6 December 2012
One Trillion Euro.
That is what we are losing every year to tax evasion and avoidance in the EU.
To break it down, we are talking about €2 000 per European citizen.
It is a scandalous loss of public income, particularly in these economic times.
And it is an attack on the fundamental principle of fairness.
The crisis has made the fight against tax evasion all the more urgent.
But in a globalised economy, with increasingly mobile activity, this is not a battle that can be fought alone.
Success relies on combining forces at national, EU and global level, in a strong, cohesive stance.
On that basis, and as requested by the European Council, I present to you today a comprehensive Action Plan to better fight tax evasion and avoidance as a Union.
It sets out over 30 measures to close loopholes, increase information exchange, reinforce rules and intensify cooperation between Member States.
And all those measures support a new EU stance based on 3 fundamental points:
- Tax competition in the EU cannot open ways to fraudsters and evaders;
- The EU should have a stronger EU stance in relation to 3rd countries that facilitate evaders;
- Tax shopping should be made harder and businesses have to contribute their fair share to act in the single market
For growth and jobs in the EU, we know that we need quality tax systems.
Tax systems which support companies and promote a favourable business environment.
But equally, tax systems founded on the principles of good governance and fairness where everyone would pay what they owe.
Allow me to focus on the issue of tax competition, as I know that this has become an issue of lively debate.
It is perfectly acceptable for each Member State to strive for a competitive tax system, so long as they do so in a fair and open way.
The problems only arise when tax regimes are artificially designed to steal tax bases or encourage aggressive tax planning.
Tax competition must not open the door to fraudulent or abusive tax practices.
In the EU, we have an instrument to ensure fair tax competition.
The Code of Conduct on Business Taxation provides a solid basis for Member States to assess each other’s tax regimes, and demand that harmful ones be amended.
However, I believe that this Code could be used with more ambition by Member States than it is today.
I urge any Member State that has any concern that our standards are being compromised to immediately put this before the Code.
They should also look into strengthening it and expanding its scope, notably to wealthy individuals.
Among the other ideas in today’s Action Plan are an EU Tax Identification Number, better tools for information exchange, and extending the scope of Eurofisc.
Through better use of our current tools and targeted new actions, we can reinforce transparency, information exchange and fair competition within the EU.
The success of these measures will be determined by the level of commitment amongst Member States themselves.
But they must keep up the peer pressure between them on these issues.
The next important step that I propose is to extend our good governance principles beyond the EU.
There is no valid reason why our global partners should not respect the same minimum standards as our Member States.
So, we must take a tougher line against tax havens. And we must take it together.
It is time for the EU to have its own definition of tax havens, which goes beyond current globally accepted standards, and to define and use defensive tools against uncooperative jurisdictions.
Today, the Commission recommends that Member States use common criteria to identify and blacklist tax havens, and apply coordinated measures against them.
Acting as a Union, representing 500 million citizens, will prove far more effective in this area than a patchwork of national approaches.
I have spoken on the role of fair and competitive taxation in fighting tax evasion – at home and abroad.
The third step is to strengthen our tax environment.
We must hamper those that seek to escape taxation by tax shopping amongst mismatches and loopholes between national systems.
The vulnerabilities of national tax systems in a global economy are increasingly apparent, with the greater mobility of capital and increasingly sophisticated tax planning.
Given the cross-border nature of aggressive tax planning, coordinated EU action on this issue holds major added value.
I don’t claim to have a silver bullet that can address all the complexities linked to this issue – that would require a major global shift.
But the approach I propose can certainly close important loopholes and make life harder for tax avoiders in Europe.
What the Commission recommends today is that Member States apply common measures to block opportunities for aggressive tax planners.
They should reinforce their Double Tax Conventions, to prevent them from being exploited for tax avoidance purposes.
And they should 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.
At EU level, we will review key legislation, such as the Parent-Subsidiary Directive, and strengthen anti-abuse measures in EU corporate tax laws.
We will also push for a high level of ambition in the international arena, working closely with the OECD to address these problems.
Finally, let us not forget the role of the taxpayers themselves in this story.
I have spoken already of the need for business friendly tax systems, which ease compliance costs and reduce administrative burdens.
However, there must be give and take.
Businesses must acknowledge the many benefits they derive from the Single Market, by paying their fair share in taxes.
In the current economic climate, there should be little tolerance of abusive tax schemes used to escape taxation.
Arguing that they are legal does not make them right.
Aggressive tax planning goes against the very nature of corporate social responsibility, as well as undermining fair taxation.
We will develop a Taxpayers’ Code, so there is no uncertainty about the rights and obligations of those operating in the EU.
Meanwhile, honest businesses have everything to gain from a stronger EU stance on avoidance.
It will reduce the competitive distortion they face compared to their less honest counterparts, and level the playing field.
Today I have presented the way forward for a stronger EU approach to tax evasion. It is an ambitious agenda, but a highly achievable one.
Now it is up to the Member States to play their part.
They must commit to deeper coordination, support the new tools proposed and unite in pushing our standards globally.
To make sure that the momentum is maintained on this critical subject, I will create a new Platform for Tax Good Governance.
This will closely monitor progress and create incentives for action through peer pressure.
The rewards on offer are great: billions of euros in revenue, and fair and competitive tax systems for recovery and growth.
- The Commission accused of tolerating corruption and fraud in taxation (europeansting.com)
- How Internal Audit could contribute value in realizing indirect tax objectives? (indirecttaxtechnology.com)
- Tax efficent solutions in Germany (malcolm-mcdowell.net)
- Janet Napoles, husband face tax evasion raps (newsinfo.inquirer.net)
- Messi’s image faces tax evasion test (bigpondnews.com)
- EU ministers discuss fighting tax evasion (boston.com)
- How Internal Audit could contribute value in realizing indirect tax objectives? (richardcornelisse.com)
- Benefit errors cost £1 million a day. Tax avoidance and evasion cost £260 million a day (taxresearch.org.uk)
- Brussels treading difficult line in tackling tax evasion (irishtimes.com)
- Hammond restaurant owner agrees to plead guilty to tax evasion (posttrib.suntimes.com)