finances (SOC)

As underlined in the Annual Growth Survey 2013, Member States should pursue differentiated and growth-friendly fiscal consolidation. Hence, cuts in more growth-friendly spending (such as education or research and development) should be avoided or minimised, savings should come from efficiency gains as much as possible and essential social safety nets should be safeguarded. This is the overarching objective behind the conclusions on the Commission’s staff report on the quality of public expenditure which is to be endorsed by the ECOFIN Council.

The report underlines the role of peer reviews and exchange of best practice among Member States. These should, in particular, cover measures to increase the efficiency of healthcare and budgetary processes and practices, bringing more ‘value for money’ in the public sector (for instance through spending reviews and performance-based budgeting). These peer reviews will not imply more red tape for Member States, as they would just build on existing EU processes to encompass efficiency alongside fiscal discipline.

Economic and Monetary Union European Semester – Response to President of European Council (SOC)

While a lot has already been done to improve and strengthen economic governance in the EU, weaknesses still exist. This is why it is necessary to re-design the architecture of the Economic and Monetary Union (EMU).

The potentially significant spill-over effects within the euro area that are associated with structural reforms at national level justify the introduction of further, ex ante, coordination in this area. In its Blueprint (IP/12/1272, MEMO/12/909), the Commission proposed contractual arrangements through targeted financial support. These arrangements are the missing link between the European Semester and the national semester. They will enhance national ownership of recommendations issued at EU level and contribute to the timely adoption and implementation of these key reforms.

As the Commission announced in its declaration on the Two-Pack, it will put forward proposals on ex ante coordination and the Convergence and Competitiveness Instrument before the end of this year.

Follow-up to G20 Meeting of Finance Ministers and Governors (Moscow, Russia) (SOC)

The Ecofin Council will be briefed on the main outcome of the G20 Finance Ministerial and Central Bank Governors’ meeting held in Moscow 15 – 16 February. This was the first meeting of Finance Ministers under the Russian G20 Presidency. Discussions in Moscow focused on the global economic situation and the actions needed to strengthen the global recovery. Ministers agreed that credible medium-term fiscal consolidation plans will have to be put in place, taking into account near-term economic conditions and fiscal space. Work will continue on developing credible medium-term fiscal plans in line with the commitments made by G20 Leaders in Los Cabos in June 2012. There was also confirmation of a cooperative approach on exchange rates in Moscow. There was general recognition of Europe’s anti-crisis actions which helped reduce tail risks to the global economy. G20 Ministers and Central Bank Governors also discussed issues related mainly to the international financial architecture and financial regulation.

Other items

The Irish Presidency will update the Finance Ministers on progress made in respect of some current legislative including:

Single Supervisory Mechanism

On 12-13 December 2012 the Council agreed a position on two proposals for a single supervisory mechanism (SSM) for banks. Trilogues have started in December 2012 and are continuing intensively in view of reaching a final agreement in March. The proposed new supervisory system with the ECB at its centre aims to strengthen the Economic and Monetary Union. The SSM is a key element of a fully-fledged banking union as it was laid out in the Commission’s Communication of 12 September 2012 and in the “Blueprint for a deep and genuine economic and monetary union” of 28 November 2012 (see IP/12/953 and IP/12/1272). In this context, Commissioner Barnier will welcome the Irish Presidency’s plan to reach agreement on this file as soon as possible in March and encourage all sides to work together constructively to make this possible.

More information

Revised rules for markets in financial instruments

In October 2011, the Commission adopted proposals for a review of the Markets in Financial Instruments Directive (MiFID) aimed at establishing safer, sounder, more transparent and more responsible financial markets that work for the economy and society as a whole. It will notably complement the on-going reform of EU derivatives markets by mandating the trading of standardised derivatives onto organised trading venues and by enhancing the transparency and oversight of derivatives markets including commodity markets in line with our G20 commitments. Commissioner Barnier will welcome the progress reached under the Cypriot Presidency on this review and support the Irish Presidency’s work to reach a general approach in the Council with the aim to start informal trilogue as soon as possible.

More information

Bank recovery and Resolution

The Presidency will debrief on the latest progress on the Bank Recovery and Resolution Directive.

Commissioner Barnier will reiterate that the Commission fully supports the efforts of the Presidency in reaching an agreement on this important proposal in line with timetable adopted by December European Council.

More information

via EUROPA – PRESS RELEASES – Press Release – Preparation of Economic and Finance Ministers Council, Brussels, 5 March.

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Press Release European Commission – Speech – making progress on European Tax Policy: towards more fairness and greater competitiveness

In EU development on 16/01/2013 at 8:29 am

INSTITUTE OF INTERNATIONAL AND EUROPEAN AFFAIRS

Dublin, 11 January 2013

Ladies and Gentlemen,

Magnitude of the crisis and responses

The crisis that we are going through is the biggest economic crisis since 1929.

The European Union has reacted to this crisis by promoting fiscal discipline in Member States through the creation of the European Semester.

We also worked on the stability of financial markets by creating financial backstops, proposing a supervisory role for the European Central bank and launching the European Stability Mechanism.

In addition, and as a necessary companion to fiscal discipline, we put forward the EU 2020 Strategy and the Growth Compact to promote growth and jobs.

