EN Official Journal of the European Union C 198/34

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament and the Council — An action plan to strengthen the fight against tax fraud and tax evasion’

COM(2012) 722 final

2013/C 198/05

Rapporteur: Mr DANDEA

On 12 March 2013, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the Commission to the European Parliament and the Council – An action plan to strengthen the fight against tax fraud and tax evasion

COM(2012) 722 final.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 4 April 2013.

At its 489th plenary session, held on 16, 17 and 18 April 2013 (meeting of 17 April 2013), the European Economic and Social Committee adopted the following opinion by 169 votes to 1 with no abstentions.

1. Conclusions and recommendations

1.1 The Committee endorses the Commission's plan and supports its efforts to find practical solutions as regards reducing tax fraud and tax evasion. Real progress is possible only if the Member States devote more attention to enhancing the efficiency of their tax administrations, equipping them with sufficient financial and human resources, while ensuring better coordination between them.

1.2 The Committee recommends that the Commission and the Council include the issues of tax fraud, tax evasion and aggressive tax planning in the annual growth surveys and the European semester, and implement specific measures to combat these phenomena so as to ensure progress in the payment and collection of taxes, make taxation fairer, and help enhance the redistribution of wealth and combat poverty.

1.3 The Committee welcomes the Commission’s proposals to blacklist jurisdictions that operate as tax havens, in disregard of standards of good governance in tax matters, and calls for common criteria to be established at EU level for identifying such jurisdictions, so as to prevent this being applied unevenly at national level. Such blacklisting should not be limited to third countries but should also cover jurisdictions belonging to Member States and companies operating in those jurisdictions.

1.4 The Committee believes that the Commission could complement the blacklisting proposals with sanctions for companies such as exclusion from public contracts, EU funding and state aid.

1.5 Given that it erodes the tax base and thus obliges Member States to increase taxes, the Committee believes that aggressive tax planning is an inherently immoral practice that significantly affects the functioning of the internal market and distorts the fairness of tax systems vis-à-vis taxpayers. Given the complexity of the phenomenon, the Commission's proposals regarding the general anti-abuse clause and the definition of an artificial bilateral arrangement should be sufficiently clear so that all Member States can easily implement them.

1.6 The Committee recognises the importance of the efforts made by the Commission to negotiate agreements on good tax governance with neighbouring countries. The Committee recommends that the Council grant the Commission a negotiating mandate, as these tools could prove extremely useful in combating tax fraud and evasion.

1.7 The Committee recommends that the Commission and the Member States continue to address the issue of simplifying and harmonising the existing legal framework at both EU and national levels. A simpler, more uniform legal framework for taxation that ensured fair taxes and was backed up by the latest IT tools for verification, control and information exchange would greatly reduce the scope for tax fraud and tax evasion.

1.8 The Committee recommends that the Commission, the Council and the European Parliament dissuade Member States from maintaining large divergences between their respective direct and indirect tax rates, which foster tax competition.

1.9 The Committee welcomes the Commission's decision to explore the possibility of introducing a European TIN (tax identification number). The Committee reiterates its call to the Member States, made in several previous opinions, to harmonise the indirect taxation system. The Committee encourages the Commission to put forward proposals in this area. Harmonisation here, combined with the introduction of a European TIN, would hugely reduce carousel fraud.

2. Introduction

2.1 Tax fraud and tax evasion, along with tax avoidance through aggressive tax planning, are fuelling the growing inequalities generated by the economic crisis and austerity programmes, jeopardising Member States' efforts to ensure a smooth functioning tax system to fund public services, redistribute wealth, combat poverty and prevent tax competition between Member States and third countries. The ensuing financial losses suffered by the Member States are estimated to exceed one trillion euro per year (1).

2.2 On 2 March 2012, the European Council called on the Council and the European Commission to develop practical ways to combat tax fraud and evasion.

2.3 The Commission adopted a communication in June 2012 (2) which outlined how tax compliance can be improved and fraud and evasion reduced. In this communication, the Commission announced that it would present an action plan to strengthen the fight against tax fraud and tax evasion.

2.4 In December 2012, the Commission presented the promised action plan, which includes recent initiatives as well as new measures that could be implemented in both the short and long term. This plan was accompanied by the Commission Recommendation regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters (3), and the Commission Recommendation on aggressive tax planning (4).

3. General comments

3.1 The Committee endorses the Commission's plan and supports its efforts to find practical solutions as regards reducing tax fraud and tax evasion (5). However, the Committee is sceptical regarding the implementation of some of the proposed measures, given the numerous policy divergences between the Member States, which slows down the decision-making process at Council level. Furthermore, the cuts to tax authorities' financial and human resources (6) in most Member States through austerity measures implemented in recent years greatly jeopardises implementation of the new measures. Real progress is possible only if the Member States devote more attention to enhancing the efficiency of their tax administrations – equipped with sufficient financial and human resources – and ensure better coordination between them.

