Brussels, 06/12/2012 (Agence Europe) - On Thursday 6 December, the European Commission presented a comprehensive action plan in the form of two recommendations to help member states combat tax evasion and fraud and to counter aggressive tax planning strategies set in place by companies to avoid paying taxes within the single market (see EUROPE 10734).
To combat practices that, due to the disparity between national legislations, make member states lose around €1,000 billion each year in tax receipts, the Commission underlines the need for joint, cohesive action at EU level. It suggests some 30 measures to fill the gaps, improve information exchange, strengthen regulations and intensify cooperation between member states, says Taxation Commissioner Algirdas Semeta.
The Commission first and foremost calls on member states to fully apply the instruments already in force, implementing norms for good taxation governance. Thus, in the chapter on administrative cooperation and the exchange of information, measures appearing in the package are: revision of the directive on savings taxation, the Commission's mandate for review of the tax agreements with Switzerland and four other third countries, as well as implementation of the early warning mechanism for combating VAT fraud. In the same chapter, but over the shorter term, the Commission provides a taxpayers' code to improve respect of tax standards, and standard formulas in order to facilitate the exchange of information between administrations. Over the longer term, measures include a European tax identification number, review of the anti-abuse clauses in the main Union directives, a taxation internet portal, guidelines on the traceability of financial flows to follow monetary flows and, possibly, harmonised sanctions in the event of tax infringements.
To ensure there is equitable tax competition within the internal market, the Commission suggests extending the scope and range (for example to the large fortunes) of the code of conduct on corporate taxation, which allows member states to mutually evaluate their respective tax systems and demand changes to harmful tax regimes. It also suggests more active use of this code by states, with action being taken before the Court of Justice in the event of abuse.
On the subject of combating tax havens, the Commission calls on member states to identify havens according to common criteria defined in the code of conduct on business taxation (lack of transparency, level of effective taxation, advantages for non-residents or for activity not connected to the national economy, etc.) by including them on national blacklists. In this case, member states are encouraged to renegotiate, suspend or denounce double tax conventions with countries on those lists. The recommendation also defines specific measures intended to convince third countries to apply governance standards defined by the Union.
Finally, a second recommendation concerns aggressive tax planning on the part of companies that avoid corporate tax by juggling with the different tax bases or rates of tax, as well as the loopholes in tax legislation of the different member states. In order to counter that practice, which costs them around €60 billion annually, they are encouraged to strengthen their conventions on double taxation and to eliminate any inconsistencies in their legislation, failing which the Commission will legislate. Member states are also invited to adopt a common general anti-abuse rule, whereby they could ignore any artificial system set in place to circumvent taxation and impose taxation on revenue on the basis of economic reality.
Follow-up of these measures, which will be presented to the Ecofin Council and to the Parliament, will be ensured by a platform on good taxation governance composed of the Commission, member states and stakeholders. It will issue periodical reports. (FG/transl.jl)