We now have the governance tools and rules to ensure that the EU as a whole can forge ahead on the path to recovery and growth.

Nonetheless, the outlook for this year is still weak and

2013 will continue to be challenging. We must sustain our commitment to recovery, deploy all necessary instruments and pull tighter together as a Union to emerge strong from this crisis.

Where does tax policy stand in this context?)

In this context, we must look at how tax policy can contribute to the consolidation and smart growth agenda of the EU.

In the Single Market, we should strive towards world class tax systems, which would put the EU at a decisive competitive advantage in the global economic arena.

We must create a tax environment which allows businesses to expand and create jobs, and attracts foreign investors.

We must cut compliance costs and red tape, so that businesses can invest what they save in bureaucracy in research, innovation and training.

We must also create a fair tax environment. One where it pays to work and where labour and capital, across all the sectors of the economy, would contribute a fair share to financing our European social and economic model.

So, how to progress on this road towards making the Single Market the best place in the world to do business? I believe that the answer is twofold:

  • First, we need to push, through the European Semester process, for appropriate tax reforms in Member States.

  • Second, Member States should speed up the adoption of the initiatives proposed by the Commission to strengthen the Single Market, which should become a reality also from the tax perspective.

Using the European Semester to improve the quality of tax systems in the Member States

An assessment of last year’s exercise

Let me start with a few words on our experience so far with taxation in the European Semester.

Over the last few months, there has been a general trend observed in the Member States towards fundamental tax reforms.

However, there is still scope to shift the overall tax burden towards tax bases that are less detrimental to growth and job creation.

Such a shift requires a package approach which ensures equitable redistribution and is adapted to the circumstances of the individual Member State.

This is why the Commission recommends that:

  • First, the tax burden on labour should be substantially reduced in countries where it is comparatively high and hampers job creation. To ensure that reforms are revenue neutral, taxes such as consumption tax, recurrent property tax and environmental taxes should be favoured.

  • Second, revenue should preferably be raised y by broadening tax bases rather than by increasing tax rates or creating new taxes;

  • Third, tax compliance should be improved by reducing the shadow economy, combatting tax evasion and ensuring greater efficiency in the tax administration.

  • Finally, the corporate tax bias towards debt-financing should be reduced and tax schemes which increase the debt bias of households should be reviewed to avoid financial risks.

Looking at the national tax reforms proposed so far, it is fair to say that, in general, Member states are following the recommendations made by the Commission.

In this context, I am aware that Ireland continues to make good progress, having met all the quarterly fiscal targets so far under the economic convergence programme.

I also note that most of the tax related elements of the budget presented by the Irish Government last December are well in line with what the Commission recommends for quality tax reforms, which is a good sign for the future.

But let me stress that, whether in Ireland or anywhere else in the EU, success relies on tax reforms which take into account two essential elements: competitiveness and fairness.

A more ambitious trend towards tax shifts and equity

For competitiveness, we know that job creation is fundamental. Therefore, the shift to more growth-friendly taxes is particularly important at a time where we need to use every possible measure to boost employment.

Our analysis of Member States’ tax reforms shows that more can be done to shift taxes away from labour towards consumption, environment or property taxation.

It is also time to put the emphasis on fairness.

The public acceptability of tax reforms depends greatly on how fair they are perceived to be. I will speak in a minute about what we are doing at EU level to this end.

But at national level, more efforts to address fraud and evasion will certainly contribute to fairer burden sharing for honest taxpayers.

The current pressure on public finances could also be turned into an opportunity for increasing the efficiency and effectiveness of the public administrations. In these difficult times, we need to get value-for-money, less expensive and more resilient administration.

A lot is to be done at national level and taxation reforms should benefit more from the e-government programmes in Member States.

Ladies and Gentlemen,

As you know, in the European Union, the main responsibility for tax reforms lies with the Member States. As long as they comply with EU law, they retain their full sovereignty to adapt their tax systems and tax rates to their national preferences and objectives. However, with our extremely interconnected economies, working in isolation doesn’t pay off.

I truly believe that there is immense added-value to tax coordination at EU level.

This can support national reforms and complement the actions of each country by, for example, tackling cross border bottlenecks and simplifying the tax environment for businesses.

Offering new opportunities for growth in the Single Market

This leads me to the second point I would like to raise today. For our common recovery, we must create a more business-friendly environment.

One in which companies can expand beyond their national markets and are not hindered by a patchwork of divergent national approaches to taxation.

(Fragmentation of the Single Market and competitiveness of the EU)

Improving the business tax environment is a central issue for competitiveness of the EU: Investors need stability, legal certainty, less administrative burden and less compliance costs. That is why I proposed a Common Consolidated Corporate Tax Base.

Its purpose is to offer cross-border businesses cheaper and easier access to the Single Market, not to introduce any tax rate harmonisation.

I also proposed a review of the directive on taxation of energy products. It would introduce a formula putting all fuels on an equal footing taxing them on the basis of their energy content and CO2 emissions.

This should avoid double taxation for businesses subject to the Emission’s Trading System and encourage the development of the green economy.

My contacts with the business community also confirm that one key element for a business-friendly environment is to cut red tape, decrease compliance costs and improve business cash flow.