3.2 A significant proportion of the losses to the tax collection system generated by the shadow economy arise from aggressive tax planning. The Commission recognises that this practice makes use of mismatches between two or more tax systems, which, while considered a legitimate practice at global level, runs contrary to the principles of corporate social responsibility. Given that it erodes the tax base and thus obliges Member States to increase taxes, the Committee believes that aggressive tax planning is an inherently immoral practice that significantly affects the functioning of the internal market, discouraging fair competition between companies in general and between SMEs in particular, and distorts the fairness of tax systems vis-à-vis taxpayers.

3.3 The Committee welcomes the Commission's recommendation on aggressive tax planning, but feels that the measures proposed to counter this practice do not go far enough. Given the complexity of the phenomenon (aggressive tax planning), the general anti-abuse clause and the definition of an artificial bilateral arrangement could prove difficult to implement in the context of the agreements concluded between Member States. Furthermore, the Committee believes that these measures will raise more implementation problems for Member States than if they immediately terminated those agreements, especially those involving jurisdictions that are tax havens or do not agree on applying a set of basic rules on good tax governance.

3.4 The Commission proposes that Member States adopt a set of criteria to identify third countries not meeting standards of good governance in tax matters, and suggests that such jurisdictions could be blacklisted. The Committee points out that this measure should also include jurisdictions belonging to Member States as well as companies that continue to conduct operations involving entities belonging to those territories.

3.5 The Commission has proposed amending certain directives (7) to close loopholes that could encourage tax fraud or tax evasion. It has also requested a mandate from the Council to negotiate anti-fraud and tax cooperation agreements with four neighbouring countries and has called on the Council to sign the draft agreement between the EU and its Member States and Liechtenstein. The Committee recommends that the Council address these proposals as soon as possible, as these tools could prove extremely useful in combating tax fraud and evasion.

3.6 The Committee believes that, in the course of implementing the action plan, the Commission and the Member States should continue to address the issue of simplifying and harmonising the existing legal framework at both EU and national levels. A simpler, more uniform legal framework for taxation that ensured fair taxes and was backed up by the latest IT tools for verification, control and information exchange – while benefiting from well-trained staff – would greatly reduce the scope for tax fraud and tax evasion. This would also reduce the administrative and tax burden for companies and individuals, with direct benefits for Member States' revenue.

3.7 The Committee recommends that the Commission, the Council and the European Parliament dissuade Member States from maintaining large divergences between their respective direct and indirect tax rates, which foster tax competition. Furthermore, the Committee draws attention to the direct link between the level of taxes and tax evasion. Effectively combating tax fraud, tax evasion and aggressive tax planning can help lower the overall level of taxation to the benefit of all taxpayers.

4. Specific comments

4.1 The Commission acknowledges that, given the freedoms that come with operating in the internal market, businesses may structure arrangements with tax-haven jurisdictions via the Member State with the weakest response. This erodes Member States' tax bases and endangers fair competition between companies in general and between SMEs in particular, distorting the operation of the internal market. The Committee encourages the Commission and the Member States to blacklist companies that engage in such practices. Member States should, among other measures implemented at national level, suspend the right of such companies to participate in procurement procedures or refuse to grant state aid where such applications are made.

4.2 The Commission estimates that aggressive tax planning generates half of the losses incurred by the Member States due to practices specific to the shadow economy. The Committee thinks that the measures to combat this practice proposed by the Commission (8) do not go far enough and recommends that both the proposed general anti-abuse clause and the definition of an artificial arrangement should be more clearly drafted, so that the Member States can act quickly to implement them, without generating complicated court proceedings over aggressive tax planning.

4.3 The Committee endorses the Commission's proposal to establish a platform for good governance in tax matters. It calls on the Commission to also invite the social partners to take part in this platform, especially those with members working in financial administrations who have valuable experience in the field of combating tax fraud and tax evasion. Furthermore, clarification is needed of the way in which this platform will interact with other EU-level bodies operating in the field of taxation.

4.4 In the context of the negotiations on the Code of conduct for business taxation, negotiations coordinated within the OECD, the Commission proposes to seek to remove provisions from existing directives that, in certain situations, provide opportunities for aggressive tax planning or prevent appropriate solutions by allowing double non-taxation. The Committee welcomes this Commission initiative and recommends that these measures be taken as soon as possible.

4.5 The Commission proposes intensifying work on special tax regimes for expatriates and for wealthy individuals, which are harmful to the internal market and reduce overall tax revenues. The Committee encourages the Member States to abolish these special tax regimes. Moreover, the Committee reiterates its call to the EU institutions (set out in previous opinions (9)) to adopt measures to prevent abuse of the principle of "residence" by means of ownership arrangements and fictitious residency, whereby holding companies not actively engaged in business, or bogus companies, allow the owners to avoid paying taxes in their country of domicile.

