The communication – published by Tax Commissioner Algirdas Šemeta – heralded proposals to be published in the next few weeks for new criminal law measures designed to create common minimum rules and sanctions for certain tax offences “to protect the EU's financial interests against fraud”.
Given the nature of tax evasion and fraud, it is difficult for agencies to put a precise figure on them. Nonetheless, the size of the shadow economy is estimated to be nearly one fifth of GDP on average across EU member states, representing nearly €2 trillion in total.
Tax fraud difficult to quantify, but significant amounts involved
Some studies estimate the level of tax evasion and avoidance in Europe to be around €1 trillion, and recent reports suggested that tens of billions of euros are off-shore, unreported and untaxed.
The VAT early warning system for fraud – Eurofisc – will be beefed up to cover direct taxes according to the plans, which also proposed a so-called ‘Quick Reaction Mechanism’ for VAT fraud, enabling faster recovery of lost sums.
The creation of teams of auditors focussed specifically on cross-border tax fraud is also envisaged.
The use of offshore tax havens by high-net worth individuals and companies also came under the spotlight in the blueprint.
Before the end of 2012, the Commission will come forward with a strategy to tackle aggressive tax planning in the EU – it says – examining ways to improve access to information on money flows through off-shore bank accounts.
The Communication mentioned several tools that could facilitate this, including a single tax web portal with information on all taxes, for all taxpayers. There should also be measures – at national and EU level – to encourage tax compliance, it said.
Member states guard tax policies jealously
The Commission will also develop a stronger communication strategy for tax fraud, developing a taxpayers' charter incorporating fundamental tenets of corporate social responsibility.
Taxation remains one of the competencies most fiercely guarded by the member states, so the communication’s reference to the need for action to tackle the willful exploitation of differences in tax systems and rules across the union is likely to be quite controversial.
A code of conduct on business taxation already commits member states to key principles and refraining from introducing measures that would allow harmful tax competition.
The Commission’s desire – stated in the communication – to look at how this code can be further strengthened, and has started work to have its principles applied by key international partners, might rub up against opposition.
The EU executive is keen to tackle double non-taxation – which allows aggressive tax planners to exploit loopholes between Member States' systems.