We have taken all this into account in the VAT reform which I presented at the end of last year. Certain important measures have already been delivered. On 1 January, new EU invoicing rules came into force, which will make a big difference to the lives of business – both large and small.

They establish equal treatment between paper and electronic invoices, facilitating the uptake of e-invoicing. And they enable all Member States to authorise cash accounting for micro-businesses, which will make a huge difference to many SMEs in terms of cash-flow.

In other words, we are making sure that VAT rules do not leave the smallest businesses out of pocket, or struggling to make ends meet. The Commission will continue on this route this year, by presenting a proposal for standardising the VAT return.

Ensure fair taxation

Fairness is also an issue which we fully take into consideration in our initiatives at EU level. Our European social model is about combining economic dynamism with social fairness. And taxation plays a part in this model.

The essence of fairness lies in Member States being able to collect the taxes that are due, and all taxpayers paying their legitimate share.

I have briefly mentioned that Member States need to increase their efforts to tackle fraud and evasion at home. Likewise, more European coordination could substantially improve our fight against this problem.

Tax evasion and avoidance deprive Member States of up to €1 trillion every year.

This not only means the loss of much needed revenue, it also undermines fairness. Those who do pay their taxes must pay more, to compensate for the evaders. And competition between tax compliant businesses and their non-compliant counterparts becomes distorted.

With this in mind, in December, the Commission adopted an action plan to fight against tax fraud and tax evasion, along with recommendations to Member States for action. Allow me to briefly mention some of the actions which need quick progress:

  • First, Savings taxation: Member States must urgently agree on the reinforced Directive and mandate the Commission to review the related Agreement with Switzerland and other non EU European Countries;

  • Second, tax havens: Member States should implement a common definition of tax havens and black-list uncooperative jurisdictions;

  • Third, aggressive tax planning. Loopholes and mismatches in the Single Market should not lead to situations of “de facto” non-taxation. Member States should apply common measures to block opportunities for aggressive tax planners. They should reinforce their Double Tax Conventions and adopt a uniform General Anti-Abuse Rule, which would allow them to tax on the basis of real economic substance, and ignore artificial tax arrangements.

I can’t finish on this topic without mentioning a fundamentally fair tax which the Commission proposed last year and which currently is the source of much attention: the Financial Transaction tax.

We all know that Member States and the EU intervened massively to rescue the financial sector.

Meanwhile, this same sector carries a disproportionately lower tax burden than other sectors in our society.

The FTT will redress the balance, and ensure that the financial sector makes a fair contribution to public finances.

In addition to this, it will deliver significant new revenues that could be channelled into growth-promoting measures, for the benefit of all.

Agreement on the FTT has not been possible at 27. However, last year, the Commission received requests from 11 Member States to move ahead with a common FTT, under what we call the enhanced cooperation procedure.

Although Ireland is not one of these 11 Member States signed up to move ahead with the FTT, I am confident that it will facilitate progress during its Presidency. The European Council and our citizens have high expectations for quick results.

Conclusion

Ladies and Gentlemen,

Taxation has a major role to play in ensuring smart consolidation and sustainable growth in the EU.

Our goal must be to make the Single Market the best place in the world to do business; to become a benchmark for competitive and efficient tax systems.

The European Union is currently designing the deepening of the Euro and the forging a genuine Economic and Monetary Union.

Taxation cannot be avoided in this debate. The day of isolated tax policy is over.

Coming closer together as a Union on tax matters reinforces every Member States’ capacity to offer a sound and competitive business environment.

It helps our businesses, and attracts investment. And it strengthens our common position when addressing international challenges and spreading the principle of fair taxation abroad.

I therefore strongly believe that for taxation, as for other policy areas, the answer to our current challenges lies in more Europe, not less. And I am confident that the Irish presidency will push this agenda forward.

Thank you for your attention.

via EUROPA – PRESS RELEASES – Press Release – Speech – MAKING PROGRESS ON EUROPEAN TAX POLICY: TOWARDS MORE FAIRNESS AND GREATER COMPETITIVENESS.

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Reblog: David Cameron: Tax avoiding foreign firms like Starbucks and Amazon lack ‘moral scruples’ – Telegraph

In Audit Defense, EU development, Tax News on 05/01/2013 at 2:03 pm

By Christopher Hope, Senior Political Correspondent from The Telegraph

Foreign companies like Starbucks and Amazon which have avoided paying large corporation tax bills in Britain lack “moral scruples”, David Cameron has said.

The Prime Minister said he was going to make “damn sure” that foreign companies like Starbucks and Amazon which have been found to avoid legally paying a large corporation tax in the UK paid their fair share.

Mr Cameron was speaking weeks after MPs on the Public Accounts Committee accused Starbucks, Google and Amazon in a high profile report of “immorally” minimising their UK tax bills.

Last year Treasury minister David Gauke caused a row when he told The Daily Telegraph that people who paid cash in hand to tradesmen, allowing them to avoid VAT, were “morally wrong”.

Mr Cameron was asked by a business audience in the north west of England on Thursday why “Starbucks and Amazon” were allowed to avoid paying large corporation tax bills, given that they have a large presence in the UK.

Mr Cameron said:

“We’ve got to crack that, you’re absolutely right. This is a really important issue. We’re saying, are going to have a really low rate of corporation tax but I want to make damn sure that those companies pay it.”

