The EC has presented an Action Plan and adopted two Recommendations today to help member states take coordinated action on tax havens and aggressive tax planning.
More than one trillion euros is lost a year across the EU to tax evasion and avoidance. The first measure adopted today set out rules to identify tax havens using common criteria and place them on “national blacklists.”
The EC will also be trying to persuade non-EU states to comply with EU standards over tax issues.
The second recommendation is on aggressive tax planning, and suggests ways to address “legal technicalities and loopholes which some companies exploit to avoid paying their fair share.” The rule encourages countries to reinforce their double tax conventions and to adopt a common General Anti-Abuse Rule.
A strong and cohesive EU stance against tax evaders, and those that facilitate them, is essential
"Around one trillion euros is lost to tax evasion and avoidance every year in the EU,” said Algirdas Šemeta, Commissioner for Taxation. “Not only is this is a scandalous loss of much-needed revenue, it is also a threat to fair taxation. While member states must toughen national measures against tax evasion, unilateral solutions alone won't work. In a single market, within a globalised economy, national mismatches and loopholes become the play-things of those that seek to escape taxation.
"A strong and cohesive EU stance against tax evaders, and those that facilitate them, is therefore essential."
Other initiatives in the Action Plan include a taxpayers' code, an EU tax identification number, a review of the anti-abuse provisions in key EU Directives, and common guidelines to trace money flows.
The EC is also recommendeding that the EU code of conduct is extended in scope to include special tax regimes for wealthy individuals.
New monitoring tools will be put in place to report on how well the countries are fighting tax evasion and avoidance. The Action Plan and Recommendations will now be presented to the EU's Council of Finance Ministers and the European Parliament.
The proposals were drawn up after the Commission was asked in March this year to “rapidly develop concrete ways to improve the fight against tax fraud and tax evasion, including in relation to third countries".
The move has been welcomed by ICAEW. Ian Young, international tax manager of ICAEW’s Tax Faculty, said the tough economic environment had created an incentive to create a more effective, fair and simple corporate tax regime.
“The current economic climate incentivises policy makers to clamp down on evasion and fraud, however there needs to be substantial political will for change to take place,” he said. “The package from the European Commission provides a welcome push to improve the international framework by increasing information exchange across country borders and dealing with tax havens. There is an unprecedented momentum at the moment.
“To reduce fraud and evasion, collaboration on an international level is absolutely critical. We need a tax system that allows businesses to do what they are best at doing; generating profit, while contributing fairly to the societies in which they operate.”