Creating a fiscal union will require greater cooperation on taxation and tax evasion, Taxation Commissioner Algirdas Šemeta tells EURACTIV in an exclusive interview.
Algirdas Šemeta is the Taxation and Customs Union, Audit and Anti-Fraud commissioner. He is a former EU budget commissioner and finance minister in
Many member states at the June Ecofin expressed an interest in pushing the financial transaction tax forward through enhanced cooperation. What is the state of play on this?
I strongly believe that the FTT continues to be a top priority for the EU. At the June meeting of the financial ministers’ Council [Ecofin], member states confirmed that there was no possibility to reach a unanimous agreement for the foreseeable future, but at the same time many member states expressed their strong wish to go forward with this proposal within the framework of an enhanced cooperation.
Since that time there have been a lot of co-ordination efforts among those member states, they are working very hard as far as I know. Some member states need approval from their national parliaments to move ahead with the enhanced cooperation. So this work is ongoing. Of course, it does not grab the headlines, but it doesn’t mean that the proposal is lost somewhere.
I see a strong commitment from many member states to move ahead. The ball is currently in the court of the member states, because firstly they need to send a request to begin it and they are currently working on this request.
Once an official request has been made, do you think that any new proposal the Commission frames will differ from the original?
First we need nine member states to start the procedure and I strongly believe that we will have nine or more express this wish and then we will have to look at the request. The request will express the scope and objectives of the enhanced cooperation. On the basis of the request, the Commission will produce a new proposal. But I do not think that it could differ very much from what we already proposed because those member states that expressed a desire to continue with an enhanced cooperation also confirmed that they see the present proposal as the basis for moving ahead.
France and Germany have announced a common corporate tax from January 2013, whilst the Commission’s own plans for a common consolidated corporate tax base [CCCTB] seem not to be progressing. What are your views on this?
First of all I think and believe personally that the CCCTB is extremely important in terms of the promotion of growth and jobs within the EU, and of efficiency within the single market. Of course it is not an easy proposal since it deals in corporate tax and it tries to harmonise tax bases for corporate taxation. Such a complicated proposal requires a lot of discussion amongst the member states and I have to say that we see very constructive debates in negotiations in the council in order to make progress on this file.
France and Germany’s work on more harmonising of their corporate tax systems does not contradict the proposal. Any attempts by member states to bring their corporate tax systems closer together should be welcomed. Both states presented their views in a previous Ecofin and I said then that their work could contribute to the CCCTB proposal and that both could be developed in parallel and should not harm each other.
In your communication on tax fraud and evasion released before the summer, you set out a series of specific ideas to tackle tax evasion at EU and national level. Have you started work on these measures yet, and what initiatives can we expect in the next 12 months?
Fighting tax fraud and evasion should be a top priority because our member states lose up to an estimated €1 trillion each year, and of course we need to make progress in the area to enable member states to make the most of their budget consolidations. With around 25 measures we have already presented an important measure in the quick-reaction mechanism to fight against VAT fraud.
By the end of the year we will issue an action plan for the implementation of the proposal, as well as an initiative to fight tax havens and aggressive tax planning. At the same time I think it is important that actions take place at member state level, because it is not a secret that a lot of tax evasion is taking place within our member states, and they have to simplify their tax collection systems to try to offer incentives to pay taxes. We addressed this very thoroughly in the framework of the European semester, and in many member states we offered advice on how they could improve their ability to fight against tax fraud and evasion.
On third countries and the interrelation of these with Europe on tax evasion, you have said you want to make progress. There are some interesting developments going on in the microstates, with Andorra, Monaco and San Marino actively looking for an EU framework agreement. What impact would such a move have on the other offshore states (Isle of Man etc.) and on the outstanding issue of banking secrecy in Luxembourg and Austria?
As a Commission we would be open to explore any good proposals for making progress on cooperation between the EU and those small countries that you mentioned. However, regarding taxation, we have very clear policies following the principle of good governance in tax matters, which means transparency, exchange of information and fair tax competition. We believe that any cooperation in tax matters should be based on those principles.
At the same time we continue to work on pushing member states to give a mandate to the Commission to negotiate with Switzerland, Liechtenstein and the three microstates for agreements on savings taxation on the issue of exchange of information.
Unfortunately we are still not there, because of the blockage of the two member states concerned – Luxembourg and Austria – and we are currently working very hard with the Cyprus presidency to convince those member states to improve the situation on tax collection from savings.
We have to make this agreement and this is not only on the part of the Commission. The 25 other member states consider we have to ensure efficiency on savings tax by broadening the scope of the directive. Taking into account the situation that we have in Greece I think it is untenable that those two member states continue to block progress on the files.
The problem with capital flight from Greece is of course a big problem which could be well addressed if we could deal with the savings tax directive, and on exchange of information and equivalence of measures. We are working with the Swiss and Liechtenstein on business taxation and we try to promote our principles. This requires constant work and pressure, also with third countries treated as tax havens, which is covered within the action plan.
We will come with a proposal for tax havens and tax planning by the end of this year. We should use a ‘stick and carrot’ approach, and a united coordinated effort in the treatment of the tax havens, and there are various tools, such as the application of withholding taxes for payments to such countries, and blacklisting such countries could be strong tools in terms of sticks. Whilst in terms of carrots, of course we could include better conditions of entry to EU markets.
With banking union and fiscal union at the top of the European agenda, how will these impact on tax issues? Will they increase the likelihood of pan-European taxes?
Of course when we talk about a banking union it has probably not much to do with concrete tax policies. It is banking policies, deposit insurance and banking resolutions and so on. But, of course, the crisis has demonstrated that we need stronger integration in the EU in order to address challenges created by the crisis, and that is why there are a lot of debates about moving to a sort of fiscal union, and of course fiscal policy is closely linked to tax policy.
I would not say that it means common taxes in the EU. We are not there yet, but I think it means we need much stronger co-ordination of tax policies. This is already taking place through the EU semester, where we issued tax recommendations to 25 of the 27 member states, which was probably difficult to imagine several years ago, and I think this trend will continue, because it has become clear that member states cannot set up their tax measures completely in isolation from other and neighbouring member states.
There is a need to exchange information, to co-ordinate policies in order to avoid mismatches and loopholes that could be used by tax-evaders, or to make sort of competitive disadvantages to other member states, and that co-ordination will I believe continue to strengthen.
You experienced the crisis of the fall of the Soviet Union within Lithuania, with the huge changes that brought about. Do you recognise the current crisis as a similar upheaval?
It’s true that Lithuania, together with other Baltic states, experienced pressures during that time we were occupied by the Soviet Union. But that created a feeling of solidarity in all these countries, and I like to be involved in constructive work and I feel privileged to be in a position to do so during this period.
- Commission communication on tax fraud (31 July 2012)