News
BackOn Thursday 5 December 2013, the European Commission took stock as regards to the progress made concerning the implementation of its so-called “Action Plan to strengthen the fight against tax fraud and tax evasion”. Algirdas Šemeta, European Commissioner for Taxation and Customs Union, had presented the Action Plan in question a year earlier. An ambitious plan by all means but what if anything has been implemented so far?
Why an Action Plan at all?
The urgent need for action in respect of European tax policy is easily explained: according to calculations by the Commission, year after year, the Member States miss out on about a trillion Euros through tax evasion and tax avoidance. This is due to the desire of national states to “go it alone”, which could be avoided by coordinated measures at EU level, if the joint political will of all countries existed. Because a common European tax policy requires unanimity among all Member States.
The rampant growth of national solo efforts related to tax policy is creating considerable problems in many areas. In particular multinational corporations, with active assistance from consultancies have been perfecting complex tax avoidance strategies, where, for example, companies generate revenues in one EU Member State, but shift the tax to be paid on these revenues to another EU country with a low rate of tax. Another big problem is tax evasion and tax avoidance by individual persons, who exploit bank secrecy and confidentiality to park their funds in foreign accounts.
Key targets of the Action Plan
The Action Plan of the European Commission, which was presented a year ago, lists a number of strategies to remove the most serious abuses. After all, in times of tight budgets and prescribed austerity policy, Member States have nothing to give away.
The measures include among other the introduction of an automatic exchange of information within the EU (see AK Europe Newsletter) and a Directive on the implementation of a common Europe-wide corporate tax base.
Automatic exchange of information
In June this year, the Commission presented a proposal for a Directive regards the mandatory automatic exchange of information in the field of taxation. In contrast to the current system, information on capital gains of private persons shall in future be automatically exchanged between national tax authorities of the EU.
This information concerns, apart from the classic savings book, in particular wages and salaries, fees for members of the supervisory board and the administrative board, life insurances, pensions and property assets.
Fight against tax competition
Another key problem is tax competition within the European Union. Companies systematically exploit loopholes in national tax systems to minimize their tax burden. The shifting of profits leads to considerable tax losses, as the OECD has also ascertained on several occasions. Countries would be deprived of more and more tax revenue, whilst the major part of the tax burden would rest on the shoulders of employees. Hence, the Action Plan of the Commission provides measures, which are supposed to at least stem the race to the bottom, such as the Directive proposal for a common Europe-wide corporate tax base, or the proposed amendment to the so-called “Parent-Subsidiary Directive” (see AK Europe Newsletter), which has only recently been presented by the Commission. It shall help to stem the deliberate shifting of profits between parent companies and subsidiaries of large concerns to minimize taxes.
Action Plan: Result & Forecast
The Action Plan of the European Commission against tax fraud and tax evasion is to be welcomed in general. It contains a significant number of ambitious targets. However, the meagre experiences so far give rise to fears that it will need quite some time and that it will not be easy to overcome the often different and not always solidary national interests.
Further Information:
Press release of the Commission “Fighting Tax Evasion and Avoidance: A year of progress”
Action Plan against Tax fraud and Tax evasion
The urgent need for action in respect of European tax policy is easily explained: according to calculations by the Commission, year after year, the Member States miss out on about a trillion Euros through tax evasion and tax avoidance. This is due to the desire of national states to “go it alone”, which could be avoided by coordinated measures at EU level, if the joint political will of all countries existed. Because a common European tax policy requires unanimity among all Member States.
The rampant growth of national solo efforts related to tax policy is creating considerable problems in many areas. In particular multinational corporations, with active assistance from consultancies have been perfecting complex tax avoidance strategies, where, for example, companies generate revenues in one EU Member State, but shift the tax to be paid on these revenues to another EU country with a low rate of tax. Another big problem is tax evasion and tax avoidance by individual persons, who exploit bank secrecy and confidentiality to park their funds in foreign accounts.
Key targets of the Action Plan
The Action Plan of the European Commission, which was presented a year ago, lists a number of strategies to remove the most serious abuses. After all, in times of tight budgets and prescribed austerity policy, Member States have nothing to give away.
The measures include among other the introduction of an automatic exchange of information within the EU (see AK Europe Newsletter) and a Directive on the implementation of a common Europe-wide corporate tax base.
Automatic exchange of information
In June this year, the Commission presented a proposal for a Directive regards the mandatory automatic exchange of information in the field of taxation. In contrast to the current system, information on capital gains of private persons shall in future be automatically exchanged between national tax authorities of the EU.
This information concerns, apart from the classic savings book, in particular wages and salaries, fees for members of the supervisory board and the administrative board, life insurances, pensions and property assets.
Fight against tax competition
Another key problem is tax competition within the European Union. Companies systematically exploit loopholes in national tax systems to minimize their tax burden. The shifting of profits leads to considerable tax losses, as the OECD has also ascertained on several occasions. Countries would be deprived of more and more tax revenue, whilst the major part of the tax burden would rest on the shoulders of employees. Hence, the Action Plan of the Commission provides measures, which are supposed to at least stem the race to the bottom, such as the Directive proposal for a common Europe-wide corporate tax base, or the proposed amendment to the so-called “Parent-Subsidiary Directive” (see AK Europe Newsletter), which has only recently been presented by the Commission. It shall help to stem the deliberate shifting of profits between parent companies and subsidiaries of large concerns to minimize taxes.
Action Plan: Result & Forecast
The Action Plan of the European Commission against tax fraud and tax evasion is to be welcomed in general. It contains a significant number of ambitious targets. However, the meagre experiences so far give rise to fears that it will need quite some time and that it will not be easy to overcome the often different and not always solidary national interests.
Further Information:
Press release of the Commission “Fighting Tax Evasion and Avoidance: A year of progress”
Action Plan against Tax fraud and Tax evasion