Three academics shared their views on how to simplify tax policy at a hearing before members of the European Parliament’s Subcommittee on Tax Matters.
Eva Eberhartinger, Professor at the Vienna University of Economics and Business, believes that tax complexity exists for some good reasons, such as fairness, new business models, and the fight against tax evasion and fraud. “Any simplification should rather address the other, not so good reasons for tax complexity”, she stressed. These include investment incentives, which can be cumbersome to administer and whose real impact is often uncertain. As well as being costly, tax complexity also affects business decisions: discouraging entrepreneurship, reducing foreign direct investment and undermining the beneficial effect of tax rate cuts.
Mrs Eberhartinger therefore suggested continuing to simplify current tax legislation, in particular the ‘FASTER’ initiative on withholding tax (see EUROPE 13501/24) or the Transfer Pricing Directive (see EUROPE 13389/18).
Christiana Hji Panayi, Professor at Queen Mary University of London, referred to the Directive on Administrative Cooperation in Tax Matters (DAC 6) and called for its revision (see EUROPE 13465/26). This text is “especially problematic”, as it generates different interpretations and implementations of sanctions regimes, shifts the reporting obligation onto taxpayers and creates uncertainty as to how information is handled by local tax authorities, not to mention the disproportionate administrative cost. She therefore recommends simplifying the existing texts before going further in the fight against harmful tax practices.
“It is essential to approach any calls for tax simplification with caution, particularly regarding lower corporate tax rates, the revision of the Anti Tax Avoidance Directive (ATAD) with higher applicability rules, and the relaxation of Controlled Foreign Corporations (CFC) rules”, warned Panayiotis Nicolaides, Director of research at the EU Tax Observatory. Any double reporting must be correctly identified, because any form of harmonisation of reporting obligations for multinationals must not allow measures to combat tax evasion to be relaxed or the scope of the Directive to be altered. (Original version in French by Anne Damiani)