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EC Unveils 3-Tier Approach To Combatting Tax Evasion

by Ulrika Lomas, Tax-News.com, Brussels

02 July 2012


The European Commission has recently set out concrete measures aimed at tackling tax fraud and evasion, and aims to submit the proposals to the European Union summit in Brussels.

The Commission has put forward a number of proposals aimed at intensifying the fight against tax fraud and evasion in the European Union, including minimum sanctions for tax crimes, a cross-border tax identification number, a European Union (EU) taxpayer's charter and stronger common measures against tax havens.

Highlighting the fact that the size of the shadow economy is estimated at nearly one fifth of gross domestic product (GDP) on average across member states, representing nearly EUR2 trillion (USD2.48 trillion) in total, the Commission set out a three-tier approach aimed at attacking evasion and fraud at national, European and global level.

The Commission calls on member states to focus on improving their administrative capacity to collect taxes, and says that it will closely monitor progress in this field, providing technical assistance where needed.

National authorities should also make it easier for the willing to comply, for example, through voluntary disclosure programmes, the Commission stresses, adding that EU instruments such as the one-stop-shop and a possible tax web portal should also assist better compliance.

At European Union level, the Commission explains that action taken to tackle tax evasion has proven to be effective, thanks notably to the EU Savings Directive, requiring member states to exchange information on non-resident taxpayers to the value of EUR20bn.

According to the Commission, the challenge now is to deepen such cooperation and strengthen common tools. In this respect, agreement by member states on the revised Savings Directive is essential, and other new ideas include a possible European cross border tax identification number, a quick reaction mechanism for value-added tax (VAT) fraud, and minimum EU rules and sanctions for fraud and evasion.

For the fight against tax evasion to be truly effective, international partners must apply good governance standards that are equivalent to the EU's, the Commission underscores, pointing out that the mandates that the Commission has requested to negotiate stronger savings agreements with key neighbouring countries are crucial in that respect.

As regards next steps, the Commission aims before the end of the year to present an action plan on fighting fraud and evasion, with specific measures that could be rapidly developed. In tandem, the Commission will also come forward with its initiative on tax havens and aggressive tax planning.

Commenting on the Commission’s latest communication, Algirdas Šemeta, Commissioner for taxation, customs, anti-fraud and audit, said:

"Let there be no illusion: tax evaders steal from the pockets of ordinary citizens and deprive member states of much-needed revenue. If we want fair and efficient tax systems, we must stamp out this activity. The political will to intensify the battle is there. Now it is time to translate that into action. As a Union of 27, we have a powerful advantage - strength in numbers. If we play as a team, with a common strategy, we can defeat the fraudsters and evaders, and reclaim vast sums of money that are legitimately due."

TAGS: compliance | tax | European Commission | value added tax (VAT) | law | gross domestic product (GDP) | agreements | tax planning | standards | European Union (EU) | Europe

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