COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on concrete ways to reinforce the fight against tax fraud and tax evasion including in relation to third countries
Date: 2012-06-27
Institutions: European Commission
Subjects: intergovernmental cooperation (EU), public finance, tax avoidance, tax evasion

EUROPEAN COMMISSION 

Brussels, 27.6.2012  
COM(2012) 351 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

on concrete ways to reinforce the fight against tax fraud and tax evasion including in 
relation to third countries 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

on concrete ways to reinforce the fight against tax fraud and tax evasion including in 
relation to third countries 

1. 

INTRODUCTION 

Tax fraud and tax evasion are limiting the capacity of Member States to raise revenues and to 
carry out their economic policy. In times of fiscal consolidation, when many Member States 
need to cut expenditure and increase revenues, the conduct of fiscal policy is made even more 
difficult by tax fraud and evasion1. Estimates of the size of the shadow economy in the EU of 
nearly one fifth of GDP, gives a first indication of the extent of the problem.  

Figure 1: Estimate of the size of the shadow economy in 2011 (% of GDP)2 

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Tax fraud is a form of deliberate evasion of tax which is generally punishable under criminal law. The 
term  includes  situations  in  which  deliberately  false  statements  are  submitted  or  fake  documents  are 
produced.  Tax  evasion  generally  comprises  illegal  arrangements  where  liability  to  tax  is  hidden  or 
ignored,  i.e.  the  taxpayer  pays  less  tax  than  he  is  legally  obligated  to  pay  by  hiding  income  or 
information from the tax authorities. 
Source: Schneider, F. (2012), "Size and development of the Shadow Economy from 2003 to 2012: some 
new  facts".  The  figures  contained  in  this  study  are  necessarily  based  on  assumptions  and  should 
therefore be considered cautiously as their certainty is not demonstrated. 

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Also, tens of billions of euro remain offshore, often unreported and untaxed, reducing national 
tax  revenues.  Given  the  order  of  magnitude,  stepping  up  the  fight  against  tax  fraud  and 
evasion is not only an issue of revenue, but also of fairness. It is important to remember that 
the  vast  majority  of  EU  taxpayers  generally  seek  to  comply  with  their  tax  obligations. 
Particularly  in  these  difficult  economic  times,  these  honest  taxpayers  should  not  suffer 
additional  tax  increases  to  make  up  for  revenue  losses  incurred  due  to  tax  fraudsters  and 
evaders.  The  focus  should  therefore  be  on  tackling  fraud  and  evasion.  The  present 
communication  does  not  address  undeclared  work  as  such,  although  it  may  occur  in 
conjunction with the evasion of indirect taxes; the approach to tackle undeclared work was set 
out  in  COM  (2007)  628.  The  benefits  from  addressing  these  problems  can  be  significant. 
Estimates  show  that  recent  voluntary  compliance  initiatives  as  a  result  of  a  G20  initiative 
alone raised 10 billion euro over 2 years for the EU Member States concerned3. By reducing 
fraud and evasion Member States can increase tax revenues which will also give them more 
leeway to restructure their tax systems in a way that better promotes growth as outlined in the 
2012 Annual Growth Survey4. 

In recent years, the challenge posed by tax fraud and evasion has increased considerably. The 
globalisation  of  the  economy,  technological  developments,  the  internationalisation  of  fraud, 
and the resulting interdependence of Member States' tax authorities reveal the limits of strictly 
national approaches and reinforce the need for joint action. 

On  2nd  March  2012,  the  European  Council  therefore  called  on  the  Council  and  the 
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.  In  April  the 
European Parliament adopted a resolution echoing the urgent need for action in this area. 

An increase in efficiency and effectiveness of tax collection is, thus, desperately needed. The 
problems  posed  by  tax  fraud  and  evasion  must  be  tackled  at  three  levels:  firstly,  the  tax 
collection within each Member State must be improved. Secondly, there is a need to enhance 
cross-border cooperation between Member States' tax administrations. Thirdly, the EU needs 
to have a clear and coherent policy vis-à-vis third countries in order to promote its standards 
at international level and ensure a level playing field. Co-operating at EU level has an added 
value in each of these three fields. 

