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Šemeta In Final EU Tax Harmonization Push

by Ulrika Lomas,, Brussels

16 April 2014

The European Union will benefit from a more coordinated approach on taxation, the European Union's Tax Commissioner Algirdas Šemeta has said, outlining near-term fiscal policy proposals.

"The biggest threat to tax sovereignty is an isolationist approach," Šemeta said in an address to the French Senate. He acknowledged a recent shift toward "more tax coordination, and, indeed, more harmonization in some areas." He said that collaborative policy is key to providing investors with the stability and legal certainty they require, and to cut administrative and compliance burdens.

Discussing EU fiscal policy, Šemeta said the much debated Common Consolidated Corporate Tax Base proposal remains a key tool. He argued that it would "make it easier and cheaper, notably for small- and medium-sized enterprises, to grow beyond domestic markets." He called for greater participation in the joint work undertaken by France and Germany on this issue, arguing that "if well framed in a European approach, this could speed up the progress towards an agreement on the EU directive."

In a similar vein, Šemeta believes that his plans for a financial transaction tax (FTT) would improve the picture further still. A Tobin tax would assist the idea of a more stable and predictable business environment, avoid a patchwork of national approaches, and respond to citizens' demands for fairer taxation, he said. Šemeta admitted that he is not optimistic that these changes will be "done and dusted" by the end of his term as Commissioner, however.

Turning to the issue of value-added tax (VAT), he told the French Senate that "harmonized VAT rules are the only way to avoid major distortions between businesses and between [EU] member states." The EU has introduced a new standard e-invoicing measure designed to save companies EUR18bn (USD24.8bn) a year, as well as a standard VAT declaration to cut the burden on businesses selling across borders.

Before the end of his term, the Commission will adopt a white paper on the way forward for a "definitive" VAT regime, Šemeta said, urging that greater harmonization in VAT should be a core objective.

Šemeta is likewise hopeful that key initiatives to tackle international tax avoidance and evasion can be put in place before his term ends. He explained that he would like to see the Commission's recommendations on the Administrative Cooperation Directive implemented as soon as possible. The text is intended to pave the way for the automatic exchange of information on all types of income, and should "allow the EU to move seamlessly and coherently towards implementing the Organisation for Economic Co-operation and Development (OECD) global transparency standard," he said.

The Commission is continuing negotiations toward an improved Parent-Subsidiary Directive, to close loopholes in corporate taxation, and Šemeta is awaiting feedback from a High Level expert group appointed to examine the problems associated with taxing the digital economy.

More broadly, he said that the Commission will continue to use every tool at its disposal – whether state aid rules or the Code of Conduct on Business Taxation – to ensure that member states engage in fair competition. "In a Union striving together to renew growth and competitiveness, there is no room for one neighbor undermining the revenue-raising efforts of another through harmful tax practices," he said.

"I am quite convinced that the issue of fair tax competition is going to be an increasingly central one in EU tax policy in the years to come. And rightly so. In the EU, we should compete with the rest of the world – on the basis of the strong merits that we have – and not between ourselves on the basis of unfair tax regimes," he concluded.

TAGS: compliance | tax | business | European Commission | value added tax (VAT) | tax compliance | tax avoidance | tax incentives | revenue guidance | tobin tax | tax planning | tax rates | France | Germany | revenue statistics | tax reform | European Union (EU) | Europe | Tax | Tax Evasion

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