The adequate fight against tax fraud, tax evasion and tax havens is currently at the centre of the political debate at European level. This debate does not only concern fair taxation and the drainage of a swamp, which on occasions looks like being structured in Mafioso style, it also concerns a lot of money: these partly still legal, partly illegal practices mean that the European Member States miss out on an income of ca. 1 billion Euros per year, which would not only be important for budget consolidations, but would also represent necessary funds for investments in sustainable growth and employment. EU Commissioner Šemeta presented a platform for “Tax Good Governance“ this week, where various experts shall critically analyse the ideas of the Commission - laid down in the Action Plan at the end of 2012 - over the coming months. However, public pressure is also required to make sure that these proposals for just and fair taxation do not peter out.
At a press briefing held by the Commission on Tuesday, the Lithuanian Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, Algirdas Šemeta, announced the creation of a new platform for Tax Good Governance. This international forum shall support and monitor progress made by the Member States in tackling aggressive tax planning by large companies and tax havens. The setting up of this group of experts had already been announced in the Commission’s Action Plan against tax fraud and evasion - adopted in December 2012 -, whereby this plan also includes those issues, which shall be addressed by the members of this new group: uniform criteria are required to recognise tax havens resp. to put them on “black lists”. Non-EU states shall be persuaded to implement “tax good governance”, which (in future) shall apply within the EU. Also required is a common approach against “aggressive tax planning” by large companies, which avoid their tax liability by means of legal tricks and loopholes. Member States shall improve their double tax treaties; common anti-abuse measures, automatic data exchange within the Union, an EU-wide tax identification number, common guidelines to trace capital flows and a course of action against harmful tax competition would be required. Finally, Europe shall speak with one voice at international level (G8, G20) to develop and to enforce international high standards against tax evasion and fraud. All these issues and proposals, most of which are still in their initial stages, play an important role. The group of experts will be made up of ca. 45 people, who represent a broad range of interested participants: together with 15 additional experts - from companies operating throughout Europe or civil society stakeholders resp. trade unions and scientific circles -, representatives of all national tax authorities will contribute to the fight against tax evasion and fraud. The first meeting of this platform shall take place as early as 10 June, whereby Member States, trade unions, NGOs and companies will have until 8 May to apply for a seat in the platform resp. to appoint their tax experts. Organisations will be appointed for a period of three years.

Public pressure on the increase - focus on fair taxation

The issue of tax fraud and fair taxation is currently also of key importance at European and international level. No country in the world is in a position to tackle tax evasion alone. That is why a common political approach both at European and international level is essential. What is at stake is the trust of taxpayers in the effectiveness and fairness of their tax systems as is maintaining the funding of welfare state services. Intergovernmental fairness and solidarity are required, whereby for example the automatic exchange of interest income on the one hand and tackling harmful “downwards” tax competition on the other all play a vital part. From a social fairness perspective it seems to be unreasonable that a small economic elite are hiding their income from capital from the treasury, thereby cheating the (welfare) state, whilst employees and workers have to foot the bill for bank bailouts and austerity measures. Hence, the current debate on fair taxation is not only associated with the question how the future development of a social and sustainable infrastructure might be financed, but it also picks up on the issue of collective division, based on the principle of solidarity, of these necessary investments in the welfare state: depending on their assets, all shall contribute to funding public services by fair and efficient taxation. If, apart from that, the tax structure of a country shall be organised more fairly - for example by introducing wealth taxes - the unrestricted knowledge of tax authorities as regards to a person’s various sources of income seems to be essential.
In political terms, it is definitely required to use the current medial momentum and to enforce the highest standards in the fight against tax evasion, tax havens and tax fraud, at both international and European level. Austria too, following an abrupt U-turn by Luxemburg - at European level - as also demonstrated by the press conference held by Šemeta this week - has been the focus of criticism. The refusal of the Ministry of Finance to take part in the automatic data exchange at European level, makes a common European approach by the Commission against third countries such as Switzerland, Liechtenstein, Andorra or Monaco more difficult.
The final communiqué of the G20 Ministers of Finance last week as well as the OECD initiatives clearly indicate the adoption of automatic comprehensive data exchange as the new global standard. This was confirmed by Commissioner Šemeta and the Irish Presidency in a joint letter sent on Wednesday to the European Ministers of Finance in advance to the next meeting of ECOFIN on 14 May. To ensure that announcements at Commission and Council level amount to more than just hot air, public pressure too has to be put on the decision makers the coming weeks.

Further information:

Action Plan by the Commission from December 2012 against tax fraud and tax evasion

Letter of Commissioner Šemeta and the Irish Minister for Finance Michael Noonan to the European Ministers of Finance (24.4.2013)