This  Communication  outlines  how  tax  compliance  can  be  improved  and  fraud  and  evasion 
reduced, through a better use of existing instruments and the adoption of pending Commission 
proposals.  It  also  identifies  areas  where  further  legislative  action  or  coordination  would 
benefit the EU and Member States. Such action should not only target fraudulent activity and 
tax  evasion  but  also  aggressive  tax  planning.  Aggressive  tax  planning  includes  the  use  of 
artificial operations or structures and the exploitation of mismatches between tax systems with 
the effect of undermining Member States' tax rules and exacerbating the loss of tax revenues.  

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OECD: The Era of Bank Secrecy is Over; the G20/OECD process is delivering results, 26 October 2011 
Commission  Communication  on  the  Annual  Growth  Survey  2012  –  COM(2011)  815  final  of  25 
November 2011 – 17229/11; Council conclusions of 16 February 2012 (6353/1/12 Rev.1) 

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2. 

MORE EFFECTIVE TAX COLLECTION WITHIN MEMBER STATES 

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.  

However,  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 importance of tax policy for fiscal consolidation and growth has been clearly recognised 
in  the  process  of  the  European  Semester5  and  the  Euro  Plus  Pact6.  This  has  also  been 
emphasised by the G20. Fair and ambitious fiscal consolidation is impaired by inefficient and 
ineffective tax collection.  

The broad analysis carried out by the Commission in  the context of  the European Semester 
and translated into recommendations both to individual Member States and the Eurozone has 
revealed that for many Member States there are real and substantial problems of tax evasion 
sometimes  linked  to  poor  administrative  capacity.  Country-specific  recommendations 
regarding these issues were addressed to 10 Member States7 . 

Reinforcing  the  fight  against  fraud  and  evasion  as  specified  in  some  Country  Specific 
recommendations  will  increase  tax  revenues  and  therefore  support  the  necessary  structural 
reforms.  It  may  also  help  Member  States  to  implement  other  growth  friendly  tax  related 
recommendations, including reducing tax compliance costs for businesses. 

Data  on  the  VAT  revenue  ratio  in  Member  States  illustrate  the  extent  of  under-collected 
revenue. While VAT reduced rates and exemptions offer a partial explanation for this gap, it 
is also due to tax evasion that Member States collect only part of the theoretical VAT revenue. 

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Commission  Communication  on  the  Annual  Growth  Survey  2012  –  COM(2011)  815  final  of  25 
November 2011 – 17229/11; Council conclusions of 16 February 2012 (6353/1/12 Rev.1) 
Council conclusions of 16 February 2012 (6404/1/12 Rev.1) 
Country-specific  recommendations  on  these  issues  have  been  addressed  to  Bulgaria,  Cyprus,  Czech 
Republic,  Estonia,  Hungary,  Italy,  Lithuania,  Malta,  Poland,  Slovakia.  Note  that  Member  States 
currently  benefiting  from  financial  assistance  under  the  European  Financial  Stability  Facility  (EFSF), 
the European Financial Stabilisation Mechanism (EFSM) or under the provisions of Article 143 of the 
Treaty  are  recommended  to  implement  the  measures  laid  down  in  their  respective  Implementing 
Decisions  and  further  specified  in  their  Memorandums  of  Understanding  and  possible  subsequent 
supplements. This concerns Greece, Ireland, Portugal and Romania 

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Figure 2: Actual VAT revenue in 2010 (% of theoretical revenue at standard rates)8 

The  problems  which  tax  administrations  face  are  also  evidenced  by  the  substantial 
administrative costs related to tax collection. 

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Figure  3:  Administrative  costs/net  revenue  collections  in  2009  (costs  in  EUR  per  100 
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In  this  context,  specific  technical  assistance  programmes  are  already  available10  and  the 
Commission invites Member States to rely on them when designing programmes to improve 
the  functioning  of  their  tax  administrations,  enhancing  administrative  capacity  and  tax 
compliance.  For  the  future,  there  is  a  need  for  an  effective  successor  to  the  FISCALIS 
programme, to improve the proper functioning of the taxation systems in the internal market.  

