Informal Meeting of Economic and Financial Affairs Ministers
27-28 April 2018

PRESIDENCY ISSUES NOTE
Working Session II: Towards a common agenda for modern tax
administrations: improving revenue collection and fighting tax fraud in
the single market
1. Collecting taxes in the Internal market today and challenges ahead
Tax administrations play a critical role in the implementation of tax laws. They are
responsible for the collection and enforcement of tax revenues, while having to
respect taxpayers’ rights and protect their data. This is a demanding role, due to the
rapidly changing national and international environments in which tax
administrations operate. Ongoing economic, social and technological developments
force tax administrations to adapt constantly for being able to carry out their core
business and secure tax revenues while resources are often being reduced.
Digitalisation changes the way tax administrations interact with taxpayers and the
manner in which data is collected (allowing for more real time information). This
calls for innovative approaches to keep tax collection systems up-to-date. Tax fraud,
evasion and aggressive tax planning with an international dimension increasingly
challenge tax administration practices. They clearly demonstrate that without
effective cooperation tax administrations will continue losing tax revenues. The “spillover” effect – i.e. how a Member State manages its tax system affects other Member
States and the EU budget – is today’s reality in the internal market.
Evidence shows that the EU faces a substantial tax gap: for VAT, it is estimated at
more than EUR 150 billion per year. This amounts to about 5 times the annual budget
of the 28 Member State tax authorities put together.1 The European Court of Auditors
and Europol have estimated that missing trader intra community (MTIC) fraud alone
could account for EUR 40 to 60 billion of annual VAT revenue losses. Tax avoidance
by companies cost EU countries EUR 50-70 billion in lost revenue a year. Cross1

Source of budget figures: OECD, Tax Administration 2017 - Comparative Information on OECD and other
Advanced and Emerging Economies, Annex A, Table A.49. 2015 data. No data available for Romania and
Slovakia.

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border recovery of taxes in some Member States hardly takes place; in these Member
States the percentage of average yearly recovered amounts ranges from 0.05% to
2.21%, compared to the average yearly amounts for which recovery assistance was
requested.
No Member State can address these challenges by itself. The way forward is for
Member States to cooperate so as to:
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

obtain more tax revenues due from cross-border activities and from taxpayers
having assets abroad;
deter and detect tax evasion, fraud and avoidance at an earlier stage;
increase chances that all taxpayers pay their fair share leading to better public
services for citizens and fair competition for businesses;
increase tax revenues providing policy-makers more margins to lower taxes
and share the tax burden more equally.

This is why enhancing administrative cooperation and effective exchange of
information among Member States is high on the EU tax policy agenda. In the field
of direct taxes, there exists already a robust and extensive framework for cooperation.
Every year, Member States exchange automatically with each other a vast amount of
tax data covering non-residents’ income from employment, directors' fees, and
certain life insurance products, pensions and ownership of and income from
immovable property, as well as information on non-residents’ financial accounts, tax
rulings and – as from mid-2018 – multinationals’ country-by-country reports. Using
this existing EU framework for administrative cooperation for direct taxes as well as
for VAT to its full potential and getting the proposal on administrative cooperation in
the field of VAT swiftly adopted are therefore crucial.
Unfortunately, the current level of administrative cooperation and exchange of
information between tax administrations is not as effective as it could and
should be. This is evidenced in the Commission reports of December 2017 2 on the
2

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT - Eighth
report under Article 12 of Regulation (EEC, Euratom) n° 1553/89 on VAT collection and control procedures,
Brussels, 18.12.2017 COM(2017) 780 final
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the
application of Council Directive (EU) 2011/16/EU on administrative cooperation in the field of direct taxation,
Brussels, 18.12.2017 COM(2017) 781 final - {SWD(2017) 462 final}
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the
operation of the arrangements established by Council Directive 2010/24/EU of 16 March 2010 concerning

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functioning of administrative cooperation and mutual assistance in taxation. Yet, a
sustained level of cooperation is a matter of common interest, both for the EU and for
the Member States. This is all the more important in times where expectations from
European citizens and businesses are high for delivering on fair taxation and tackling
tax fraud and evasion in a digitalised economy.
This being said, reaping the full benefits of sincere cooperation requires that we
collectively address several obstacles, the most important being the insufficient level
of trust between Member States and their administrations, that are mainly driven by
national approaches. In a common market, it is necessary that tax administrations
are confident about the ability of other Member States' administrations to collect and
enforce taxes on their behalf, and can rely on the information and support provided
by these administrations. Addressing this challenge is key to allow Member States to
safeguard and even collect more revenue.
2. Possible ways forward
Two aspects deserve attention when discussing administrative cooperation in tax
matters.
First, the instruments for administrative cooperation in the EU. Here, we
have seen major progress in rationalising tax collection on cross-border transactions
(e.g. VAT Mini One Stop Shop) and creating the channels for exchanging information
between authorities, both for direct and indirect taxation. However, we are still
lacking the means to collectively exploit the massive amount of data exchanged in
order to collect and enforce taxes and tackle cross-border fraud and evasion.
Generalising joint audits by teams of different nationalities, a more systematic
interaction between tax, customs and other governmental and law enforcement
bodies, reinforcing EUROFISC whose capacity as an informal structure has reached
its limit, and extending it to new domains, are all areas where tax administrations
would see merits in investing.
Second, cooperation requires that national administrations have the capacity to
sustain it and benefit from its advantages. Exchanging information or detecting fraud
mutual assistance for the recovery of claims relating to taxes, duties and other measures, Brussels, 18.12.2017
COM(2017) 778 final - {SWD(2017) 461 final}

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and evasion requires qualified staff and modern IT tools, specialised knowledge
in data and risk analysis and an ability to work with foreign officials on a daily basis.
Moreover, the way the individual administrations function, are equipped and
interact with taxpayers have a direct impact on the quality and results of the
cooperation, and on tax revenue as a whole.
Boosting staff performance and skills, managing the digitalisation of tax
administrations, enhancing IT collaboration amongst national tax administrations
to share knowledge or design together IT systems to reduce costs, increasing the
resources allocated to common instruments such as EUROFISC are only a few
topics for possible discussion.
The dialogue of Heads of Tax Administrations that Greece and the Commission are
organising in June provides an opportunity for a first strategic discussion on these
topics.
3. Questions for discussion:
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What are your views on the state of our administrative cooperation as described
above? Do you agree that there is a need to increase the level of trust between our
administrations in order to tackle our common challenges? If so, how could this
be achieved?

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Do you agree that it is now opportune for the Member States to explore ways to
make a qualitative step forward in administrative cooperation and capacity so as
to deliver results for the benefit of all?

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What should be the focus of our Heads of Tax Administrations when exploring a
common agenda in the areas of administrative cooperation and tax
administration?

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