Mr Cameron said he wanted to start a debate in the UK about “really aggressive tax avoidance”.

He said: “We do need a debate in this country, not only what is against the law – that’s tax evasion, that is against the law, that’s illegal and if you do that the Inland Revenue will come down on you like a tonne of bricks – but what is unacceptable in terms of really aggressive tax avoidance.

“Because some people say to me, ‘Well, it’s all within the law; you’re obeying the law, it’s okay’. Well, actually there are lots of things that are within the law [that] we don’t do because actually we have some moral scruples about them and I think we need this debate about tax too.

“I’m not asking people to pay massive rates of tax. We’ve got a low top rate of income tax now; we’ve got a low rate of corporation tax now; we are a fair tax country. But I think it’s fair then to say to business, you know, we’re playing fair by you; you’ve got to play fair by us.

Mr Cameron’s words go much further than his letter to other leaders of the G8 economies when he said he wanted to stop this form of tax tourism.

He continued: “I’ve put it right at the top of the agenda for the G8 this year as well as making sure we fix it nationally too.

“It’s simply not fair and not right what some of them are doing by saying, I’ve got lots of sales here in the UK but I’m going to pay a sort of royalty fee to another company that I own in another country that has some special tax dispensation.

“That is that’s not right, and so we are looking at it. I’m chairing the G8 this year so I’m going to be getting the Americans and the French and the Germans and the Italians and the Japanese all to look at this together at how can we try and stop unfair tax farming practices?

“Because look, you know, we’ve got a very low rate of corporation tax; we’re already giving business a good deal, but I think to take that deal and then say, I’m actually going to find a way of not paying any corporation tax at all that’s not right.”

Last month, MPs on the Public Accounts Committee criticised Starbucks, Google and Amazon for the “unconvincing and, in some cases, evasive” evidence they gave on why their corporation tax payments are so low.

Starbucks bowed to pressure over its accounting methods on the eve of the report’s publication saying it would review its “tax approach” in the UK.

The coffee giant told MPs it had made a loss for 14 of the 15 years it has operated in the UK, achieving just a small profit in 2006.

Starbucks, with more than 700 outlets in the UK, said it was “committed to the UK for the long term”. It said: “We are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with the Treasury.”

The MPs also criticised a representative from Amazon, whose responsive because he was “evasive and unprepared to answer legitimate questions”.

While the company had a UK operation involving 15,000 staff it pays little corporation tax in the UK. It said the company’s UK website reported a turnover of £207 million for 2011 but its tax expense was just £1.8 million.

via David Cameron: Tax avoiding foreign firms like Starbucks and Amazon lack ‘moral scruples’ – Telegraph.

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Economic and Finance Ministers Council, Brussels, 4 December 2012

In EU development, Macroeconomic effects of VAT on 08/12/2012 at 11:06 am

The EU’s Council of Economic and Finance Ministers will start on Tuesday, 4 December at 11.00.

The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, Michel Barnier, Commissioner for Internal Market and Services and Algirdas Šemeta, Commissioner for Taxation and Customs Union, Audit and Anti-Fraud.

A press conference is expected to take place after the meeting.

Financial Transaction Tax

The Council is expected to hold a debate on the Commission’s proposal to authorise going forward with a common Financial Transaction Tax system in 11 Member States.

On 23 October, the Commission tabled a proposal for a Council Decision to authorise setting up a common system of financial transaction tax under the procedure of enhanced cooperation, which can be used in case no unanimity is achievable and at least 9 Member States want to go ahead in an area that is not yet covered by EU legislation (see IP/12/1138).

It will be based on the scope and objectives of the Commission proposal of 2011 (see IP/11/1085).

The objectives of the September 2011 proposal were essentially three-fold. First, an FTT would strengthen the EU Single Market and avoid distortions of competition by setting up a harmonised framework for an FTT.

Second, it would ensure that the financial sector makes a fair and substantial contribution to covering the cost of the financial crisis.

And finally, it would create appropriate disincentives for transactions that do not enhance the efficiency or stability of financial markets thereby complementing regulatory measures to avoid future crises.

Press Release

The Council discussed latest developments concerning the introduction of a financial transaction tax (FTT) in a number of member states through the “enhanced cooperation” procedure.

On 30 November, the Permanent Representatives Committee decided to send a letter to the European Parliament requesting its consent on a draft decision that would authorise enhanced cooperation.

The Council will continue work on the text once the Parliament has given its consent, and in the light of comments made by delegations.

The Commission in October presented a proposal for a Council decision that would authorise Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia to introduce an FTT via enhanced cooperation (15390/12).

Progress on this dossier is reflected in a report on tax issues to be submitted to the European Council (16327/12). Based on article 329(1) of the Treaty on the Functioning of the European Union, the decision requires a qualified majority for adoption by the Council, with the consent of the European Parliament.

A legislative act defining the substance of the enhanced cooperation would be adopted subsequently, requiring unanimous agreement by the participating member states.

In 2011, the Commission proposed a directive aimed at introducing an FTT throughout the EU2, but Council discussions in June and July this year revealed support for the proposal to be insufficient.

In September and October, the (abovementioned) 11 member states wrote to the Commission requesting a proposal for enhanced cooperation, specifying that the scope and objective of the FTT be based on that of the Commission’s original proposal.

