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Tax fraud and evasion: European Commission adopts Communication on concrete ways to reinforce the fight against tax fraud and evasion
Practical Law UK Legal Update 5-520-1034 (Approx. 5 pages)
Tax fraud and evasion: European Commission adopts Communication on concrete ways to reinforce the fight against tax fraud and evasion
by PLC EU
| Published on 28 Jun 2012 • European Union |
On 27 June 2012, the European Commission adopted a Communication on concrete ways to reinforce the fight against tax fraud and tax evasion, including in relation to third countries. (free access)
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The European Commission, on 27 June 2012, adopted a Communication on the fight against tax fraud and tax evasion, including in relation to third countries. The Commission notes that the adoption of this Communication provides a first response to the European Council's request, in March 2012, to rapidly develop concrete ways to improve the fight against tax fraud and evasion, by outlining the different levels (national, EU and international) at which action is needed.
On 27 June 2012, the European Commission adopted a Communication on the fight against tax fraud and tax evasion, including in relation to third countries.
The Commission notes that the adoption of this Communication provides a first response to the European Council's request, in March 2012, to rapidly develop concrete ways to improve the fight against tax fraud and evasion, by outlining the different levels (national, EU and international) at which action is needed.
The Communication reiterates that member states have full sovereignty over the collection of their taxes, the functioning and consistency of their tax laws and tax administrations, tax collection and the fight against tax fraud. It states however that national action or lack of action has a direct impact on the functioning of the internal market at large, as it can distort competition among EU businesses, and on the ability of member states to meet the commitments of the Stability and Growth Pact.
The Communication outlines the measures which are already in place in the EU to tackle tax evasion and fraud, such as :
- The Savings Tax Directive: the Commission notes that Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments (Savings Tax Directive) creates an information exchange system for tax authorities to help identify individuals that receive savings income in a member state other than their own. The core principle is that of automatic exchange of information. The Commission is of the opinion that the proposal to strengthen the Savings Tax Directive should be agreed by member states.
- Savings Tax Agreements with Third Countries: the EU has Savings Tax Agreements with Switzerland, Andorra, Monaco, Lichtenstein and San Marino. The aim of these agreements is to assist member states in taxing citizens who have savings accounts in these countries (see Legal update, Taxation of savings: Council examines mandate for negotiations with third countries). Talks are currently ongoing with Singapore, Hong Kong and Macao to promote the application of equivalent measures there too.
- Administrative co-operation: there has been a considerable strengthening of administrative co-operation between member states in recent years, enabling national tax authorities to benefit from exchanged data, information and experiences to better identify and address tax evasion and fraud (see Legal update, Council Directive on administrative co-operation in taxation published in Official Journal) and Legal update, Cross-border recovery of tax claims: European Commission Implementing Regulation published in Official Journal).
- The Code of Conduct on Business Taxation: the Code provides that member states will refrain from introducing, or will amend, any harmful tax measures that unfairly undermine other member states' revenue raising capacities (see Legal update, Code of Conduct for business taxation: Council adopts conclusions).
- Double non-taxation: the public consultation on double non-taxation which was launched in February 2012 closed at the end of May 2012 (see Legal update, European Commission launches public consultation to gather evidence of double non-taxation within the EU and in relation to third countries).
- The VAT Strategy presented in December 2012: this looks specifically at how to better tackle VAT fraud, with follow up action to be taken on this basis both in 2012 and 2013 (see Legal update, European Commission launches public consultation on the future of Value Added Tax).
- Tailored support to member states: the Commission notes that it is always ready to provide targeted support and technical assistance to any member state that needs it to strengthen its tax system against evasion, and improve tax collection.
Beside these existing measures, the Communication also identifies the following three areas where further legislative action or co-ordination would benefit the EU and member states:
- Improving information exchange: the Commission will analyse the idea of a cross-border EU tax identification number, while member states should give greater mutual access to relevant parts of each other's databases.
- Improving compliance: the Communication mentions several tools that could facilitate tax compliance, including a single Tax Webportal with information on all taxes, for all taxpayers. The Communication suggests the possibility of common minimum rules and sanctions for certain types of tax offences.
- Tackling evasion and fraud trends: in addition to extending Eurofisc and its Early Warning System to cover direct taxes, the Commission will also propose a Quick Reaction Mechanism for VAT fraud.
Next steps: In the next few weeks, the Commission will propose criminal law measures to protect the EU's financial interests against tax fraud. Before the end of 2012, the Commission intends to come forward with an action plan based on a proportionate impact assessment, which will identify specific measures which could be developed rapidly if the appropriate political priority is given. The presentation of this plan is foreseen together with the initiative on tax havens and aggressive tax planning. This action plan will set out concrete steps to enhance administrative co-operation and will support the development of the existing good governance policy, the wider issues of interaction with tax havens and of tackling aggressive tax planning and other aspects, including tax-related crimes.
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