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Source: European Commission; “Taxation trends in the European Union”, 2012 edition. 
Source:  OECD.  The  table  gives  data  for  23  Member  States.  Data  for  CY,  EL,  LT  and  SK  are  not 
available or under validation.  
Decision  N°  1482/2007/EC  of  the  European  Parliament  and  of  the  Council  of  11  December  2007 
establishing  a  Community  programme  to  improve  the  operation  of  taxation  systems  in  the  internal 
market (Fiscalis 2013) and repealing Decision N° 2235/2002/EC (O.J. L 330 of 15.12.2007, P. 1) 

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The Commission also believes it important to continue to assist Member States in identifying 
inherent weaknesses in their tax administrations and assist them in tackling specific problems, 
ensure  effective  exchange  of  best  practices  and  also  by  developing  benchmarking 
methodologies to assess the core functions of tax collection and controls. 

3. 

BETTER CROSS-BORDER COOPERATION BETWEEN EU TAX ADMINISTRATIONS 

The  European  integration  process  has  led  to  closer  integration  of  the  economies  of  all 
Member States with high volumes of cross-border transactions and the rolling back of cross-
border transaction costs and risks. This, in turn has posed additional challenges for national 
tax administrations in terms of co-operation and exchange of information. 

3.1. 

Best use of existing legal instruments 

Cross-border  cooperation  between  Member  States'  tax  administrations  can  only  be  truly 
effective if there is mutual trust and solidarity between Member States. Only when Member 
States are prepared to assist each other can they expect to reap the full benefits of cooperation. 
The experience of the Savings Directive11 demonstrates the benefits of such cooperation. On 
average  more  than  4  million  records  are  sent  each  year  from  source  countries  to  residence 
countries representing on average 20 billion euro of savings income. 

A series of important legal instruments for administrative cooperation have been adopted in 
recent years for both direct and indirect taxes12. However, their effective and comprehensive 
use by Member States is still to be attained.  

The  Commission  is  assisting  Member  States  in  their  efforts  by  providing  them  with  the 
practical  tools  and  instruments  they  need  to  engage  in  effective  administrative  cooperation. 
The Commission  has already developed electronic  formats  for  exchange  of  information  and 
secure  channels  of  communication  will  need  to  be  continuously  updated  and  extended  to 
cover other types of income. The Commission will closely monitor the correct application by 
all Member States of the commonly agreed rules and procedures.  

3.2. 

Further concrete ways to enhance cooperation 

3.2.1. 

Strengthening existing tools 

On  13  November  2008,  the  Commission  adopted  an  amending  proposal  to  the  Savings 
Directive with a view to closing existing loopholes and better preventing tax evasion. The two 
major  loopholes  identified  were  the  use  of  untaxed  intermediary  structures  to  obscure  the 
actual beneficial ownership and the use of innovative financial instruments and other products 
(i.e. structured retail products and insurance wrappers) not covered by the Directive.  

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Council  Directive  2003/48/EC  of  3  June  2003  on  taxation  of  savings  income  in  the  form  of  interest 
payments (OL L 157 of 26.6.2003, p.38) 
Council  Directive  2010/24/EU  of  16  March  concerning  mutual  assistance  for  the  recovery  of  claims 
relating  to  taxes,  duties  and  other  measures  (OJ  L  84  of  31.3.2010,  P.  1);  Council  Regulation  N° 
904/2010/EU of 7 October 2010 on administrative cooperation and combating fraud in the field of value 
added  tax  (OJ  L  268  of  12.10.2010,  P.  1);  Council  Directive  2011/16/EU  of  15  February  2011  on 
administrative  cooperation  in  the  field  of  taxation  and  repealing  Directive  77/799/EEC  (OJ  L  64  of 
11.3.2011, P.1); Council Regulation N° 389/2012/EU of 2 May 2012 on administrative cooperation in 
the field of excise duties and repealing Regulation (EC) N° 2073/2004 (OJ L 121 of 8.5.2012, P. 1) 

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The second review of the Savings Directive confirmed the widespread use of untaxed offshore 
structures interposed between the payer and the ultimate beneficiary in order to obscure the 
actual  beneficial  ownership:  35%  of  the  non-bank  deposits  in  Member  States  (65%  for 
deposits  in  Savings  Agreements  countries)  are  held  by  such  structures  located  in  offshore 
jurisdictions. The review also revealed that the market for structured financial products (EUR 
767,3 billion current outstanding amount of sales) has been increasing annually at more than 
30% on average in recent years. The content of the Amending Proposal is essentially agreed 
by Member States and it is vital that these changes are now adopted without delay. The EU 
must  demonstrate  its  ability  to  address  these  problems  which  will  also  put  it  in  a  stronger 
position to seek equivalent improvements from other countries.  