4.6 The Committee welcomes the launch of the "TIN on EUROPA" portal. This tool allows any third party, and in particular financial institutions, to quickly, easily and correctly identify and record tax identification numbers (TINs). It may also contribute to a more effective automatic exchange of information. Given the Commission's decision to explore the possibility of introducing a European TIN, the Committee reiterates its call to the Member States, made in several previous opinions, to harmonise the indirect taxation system. The Committee encourages the Commission to put forward proposals in this area. Harmonisation here, combined with the introduction of a European TIN, would hugely reduce carousel fraud, in the event that, in future, this were to become a unique taxpayer identifier for all types of tax.

4.7 The Commission has undertaken to standardise forms for exchange of information in the field of taxation. An IT application that was developed for using these standard forms, in all EU languages, was deployed on 1 January 2013. The Committee appreciates that these formats may play an important role in administrative cooperation between Member States on tax matters, especially once developments in IT enable the automatic exchange of information.

4.8 The Committee greatly welcomes the Commission's decision to review the Parent-Subsidiary Directive and the anti-abuse provisions of other directives. This review is necessary to ensure implementation of the Commission's Recommendation on aggressive tax planning. The Committee recommends that the Member States support the Commission's efforts, so that the review can be carried out in a reasonable timeframe. As part of this review, it is important to introduce an obligation for multinational companies to draw up separate accounts for each country in which they operate, specifying production volumes and profits made. If accounts were presented in this way, it would be easier to identify companies misusing transfer pricing or pursuing aggressive tax planning. Moreover, the Committee recommends introducing legislation on the taxation of corporate profits, based on a set of common rules.

4.9 The Committee welcomes the Commission's efforts to promote EU-developed IT tools within the OECD. Provided that they are endorsed by the OECD, the e-Forms that have been developed for the exchange of information on request and spontaneously in the field of direct taxation would be an extremely useful and effective tool in the fight against serious cases of tax fraud or tax evasion.

4.10 The Commission is proposing to develop a European taxpayers' code grouping together existing best practices in the Member States for enhancing trust and confidence between tax administrations and taxpayers, for ensuring greater transparency on the rights and obligations of taxpayers and encouraging a service-oriented approach. The Committee highlights the fact that simplifying tax systems would have the effect of reducing the administrative burden on taxpayers and companies, and instilling greater confidence amongst them. Member States could envisage reducing the administrative burden for compliant taxpayers, be they individuals or companies, and increasing it for the non-compliant. It is well known that companies engaged in aggressive tax planning are generally large multinationals.

4.11 The Commission recommends establishing one-stop-shops, to deliver all types of tax information to both residents and non-residents. The Committee agrees with this proposal and believes that such an approach would remove some of the obstacles facing taxpayers engaged in cross-border operations. Furthermore, by pooling the existing information in individual Member States' one-stop-shops, the Commission could build the European-level tax web portal along the lines of the e-Justice network.

4.12 The Commission proposes that in future EUROFISC be extended to direct taxation, building on the experience gained by this system in the area of VAT in combating fraud through the rapid exchange of information. The Committee believes that extending EUROFISC to direct taxation would complete the existing set of EU-level tools for combating tax fraud, tax evasion and aggressive tax planning.

4.13 The Committee supports the idea of aligning the definition of certain types of tax offences, including administrative and criminal sanctions for all types of taxes. Such an alignment would have the effect of discouraging companies from taking advantage of the Member State with the weakest response for conducting their operations. The Commission is proposing to explore the possibility of such an alignment.

4.14 In its June 2012 Communication, the Commission presented a series of possible measures that were not considered to be a priority by the Council. The Committee believes that ensuring direct access to national databases in the realm of direct taxation – one of the Commission's proposals – is one of the most powerful tools that could benefit Member States in combating tax fraud and tax evasion. The Commission also proposes exploring the possibility of having a single legal instrument for administrative cooperation for all taxes. The Committee endorses the Commission's proposals, which could increase the effectiveness of the fight against tax fraud and evasion.

Brussels, 17 April 2013. The President of the European Economic and Social Committee Henri MALOSSE

(1) COM(2012) 351 final, p. 2.

(2) COM(2012) 351 final.

(3) C(2012) 8805.

(4) C(2012) 8806.

(5) The Committee has repeatedly advocated measures to curb tax fraud and tax evasion: See OJ C 11, 15.1.2013, p. 31, OJ C 347, 18.12.2010, p. 73, OJ C 255, 22.9.2010, p. 61.

(6) "Impact of austerity on jobs in tax services and the fight against tax fraud and avoidance in EU-27 + Norway" Report commissioned by EPSU to Labour Research Department Lionel Fulton http://www.lrd.org.uk/, March 2013.

(7) COM(2008) 727 final - 2008/0215 (CNS); COM(2012) 428 final - 2012/0205 (CNS).

(8) C(2012) 8806 final.

(9) OJ C 229, 31.7.2012, p. 7.