That proposal involved a harmonised minimum 0.1% tax rate for transactions in all types of financial instruments except derivatives (0.01% rate).

The aim was for the financial industry, which many consider as under-taxed, to make a fair contribution to tax revenues, whilst also creating a disincentive for transactions that do not enhance the efficiency of financial markets.

VAT Quick Reaction Mechanism

The Council will hold an orientation debate on the Commission’s proposal for a Quick Reaction Mechanism (QRM) that would enable Member States to respond more swiftly and efficiently to VAT fraud (see IP/12/868).

VAT fraud costs the EU and national budgets several billion euro every year. In some serious cases, vast sums are lost within a very short timeframe.

Under the QRM, a Member State faced with a serious case of sudden and massive VAT fraud would be able to implement certain emergency measures, in a way which they are currently not allowed to under VAT legislation.

In this context, the proposal provides that the Commission would be able to take within a month a decision authorising a Member State to apply a “reverse charge mechanism” which makes the recipient rather than the supplier of the goods or services liable for VAT.

Under the current derogation system, only the Council can do so upon a proposal from the Commission, according to a procedure which may take up to a year.

The proposed QRM would significantly improve the chances of Member States to effectively tackling complex fraud schemes, such as carrousel fraud, and to reducing otherwise irreparable financial losses.

Press Release

The Council held a policy debate on a proposal for a directive aimed at enabling immediate measures to be taken in cases of sudden and massive VAT fraud (“quick reaction mechanism”).

The debate focused on whether implementing powers under the directive should be conferred on the Commission or on the Council. The Council asked the Permanent Representatives Committee to oversee further work on the proposal, exploring both alternatives, with a view to enabling it to reach an agreement as soon as possible.

Fraud schemes are evolving rapidly and situations arise that require a rapid response, for instance in cases of “carousel” fraud.

Until now, such situations have been tackled either by amendments to the VAT directive (2006/112/EC) or through individual derogations granted to member states under that directive, requiring a proposal from the Commission and a unanimous decision by the Council, a process that can take several months.

The Commission’s proposal is aimed at speeding up the procedure for authorizing member states to derogate from the provisions of the VAT directive, by providing for implementing powers to be conferred on the Commission under a “quick reaction mechanism”.

Based on article 113 of the Treaty on the Functioning of the European Union, the directive requires unanimity for adoption by the Council, after consulting the European Parliament.

  1. Preparation of Economic and Finance Ministers Council, Brussels, 4 December 2012
  2. PRESS RELEASE 3205th Council meeting Economic and Financial Affairs Brussels, 4 December 2012

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European Commission’s Press Release – The 2013 Annual Growth Survey: Towards fair and competitive tax systems

In EU development, Tax News on 29/11/2012 at 8:35 am

The 2013 Annual Growth Survey: Towards fair and competitive tax systems

National tax reforms in 2011 and 2012 were driven more by consolidation needs than in the preceding few years, resulting in increases in income tax and/or VAT in most Member States.

However, Member States have also faced the challenge of balancing their increased revenue needs with the need to support recovery and growth over the medium to long term.

It is here that the dual function of taxation comes into play. Taxation is more than just a revenue raising instrument.

Depending on how it is applied, it can be used to promote growth and competitiveness, boost employment and address specific social needs. Member States’ should therefore harness this potential of taxation. In their reforms they should focus on making their tax systems growth-friendly, as well as a source of quality revenues.

Tax changes in 2011 and 2012

What does the 2013 Annual Growth Survey say on taxation?

This year’s Annual Growth Survey is consistent with last year’s, in terms of the guidance given for Member States’ tax reforms.

The 5 key objectives which Member States should pursue for growth-friendly tax reforms are as valid now as they were 12 months ago. They should continue to be followed and implemented. These 5 objectives are:

  • Shift taxes away from labour towards more growth enhancing taxes such as consumption and property
  • Broaden tax bases rather than just arbitrarily raising rates, for smarter revenue raising
  • Increase environmental taxation;
  • Improve tax collection and compliance, particularly through the fight against evasion
  • Remove the tax bias which encourages debt

In addition, this year the Commission urges Member States to focus on increasing both the competitiveness and fairness of their tax systems, as these 2 principles determine the legitimacy of any tax system for the public.

Why is a “tax shift” advised?

Economic studies show that certain types of taxes – such as those on labour and income – are more distortive, while others such as consumption and environmental taxes are considered to be more growth-friendly.

These latter can also steer certain behaviours in a way that meets wider societal needs and objectives. The Commission therefore advises Member States to shift taxes away from areas that impede growth (labour, corporate taxes) towards more growth-friendly taxes (consumption, environment).

The Commission recommends in particular limiting the tax burden on labour, notably for the low-paid. Not only can this create more incentive for workers to work and employers to employ, but it also contributes to a fairer tax system by reducing the burden on the most vulnerable.

Despite the general consensus on the need to lower taxes on labour, in 2011 and 2012, the tax burden on labour has remained high.

The latest analyses shows that 1/3 of Member States1 could do more to shift taxes away from labour towards consumption, environment or property.

Moreover, the extent to which focus has been put on redistributing the burden and benefits of this taxation in an equitable way varies considerably depending on the Member State.