3.2.2.  Enhancing exchange of information 

Exchange of information gives tax administrations invaluable information on income received 
and  assets  owned  by  their  taxpayers  that  can  also  be  particularly  useful  for  risk  analysis 
purposes  and  that  can  serve  as  an  incentive  to  voluntary  compliance.  The  use  of  automatic 
exchange of information should be promoted where it is the most useful. The Commission has 
developed computerised formats for savings income and is currently developing new formats 
for  income  covered  by  Directive  2011/16  in  order  to  implement  secure  and  enhanced 
automatic exchange of information within the EU. The EU has a key role to play in promoting 
its  standard  of  automatic  exchange  of  information  so  as  to  give  support  to  developing 
international standards of transparency and exchange of information in tax matters.  

To ensure that information exchanged can be used immediately, it is essential to improve the 
identification of taxpayers. The experience of Member States shows that information can be 
far better matched when a Tax Identification Number (TIN) is communicated and used as a 
unique identifier. The Commission will therefore carry out an impact assessment with a view 
to proposing, where appropriate, a European TIN assigned to each taxpayer engaged in cross-
border activity. Giving Member States' tax administrations direct access to relevant areas of 
each other's national data bases together with an extension of the scope of automated access in 
the VAT area should also be envisaged. 

3.2.3.  Tackling trends and schemes of tax fraud and tax evasion  

It  is  essential  to  develop  and  share  tools,  systems  and  working  methods  that  identify  trends 
and schemes involving tax fraud and evasion, as well as individual cross-border fraudsters. To 
meet this objective, the Commission will pursue work on rapidly extending EUROFISC and 
its  Early  Warning  System  to  the  direct  tax  area  and  on  enhancing  Risk  Management 
techniques. The Commission will also propose a Quick Reaction Mechanism on VAT fraud 
cases.  

The Commission also aims to develop a strategy for tackling aggressive tax planning. It will 
examine  ways  to  improve  access  to  information  on  money  flows,  making  it  easier  to  trace 
significant payments made through off-shore bank accounts. Consideration should be given to 
the  creation,  within  the  EU,  of  teams  of  auditors  dedicated  to  cross-border  tax  fraud.  More 
regular joint audits should be promoted through extensive use of the existing legal provisions 

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on simultaneous controls and the presence of officials of a Member State in another Member 
State13. 

3.2.4.  Ensuring high levels of taxpayers' compliance 

Improving taxpayer compliance14 is an important element of an effective strategy to combat 
tax  fraud  and  evasion.  To  enhance  compliance  both  in  internal  and  cross-border  situations 
taxpayers  must  be  better  informed  about  EU  and  Member  States'  tax  rules.  Tools  such  as  a 
single TAX WEBPORTAL for all taxes and taxpayers and a one-stop shop for non-resident 
taxpayers in Member States would make it easier for the taxpayers concerned to meet their tax 
obligations.  In  the  field  of  VAT  the  Commission  is  setting  up  a  dialogue  platform,  the  so-
called "EU VAT Forum", involving Tax Authorities and business representatives. This Forum 
will  create  the  conditions  for  a  smoother  functioning  of  the  present  VAT  system  aimed  at 
enhancing voluntary compliance.  

Taxpayers'  compliance  could  be  encouraged  in  various  ways.  One  way  to  increase  tax 
compliance is to decrease its costs and complexity for taxpayers. The administrative costs for 
business  of  complying  with  the  tax  code  vary  considerably  between  the  Member  States.  As 
the  time  and  costs  fall  disproportionally  on  small  enterprises,  decreasing  administrative 
complexity and increasing the use of online tools would help tax collection and increase the 
competitiveness of many European firms. 

Tax administrations should also consider complementing their control approach with a service 
approach.  They  could  also  develop  motivational  incentives  in  the  form  of  voluntary 
disclosures programmes and encourage their taxpayers to correct their errors spontaneously. 
In the spirit of Corporate Social  Responsibility15, the Commission will develop  a taxpayers' 
charter.  

