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Semeta Sets Out EU Tax Policy

by Ulrika Lomas,, Brussels

05 October 2010

European Taxation Commissioner Algirdas Šemeta has announced that he will issue a formal proposal next year for the controversial common EU tax base as part of efforts to reduce the costs of doing business across EU borders.

Speaking at the KPMG Global Tax Summit in Prague last week, Semeta set out an ambitious agenda for the EU on the tax front, including new moves towards tax harmonization, proposals for environmental and financial taxes, and an increased focus on 'good governance' in the area of taxation, both within the EU and beyond.

"I am convinced that 27 unilateral and uncoordinated approaches is not the most efficient way forward", said Semeta, as he revealed that concrete proposals to drive forward the Common Consolidated Corporate Tax Base (CCCTB) would be issued by the European Commission next year.

"By creating common EU rules for cross-border businesses, we could eliminate costly mismatches between national systems and significantly reduce compliance costs for enterprises operating in more than one member state," he argued.

In what is shaping up to be a busy period for Commission tax officials, Semeta also disclosed that a Green Paper on improving the operation of value-added taxes across the EU will be presented next year, which will likely lead to proposals for a more harmonized EU VAT system. "The current VAT system suffers from numerous shortcomings, including a high level of administrative burdens for businesses and susceptibility to tax fraud," Semeta said.

In addition, specific proposals will be published by the Commission next year to address cross-border problems in specific fields like inheritance taxes, withholding taxes or more generally double taxation of income and capital.

Other initiatives to be pursued by the Commission include a review of the Energy Taxation Directive with a view to restructuring energy taxes to "meet high priority goals of climate change, energy efficiency and fair competition," and a discussion on new financial taxes, including a transactions tax and a financial activities tax, both of which will be proposed in a Commission Communication later this month.

Finally, Šemeta told the conference that the Commission will build on the 'third pillar' of its tax strategy by promoting 'good governance' in the area of taxation. "To this end, the EU must step up its fight against tax fraud and evasion, and continue to lead the campaign for good governance by promoting the principles of transparency, tax information exchange, and fair tax competition both within the EU and beyond," he remarked.

Šemeta also disclosed that the Commission continues to be "very active" on the issue of 'harmful tax competition' both with the EU member states and in the Commission's relations with non-EU countries.

"I am convinced that we have to maintain the pressure in the fight against harmful tax competition," he said. "Promoting investment in order to raise tax revenues is a sensible policy as part of fiscal consolidation programmes. But coordination at EU level should prevent domestic revenue raising from undermining other member states."

Semeta explained that the Commission will continue in its attempts to force these principles on third countries such as Switzerland and Liechtenstein, and seek adoption of an improved information exchange law currently pending in the Council so that "bank secrecy can no longer be invoked to refuse administrative assistance."

TAGS: inheritance tax | environment | compliance | tax | investment | business | European Commission | value added tax (VAT) | law | banking | financial services | capital markets | corporation tax | Liechtenstein | withholding tax | Switzerland | European Union (EU) | services | Europe

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