Therefore, the Commission reiterates the need for Member States to work on a growth-friendly and fairer tax shift in their reforms.

Why does the Commission recommend broadening tax bases, and how can this be done?

Increasing tax rates isn’t the only way of increasing tax revenues. In fact, a smarter way can often be to remove or reduce the number of tax breaks and exemptions.

For example, limiting the use of reduced VAT rates could provide Member States with important new revenue, without any need for further standard rate increases.

In fact, studies show that if all reduced rates were removed, the standard rate could actually be lowered by up to 7.5 percentage points in some cases, without any impact on overall revenues.

Tax breaks, exemptions and hidden tax subsidies not only reduce national income. They also contribute to a more complex tax system, which creates burdens for businesses and compliance difficulties for taxpayers.

Therefore broadening the tax base can also improve the overall efficiency of the tax system and ease life for companies.

A yearly independent review on all tax exemptions and reduced VAT rates is recommended by the Commission to make sure that intended economic and social objectives are achieved. Very often, this does not seem to be the case.

At EU level, a fundamental reform of the VAT system is currently underway, in order to make it simpler, more efficient and more robust (see IP/11/1508).

As part of this reform, the Commission is carrying out a review of reduced VAT rates, to see whether they are all still justifiable.

A public consultation on this issue was recently launched (see IP/12/1079), and the feedback should feed in to a Commission proposal on reduced rates next year.

The Financial Transactions Tax, which 11 Member States are currently keen to push forward through enhanced cooperation (see IP/12/1138) is another way for Member States to broaden their tax base without burdening ordinary citizens.

One of the objectives of the FTT is to ensure that the financial sector makes a more equitable contribution to public finances.

What is the benefit of increasing environmental taxation?

Green taxes (environment and energy) are considered to be amongst the most growth friendly, and also support wider policy objectives related to climate change, resource efficiency and energy security. Twenty Member States increased excise duties and other environmental taxes in 2011 and the first half of 2012.

However, this comes from a low starting point, and environmental taxes remain underdeveloped in many Member States.

Therefore, the Commission encourages Member States to take further measures to improve the existing design of taxes in this area including by adjusting the structure of tax rates on fossil fuels, indexing environmental taxes, or considering the abolition of reduced VAT rates on energy.

At EU level, the revision of the Energy Tax Directive (IP/11/468) would support Member States in a growth friendly shift towards environmental taxation, while also contributing to the EU’s climate change and energy efficiency goals and removing competitive distortions that currently exist between fuels.

Environmental tax revenues

2000-2010, % of GDP, arithmetic averages

Environmental Tax Revenue across Member States

2010, in % of GDP

Why has the Commission made fighting tax fraud and evasion a priority objective?

Hundreds of billions of euros are lost from national budgets every year due to tax evasion and fraud. Not only does this affect public income, but it also undermines the fairness of tax systems.

Honest taxpayers must pay higher taxes to compensate for evaders not paying their share.

Member States need to strengthen their administrations to combat this problem, and ensure that the controls and sanctions they have in place are strong enough deterrents.

Given the inherently cross-border nature of tax evasion, this is a problem that needs a multi-facetted approach.

Different and complementary actions need to be built up at national, EU and international level if the fight against evasion is to be effective. Close cooperation between Member States’ authorities is crucial for success, as is a strong common approach in dealing with third countries that facilitate EU evaders.

In June, Commissioner Šemeta presented concrete measures to crack down on tax fraud and evasion in the EU (see IP/12/513).

This will be reinforced in the coming weeks with the Commission’s Action Plan to tackle tax evasion and Recommendations on tax havens and aggressive tax planning.

An immediate step that Member States must take, to bring quick and important results in the fight against tax evasion, is to agree on the revision of the EU Savings Directive and the mandates to negotiate stronger agreements with Switzerland and other neighbouring countries. (see MEMO/12/353).

Why should Member States address the debt and housing bias in their tax systems?

Today’s high levels of debt means that many EU economic actors need to reduce their financial exposure.

However, the tax system of some Member States appears to encourage both households and corporate indebtedness.

The favourable tax treatment of mortgages is regarded as one of the contributing factors to over-investment in real estate and the housing price bubble that has played an important role in the crisis in several countries.

In some Member States, EU companies have tax incentives to favour the use of debt over equity. Malta, Greece, Luxembourg and France stood out as the countries with the highest gap between the tax treatment of debt and equity in 2011.

Although clearly lower, the gap was also significantly above the EU average gap, in Portugal and Italy, and above the EU average in Belgium, Spain, Germany and Sweden in 2011.

Tax induced incentives for debt financing should be reduced and debt bias in corporate and housing taxation kept under control. Similarly, aspects of tax schemes which increase the debt bias on households, typically through tax relief for mortgages, should be reviewed.

How can tax systems support competitiveness?

The competitiveness of a tax system extends far beyond merely the tax rate.

In fact, just as important are the cost and ease of compliance, the level of administrative burden, the transparency and stability of the system improving the business environment.

Moreover, a competitive tax system is one that supports the modernisation of the economy.

Dealing with the challenges of developing environmentally friendly taxation can help here, as can addressing the debt bias issue.

At EU level, the Commission is promoting a simpler, more efficient and more robust VAT system and has already initiated work to achieve this.