In a globalised world where non-compliant taxpayers can weigh up their risks of being caught 
and  punished  in  different  jurisdictions,  it  is  worth  considering  common  minimum  rules 
against tax fraudsters and evaders with regard to certain types of tax offences and including 
administrative  or  criminal  sanctions.  The  fight  against  fraud  is  one  of  the  priority  sectors 
identified  in  the  Commission  Communication  “Towards  an  EU  Criminal  Policy”16.  The 
Commission will propose rules to strengthen the fight against fraud affecting the EU financial 
interest by means of criminal law. 

3.2.5.  Enhancing tax governance  

A  taxpayer  committing  VAT  fraud  will  often  also  evade  corporate  or  income  tax  and  vice 
versa.  It  is  therefore  essential  to  aim  for  a  more  joined-up  approach  between  direct  and 
indirect taxes. Without ignoring the specificities of the different taxes, inspiration should be 
drawn from the different mechanisms and working methods in the respective areas to enhance 
the efficiency of the fight against tax fraud across all domains. 

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Article 7 of Directive N° 2010/24/EU; Articles 28, 29 and 30 of Regulation N° 904/2010/EU; Articles 
11 and 12 of Directive N° 2011/16/EU; Articles 12 and 13 of Regulation N° 389/2012/EU 
Tax compliance is the degree to which a taxpayer complies (or fails to comply) with the tax rules of his 
country, for example by declaring income, filing a return, and paying the tax due in a timely manner. 
Communication on a renewed EU strategy 2011-14 for Corporate Social Responsibility – COM (2011) 
681 final of 25.10.2011 
COM (2011) 573 final of 20.9.2011 

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Greater convergence of tools and systems in the direct and indirect taxation areas should be 
promoted, e.g. by providing the same layout for the common parts of forms. In the medium 
term, the Commission will consider a single legal  instrument for administrative cooperation 
for  all  types  of  taxes  to  ensure  full  integration  and  consistency  of  the  mechanisms  for 
cooperation.  

As tax fraud is often linked with other forms of criminal activity it is important to strengthen 
cooperation  between  tax  administrations  and  other  authorities,  in  particular  anti-money 
laundering, social security and judicial authorities, both at national and international level. At 
national  level,  it  is  necessary  to  ensure  a  satisfactory  level  of  cooperation  between  all  law 
enforcement services concerning not only tax fraud and evasion but also tax related crimes17 
18.  Cooperation  concerning  tax  related  crimes  can  also  be  ensured  through  Europol19.  The 
Commission can facilitate coordination in the areas concerned through joint use of its existing 
programmes and their successors. 

4. 

COHERENT POLICY VIS-À-VIS THIRD COUNTRIES 

The  EU  has  a  clear  and  coherent  policy  on  good  governance  principles  in  the  tax  area 
(transparency, exchange of information and fair tax competition) but needs to ensure that this 
is promoted in a more consistent manner, not just within the EU but with third countries as 
well.  

4.1. 

Ensuring the application of equivalent standards by third countries 

The effective and smooth application of the enhanced measures on taxation of savings at EU 
level would benefit greatly from reinforcing the existing equivalent measures with important 
partners of the EU.  

Well-known  and  marketed  financial  centres  with  strong  banking  secrecy  laws  continue  to 
dominate  the  international  cross-border  deposits  market.  Cayman  Islands  and  Switzerland 
alone,  with  a  total  of  USD  1352  billion  deposits  by  non-banks  represent  almost  20%  of  all 
worldwide deposits by non-banks. 

Figure  4  Trends  in  foreign  non  bank  deposits  with  banks  in  major  selected  non  EU 
financial centres (millions of US dollars) 20 

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Money  laundering,  terrorist  financing  and  criminal  schemes  relating  to  Missing  Trader  Intra 
Community Frauds (MTIC), including VAT carousel fraud and criminal investment in the EU Emission 
Trading Scheme. 
The  revised  FATF  standards  adopted  in  February  2012  added  tax  crime  as  a  predicate  offence  to  the 
money laundering and terrorist financing offence 
Europol allows identifying the organisers of tax related crimes and dismantling criminal networks. 
Source: BIS public aggregate data 

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Accordingly,  the  Council  should  swiftly  give  a  mandate  to  the  Commission  and  provide 
support  to  it  in  negotiating  amendments  to  the  existing  EU  savings  agreements  with 
Switzerland, Andorra, Monaco, Liechtenstein and San Marino. Aligning these agreements on 
the new standards enforced within the EU, and resulting from the amendments to be made to 
the  Savings  Directive,  should  allow  further  progress  in  the  development  of  equivalent 
measures  with  these  jurisdictions.  A  similar  step  should  be  taken  for  updating  the  savings 
agreements with the relevant dependent or associated territories. Attention should be given to 
international developments concerning financial centres around the world. 

