The European Commission has released a package of measures to tackle the estimated €1.3 trillion lost to tax evasion and fraud in Europe, against a background of alleged avoidance amongst major companies.
Algirdas Šemeta, the taxation and anti-fraud commissioner, told reporters in Brussels yesterday (6 December) this was a “scandalous loss of public income particularly in tough economic times”.
He said the action plan set out 30 new measures to close loopholes and increase information exchange, and called on EU countries to implement the current EU code of conduct on business taxation as soon as possible.
Faced with different national fiscal regimes, politicians had urged the Commission to adopt an EU-wide approach.
“In a single market, within a globalised economy, national mismatches and loopholes become the play-things of those that seek to escape taxation”, Šemeta said.
The first of the two main recommendations requires member states to take a strong stance on tax havens, going beyond the current international measures. The EU executive urged countries to identify such havens, place them on national blacklists and take their complaint to the Commission.
The second suggests ways for member states to address “aggressive tax planning”, the legal technicalities and loopholes companies use to pay less tax.
EU countries should also adopt a common anti-abuse rule, whereby they can ignore artificial tax avoidance schemes and tax the underlying sum of money, said a statement accompanying the announcement.
Šemeta said he would also push for fiscal standards outside the EU. “Today's Action Plan will serve as a robust EU contribution to the international debate on evasion and avoidance, particularly within the OECD and G20”, a Commission statement said.
"There is no reason why other countries should not respect the same minimum standards", he told reporters.
The Commissioner expressed frustration that some companies had been exploiting current divergences in national tax regimes.
The EU executive is currently pursuing an infringement procedure against France and Luxembourg for placing too low VAT rates on digital books. The Commissioner made specific reference to the retail giant Amazon, which is alleged to have placed its headquarters in Luxembourg in order to take advantage of the weaker tax regime.
The coffee juggernaut Starbucks announced yesterday that it would pay £10 million (€12.4 million) over the next two years as it restructures arrangements that have seen its UK operation pay no corporation tax in the past three years.
Starbucks is reported to have paid just €10.7 million in corporation tax since it opened in the UK in 1998 despite sales of €3.7 billion.
MEP Sven Giegold (Germany), finance spokesperson for the Green party in the European Parliament, said: "EU action to tackle tax avoidance is long overdue and today's action plan is certainly a welcome if belated step to this end. The Greens have expressed frustration with the continued failure to tackle tax avoidance - both private and 'legal' avoidance by corporations - which deprives EU exchequers of € billions in revenue each year, all the more at a time of crisis and fiscal difficulty. This action plan does outline some measures to this end but the Greens believe the EU must go further if it is serious about clamping down on tax avoidance."
"Every year in the EU, the cost of tax evasion and tax fraud amounts to around one trillion euro. This very significant and scandalous amount could undermine citizens' trust and confidence in the fairness and legitimacy of tax collection as well as in their general administrations," said MEP Jean- Paul Gauzès, Group Coordinator in the European Parliament's Economic and Monetary Affairs Committee for the European People's Party (EPP).
Ian Young, international tax manager at ICAEW, a professional membership organisation supporting over 138,000 chartered accountants around the world, said: "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. 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."
Philippe de Buck, Director-General of BusinessEurope said, “We support initiatives to improve the clarity and transparency of tax rules in EU Member States, as part of a broader strategy to both strengthen the single market and enhancing the competitiveness of tax systems in Europe. We look forward to continuing to engage constructively with the Commission on the issues raised in today’s Communication”.
Catherine Olier, Oxfam’s EU policy adviser, said: “Coordinated action is the only way to clamp down on capital flight associated with tax avoidance. If the EU adopts a unified stance in tackling tax dodging, it will not only balance the books but also release the finance many developing country and European governments desperately need to pay for essential public services, like health and education. In developing countries alone, tax avoidance costs €123 billion per year. These hidden billions should be spent building schools and hospitals.”
Javier Pereira, Policy Officer at Eurodad, said: “To efficiently crack down on tax avoidance, the EU should hold companies accountable for their tax practices, ensuring that they pay the right amount in the countries in which they work. It is only fair that multinational companies, like Starbucks and Google, pay their share of state spending in line with their real economic activity.”
Chas Roy-Chowdhury, Head of Taxation at ACCA said: “Many of the ideas in the Action Plan are really common sense and should therefore be supported. However, their implementation will require member states to work much more closely with one another for their own national interest but also in a way that will improve the tax take across the EU”.
At their March 2012 summit, EU heads of states asked the European Commission "to rapidly develop concrete ways to improve the fight against tax fraud and tax evasion, including in relation to third countries and to report by June 2012".
The Commission followed up on 27 June with a review of the measures currently in place, to see how they can be improved and intensified.
The aim is to create a stronger, more coordinated approach to tackling tax evasion, aggressive financial and tax jurisdictions, and unfair tax competition.
- Press release: Clamping down on tax evasion and avoidance: Commission presents the way forward (6 Dec. 2012) [FR] [DE]
- Communication: An Action Plan to strengthen the fight against tax fraud and tax evasion (6 Dec. 2012)
- Special website on tax fraud and tax evasion