EU Commission Pushes For Direct To Indirect Tax Shift

by Ulrika Lomas, Tax-News.com, Brussels

04 June 2014

Unveiling country-specific tax recommendations for member states, European Tax Commissioner Algirdas Šemeta said that "much more remains to be done before we have a level of taxation that supports a job-rich recovery."

According to Šemeta, "with a tax wedge of 46.5 percent in the Eurozone, our tax burden on labour outweighs other Organisation for Economic Cooperation and Development (OECD) countries." The Commission has therefore called on twelve European Union (EU) member states – Austria, Belgium, the Czech Republic, Germany, France, Hungary, Italy, Latvia, Lithuania, Netherlands, Romania, and Spain – to do more to shift taxation away from labor. They should focus instead on the three Ps: of pollution, property and purchases.

"Environmental taxation helps promote the green economy, thereby opening the way for new jobs and greater competitiveness. Recurrent property taxation tends to be fair and effective, if done in a progressive way. And there is ample economic evidence that consumption taxes can be extremely efficient revenue raisers, which don't damage economic growth," Šemeta explained.

He is nevertheless concerned that the use of consumption taxes in the EU remains far from ideal. He believes that value-added tax (VAT) exemptions and reductions eat into national intake and, by complicating the system, create administrative problems for businesses. These issues are seen as especially prevalent in Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, and the UK.

In total, eleven member states have been urged to broaden their tax base to ensure greater tax efficiency. Rather than necessitating a hike in the standard rate of VAT, "a tidier and tighter VAT system" could offer scope for rate reductions and create a more favorable environment for many businesses.

Finally, the Commission has recommended that 16 member states improve domestic tax governance with a view to facilitating compliance and cracking on evasion. Šemeta warned that "member states cannot rely on short-sighted tax schemes to attract multinationals. And Europe, as a whole, will lose out if multinationals pick and choose from our Single Market purely to minimize their taxes."

Political interest in a unified approach to tax avoidance and evasion "must translate into swift and decisive action, at national, European and international levels," Šemeta concluded.

TAGS: compliance | tax | business | European Commission | value added tax (VAT) | tax compliance | Belgium | Hungary | Ireland | Netherlands | property tax | pollution tax | tax avoidance | tax incentives | Latvia | Luxembourg | Romania | multinationals | tax planning | tax rates | Austria | Czech Republic | France | Germany | Italy | Spain | tax reform | European Union (EU) | Lithuania | Europe | Tax | Tax Evasion

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