The proposed common consolidated corporate tax base (CCCTB), could also considerably contribute to the competitiveness of Member States and of the EU as a whole.

By providing harmonised and simplified rules for businesses tax returns, it would lower compliance costs by nearly €1 billion, reduce the administrative burden for cross-border businesses and ensure greater legal certainty.

This, in turn, would create a more favourable environment for business and a more attractive market for investors.

What contributes to the fairness of a tax system?

A fair tax system is one in which everyone pays no more and no less than their share, everybody pays what they owe and the benefits of the tax are evenly redistributed.

Among the ways that Member States can ensure fairer tax systems are by clamping down on tax evasion and avoidance, removing hidden tax subsidies which create competitive distortions, ensuring that social effects are taken into account, and rewarding desirable activities (e.g. rewarding work and enterprise, or environmentally-friendly behaviour).

Fair taxation is an issue which also extends beyond national borders, to the extent that every Member State should be able to collect the tax revenues that it is due.

EU coordination in taxation ensures greater fairness by limiting non-taxation and abuse and preventing a “race to the bottom” approach which can curtail national reform efforts.

It also allows Member States to draw on their strength in numbers when tackling common problems such as harmful tax competition from third countries.

More information is available in taxation paper n° 34 Tax Reforms in EU Member

via EUROPA – PRESS RELEASES – Press Release – The 2013 Annual Growth Survey: Towards fair and competitive tax systems.

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VAT fraud – Quick reaction mechanism | European Economic and Social Committee

In EU development on 20/11/2012 at 10:36 am

The Commission has stressed the need to raise efficiency of VAT due to the great need for fiscal consolidation.

As it has been estimated, VAT frauds cost the EU and national budgets several billion euro every year (a recent example is the estimated loss of EUR 5 billion between June 2008 and December 2009 in relation to the greenhouse gas emission allowance trade).

To raise efficiency of the VAT system, the EU needs to improve tax collection and tackle tax evasion.

In this context, on 31 July 2012, the Commission adopted a proposal for a Quick Reaction Mechanism (QRM), which would enable Member States to face the aggressive forms of VAT frauds more rapidly and battle against fraudsters that have become quicker and cleverer.

Member States would no longer face legal difficulties to implement specific emergency measures in the event of sudden and massive VAT frauds.

This is not the case in the EU VAT law that is currently in force, which renders the process slow and cumbersome. This can lead to doubtful results, as it provokes significant delays to the Member States in taking action to stop the fraud immediately, or challenge them before the Courts in case they adopt immediate measures without an appropriate legal basis in the EU legislation.

Under the QRM, it is provided that a Member State would have the possibility, within the period of one month, to apply a “reverse charge mechanism” (the only anti-fraud measure currently specified).

The latter provides that the person who is liable for VAT becomes the recipient rather than the supplier of the goods or services.

This would considerably improve Member States’ chances of tackling complex fraud schemes more efficiently (e.g. carrousel frauds and missing trader fraud), and of reducing the possibility of irreparable financial losses.

Related documents

Via VAT fraud – Quick reaction mechanism | European Economic and Social Committee.

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Tax Engines – Questions to Ask Before You Commit

In Benchmark, Business Strategy, Indirect Tax Strategic Plan, Processes and Controls on 16/10/2012 at 8:10 pm
By Robbert Hoogeveen
The Current State of many multinationals

(In Dutch) Determining the VAT liability and VAT recovery of business transactions (the system’s indirect tax functionality) can be automated within Enterprise Resource Planning (ERP) systems such as SAP and Oracle, or by way of manual processes. Such determination logic can be hugely complex.

Multinationals often run various versions of ERP systems without harmonization. The ERP is often set up per business unit and thus multiple kernels per country are likely.

This can cause difficulties in running exception reports to look for missed opportunities, underclaimed VAT and potentially fraudulent transactions. A lot of (manual) work is required when reconciling the periodic VAT compliance reports from these different sources (divisions, different systems).

As ERP systems do not have flexible reporting solutions, multiple spreadsheets are often used to reconcile VAT numbers. Manual processes are subject to human error and are often inefficient due to the amount of rework (‘hidden factory’).

‘Remediate own ERP system’ or ‘Third Party solutions’

Indirect Tax functionality can be automated (fully or to a certain extent) in a company’s ERP system. The problem may arise that multiple ERP systems are used and that interfacing via a third-party tax engine must be considered as an alternative. That option means that part of the system functionality is actually outsourced.