All of these measures taken together would greatly strengthen the capacity of Member States 
to  collect  taxes  on  investment  income  of  their  respective  residents.  Recent  bilateral 
agreements  of  the  UK  and  Germany  with  Switzerland  give  an  indication  of  untaxed  assets 
held in Switzerland. These resulted in envisaged upfront payments of CHF 500 million for the 
UK  and  CHF  2  billion  for  DE.  The  actual  regularisation  payments  are  expected  to  surpass 
CHF1.3 billion for the UK and CHF 4 billion for DE. The UK estimates a total yield of up to 
GBP 4-7 billion from the regularisation payment. This estimation gives an indication of the 
magnitude of the problem for the EU as a whole.  

The  findings  of  the  second  review  of  the  Savings  Directive  show  that  enhancement  of  the 
existing  agreements  in  line  with  the  proposed  amendments  to  the  Directive  would  make  it 
possible  to  include  money  held  in  fiduciary  accounts.  These  are  accounts  holding  funds  re-
deposited  by  the  investor's  bank  in  its  own  name  in  another  jurisdiction.  In  the  case  of 
Switzerland,  the  funds  held  on  such  fiduciary  accounts  represent  4.5  times  the  money  held 
directly by such investors. 

EN 

10 

   EN 

 
 
4.2. 

Promoting EU standards at international level 

It is important to ensure better coherence between EU policies in general, so that EU partners 
under  international  trade  and  cooperation  agreements  will  commit  to  good  governance 
principles in the tax area in line with the 2008 Council conclusions21. These principles should 
continue  to  be  included  in  all  relevant  EU-level  agreements  with  third  countries  as  well  as 
the  2009 
promoted 
Communication  "Promoting  Good  Governance 
the  2010 
Communication  "Tax  and  Development  –  Cooperating  with  Developing  Countries  on 
Promoting Good Governance in Tax Matters"23.  

in 
in  Tax  Matters"22  and 

through  development  cooperation 

incentives  as  outlined 

The Council should also swiftly approve the draft EU/Liechtenstein agreement on anti-fraud 
and  tax  cooperation  matters  and  should  give  a  mandate  to  the  Commission  to  open  similar 
negotiations with Andorra, Monaco, San Marino and Switzerland. In addition, possibilities to 
conclude multilateral agreements for administrative cooperation in the field of indirect taxes 
with  third  countries  should  be  explored  as  well  as  the  participation  of  third  countries  in 
simultaneous controls. 

Recent  developments  at  international  level  as  regards  the  US  Foreign  Account  Tax 
Compliance  Act  (FATCA)  open  new  perspectives  for  strengthening  automatic  information 
exchange between Member States and third countries thus improving transparency at a global 
level.  

Finally, cooperation with other international organisations should be improved with a view to 
promoting common interests and avoiding overlaps and creating synergies for the benefit of 
financial institutions and tax administrations24. Member States should be able to use a single 
set of tools and instruments both within the EU and in their relations with third countries. To 
this  end,  the  Commission  is  promoting  EU  advanced  practical  tools  (including  electronic 
formats) with a view to ensuring their use by non-EU countries particularly in relations with 
EU Member States. 

4.3. 

The way forward to deal with tax havens and aggressive tax planning 

Tax  havens,  also  sometimes  referred  to  as  'non-cooperative  jurisdictions'  are  commonly 
understood  to  be  jurisdictions  which  are  able  to  finance  their  public  services  with  no  or 
nominal  income  taxes  and  offer  themselves  as  places  to  be  used  by  non-residents  to  escape 
taxation  in  their  country  of  residence.  The  OECD  has  identified  three  typical  'confirming' 
features of a tax haven: (i) lack of effective exchange of information, (ii) lack of transparency, 
and (iii) no requirement for substantial activities. In addition they often offer preferential tax 
treatment  to  non-residents  in  order  to  attract  investment  from  other  countries.  Tax  havens 
therefore compete unfairly and make it difficult for 'non' tax havens to collect a fair amount of 
taxation from their residents.  