Some important questions to answer during tax software selection are:

  • Does remediation of own ERP systems close any gaps?
  • Is setting up a single ERP platform within the company a practical solution?
  • Are third-party solutions available to harmonize multiple ERP systems?
  • What is the advantage of a third-party solution compared to upgrading own ERP system(s) (GAP versus SWOT analysis: complexity of business model, number of tax codes needed now and in the future, resource requirements to manage the rules and VAT rates, monitoring and controls)?
  • Is a third-party solution required for determination and calculation of indirect tax or only for the reporting?
  • What reporting functionality does my organization need?
  • Are the risks of outsourcing functionality known, documented and managed?
  • Are the liability clauses of the third party known and evaluated?
  • Is the financial position known of this third party?
  • Is the market position known of this third party (sustainability, competitor’s strength)?
  • What is the feedback from customers (references and credentials)?
  • How many staff does this third party employ?
  • What is the company’s history with respect to upgrades of its technology in response to trends in the tax market and client needs (number of upgrades)?
  • Is the solution compatible with the existing ERP environment?
  • Is the IT architecture of the third-party solution compatible with the existing IT landscape?
  • Is the interface of the solution “approved/supported” by the ERP system supplier (i.e. SAP Netweaver partner)?
  • What level of configuration / customization will be required in the ERP system and/or third-party solution?
  • How much time does it normally take to implement a country, region or even a big bang roll out?
  • Does the third party have a roadmap for implementation that includes each others’ roles, responsibilities and milestones?
  • Which countries and indirect taxes are supported by the third-party solution?
  • What is the impact on the company’s own resources?
  • What does the price tag look like (initial fee, configuration fee, license / usage fee, maintenance fee, etc.)?
  • What level of support does a vendor provide in case of troubleshooting, mandated updates, irregular maintenance, etc?

These are some important questions that need answering in order to make sure that the technology is a right fit for contributing value to the organization’s business objectives.

Related Topic Systems: ‘Indirect Tax Automation’ And ‘Plug And Play‘

Robbert Hoogeveen is COO of the KEY Group

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VAT – European Commission

In EU development, Processes and Controls, Tax News, Training on 26/07/2012 at 9:00 am

VAT: Overview of EU legislation currently in force and eLearning course

The essential piece of EU VAT legislation since 1 January 2007 has been Directive 2006/112/EC. That ‘VAT Directive’ is effectively a recast of the Sixth VAT Directive of 1977 as amended over the years.

The recast brings together various provisions in a single piece of legislation.

Directive 2006/112/EC in turn was amended several times in the last few years and a consolidated version without legally binding value was published in January 2010 in the EU Official Journal.

An eLearning course has been developed by the European Commission to help tax officials and others get a good basic knowledge of the VAT Directive.

The course is freely available for download from our web page.

Table Of Content

Key documents

Traders

Control and Anti-Fraud

New administrative co-operation regulation

Combating tax fraud

Conferences and other events

e-learning

LinkedIn | Twitter | Facebook

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Informal Commission expert group discussions with Member States / set up of EU VAT forum

In EU development, Macroeconomic effects of VAT on 24/07/2012 at 12:10 pm

Informal Commission expert group discussions with Member States

Informal Commission expert groups composed of representatives of national tax administrations provide the Commission a forum for consulting VAT experts from Member States on pre-legislative initiatives.

Until recently, the Commission’s Directorate General for Taxation and Customs Union managed for this purpose Working Party No 1, a permanent group, and the Group on the Future of VAT, a temporary group established in the context of the Green Paper on the future of VAT.

These groups have now been merged into a single permanent expert group, named “Group on the future of VAT”.

Subject

Informal Commission expert group discussions with Member States – European commission.

EU VAT forum – call for applications for the selection of members

By decision of 3 July 2012 the Commission has set up the EU VAT forum.

The EU VAT forum is a structured dialogue platform to improve the relationship between the Business and tax authorities in order to create conditions for a smoother functioning of the present VAT system in the EU, reducing costs and administrative burden on both sides.

The forum’s tasks shall be:

  • to create a platform where business and national tax authorities experts can informally discuss tax administration issues in the field of VAT with which both parties are currently confronted in a cross-border environment;
  • to discuss practical insights provided by tax authorities, as well as business experts, and to elaborate on possible ways to manage the current VAT system more efficiently, including by combating fraud, in the interest of both parties with a view to achieving a smoother functioning of the current VAT system;
  • to assist the Commission in promoting good practice including the use of IT, which could culminate in a more efficient, secure, fairer and cost-effective VAT system in the interests of both parties;
  • to work, where necessary, in cooperation with any other appropriate bodies or committees dealing with VAT and administrative cooperation in the tax field.

The forum shall comprise representatives from the Member States and representatives of 15 organisations maximum representing business or tax practitioners.

The Commission is calling for applications with a view to selecting the EU VAT forum members representing business or tax practitioners, as mentioned in Article 4 (2) (b) of the above mentioned decision.

The applicants shall represent either business interests from large, medium or small enterprises in a pan European environment in EU VAT issues.

The representation in the VAT forum should mirror the relative importance of the different size categories of enterprises in the European economy. The members must be actively involved in the practical management of the EU VAT obligations for taxpayers operating in an EU cross border context.

The Commission is looking for businesses’ and tax practitioners’ European or international organisations.

For reasons of consistency and transparency, the members of the EU VAT forum shall be appointed by the Director-General for Taxation and Customs Union from organisations with competence in the areas referred to in Article 2 of the decision above mentioned, and who have responded to the present call for applications.

Read more: Commission Decision of 3 July 2012 setting up the EU VAT forum

Related documents

Richard Cornelisse is CEO of the KEY Group and worked previously as Big4 Partner in the Tax Performance Advisory and Indirect Tax Practice and blogs on Tax Function Effectiveness and Tax Control Framework developments.

Tax Management Consultancy welcomes your opinion on any of the issues raised, so feel free to join in the discussion on LinkedIn | Twitter | Facebook.

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