21 
22 
23 
24 

Conclusions of the ECOFIN Council meeting on 14 May 2008 (Press Release 8850/08) 
COM (2009) 201 final of 28.4.2009 
COM (2010) 163 final of 21.4.2010 
The  EU  participates  actively  in  other  international  forums  such  as  the  OECD,  the  International 
Organisation  for  Tax  Administration  (IOTA),  the  Inter  American  Center  of  Tax  Administrations 
(CIAT),  the  International  Tax  Dialogue  (ITD),  the  International  Tax  Compact  (ITC),  and  the  African 
Tax Administration Forum (ATAF) 

EN 

11 

   EN 

 
                                                 
Intensive work is on-going to eliminate many of the harmful features of tax havens. Important 
progress has been made through the almost universal adoption of strong rules on information 
exchange  on  request  and  transparency  following  the  successful  re-launching  of  the  OECD 
Global  Forum  on  Transparency  and  Exchange  of  Information  for  Tax  Purposes.  However, 
although  many  former  'tax  havens'  have  committed  to  these  principles  whether  these 
commitments have been put into practice is only just being reviewed. Furthermore the Forum 
does  not  consider  the  question  of  'fair  tax  competition',  a  principle  which  the  EU  upholds 
internally via the Code of Conduct for business taxation25. Promoting such a concept to third 
countries is relevant both for the OECD and the EU.  

Tax  Havens  continue  to  potentially  damage  the  interests  of  Member  States.  The  burden  of 
additional  compliance  costs  due  to  uncoordinated  actions  by  Member  States  to  protect  their 
tax  bases  falls  on  all  taxpayers.  Similarly  when  tax  revenues  are  lost  as  tax  base  has  been 
diverted  to  tax  havens  then  all  tax  payers  suffer  when  tax  rates  are  raised  to  make  up  for 
eroding tax bases.  

Over and above specific issues linked to tax havens, the Commission's aim is to contribute to 
a  fair  and  sound  tax  environment  in  the  EU  (for  Member  States,  taxpayers,  and  investors) 
where  erosion  of  tax  bases  is  efficiently  tackled  (within  the  EU  and  in  relation  to  third 
countries).  It  is  important  that  the  ensuing  advantages  are  not  undermined  through  action 
taken  by  third  countries.  Possible  policy  responses  to  achieve  this  are  currently  being 
evaluated with the aim of a presenting an action plan towards the end of this year. The aim is 
to establish a set of measures, procedures and tools for coordinated action. This could include 
a  mixture  of  defensive  measures  or  sanctions  against  countries  which  practice  unfair  tax 
competition and incentives for those countries to cease such practices. The focus will be on 
coordinated  measures.  The  Communication  will  also  address  issues  of  aggressive  tax 
planning. 

5. 

CONCLUSION  

There  is  a  clear  political  will,  as  expressed  by  heads  of  state  and  government  on  2  March 
2012,  to  prioritise  concrete  actions  to  fight  fraud  and  tax  evasion.  This  now  needs  to  be 
translated into concrete action. This Communication provides a first response to the European 
Council's  request  by  outlining  the  different  levels  at  which  action  is  needed  and  by  giving 
broad orientations on the issues which merit further consideration. The Commission hopes to 
advance these discussions both at Council level and through the Tax Policy Group26. A swift 
adoption of the revision of the Savings directive, and an immediate agreement on giving the 
negotiating mandate to the Commission, would be a first step in this direction. 

The  European  semester  process  provides  an  ideal  opportunity  to  examine  tax  issues  in  the 
overall context of the economic development of the EU and to integrate tax policy in the push 
for growth. The Commission will continue its effort to support Member States' consolidation 
and pro-growth strategies. 

25 

26 

Conclusions of the ECOFIN Council meeting on 1 December 1997 concerning taxation policy (OJ C 2 
of 6.1.98, P.1) 
The  Tax  Policy  Group  is  a  permanent  high-level  group,  established  in  1996,  for  strategic  and 
comprehensive  discussion  on  tax  policy  issues  at  a  European  level  chaired  by  the  Commissioner 
responsible for taxation matters  

EN 

12 

   EN 

 
                                                 
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  cooperation  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.  

EN 

13 

   EN