EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud
"EU-US cooperation in tax and customs"
US Chamber of Commerce
Washington, 16 December 2010
Good morning, ladies and gentlemen,
I have the impression that I've arrived in Washington in the "tax season" – taxes have been at the top of the political agenda recently. Whether we like it or not, the topic is likely to reappear regularly in the headlines, and not only here in the US.
At the European Commission, my responsibilities include European policy on taxation and customs.
For my visit here, I have set out to advance on three policy objectives. On all three of them, I see potential for EU/US cooperation and coordination.
First, the EU has a clear agenda towards 2020: We aim to create growth and jobs, by safeguarding our competitiveness and stimulating trade. The US government has similar ambitions. For this purpose, we are determined to fight against red tape, administrative duplication and poorly coordinated regulation and enforcement.
Second, we have to address security threats. In doing so, we have to keep the first objective in mind. Security requirements have to go hand in hand with a smoother flow of legitimate goods.
Third, as we exit the financial and economic crisis, we have to react to lessons learned and take both corrective and preventive measures to ensure sustainability of our public finances.
The transatlantic relationship is key to progress on all of these objectives.
We are considering a range of customs and tax measures in pursuit of the three objectives. Let me outline some of them, and encourage you to reflect on how we – the EU and the US - can reinforce our partnership in this context.
Let me first refer to better business environment
On the tax side, the challenge today is to ensure successful fiscal consolidation whilst maintaining and promoting a competitive environment for business. In the EU, much work is being done to meet this goal and I would like to mention just a few initiatives which will help not only EU businesses but also US companies active in Europe.
Currently within the EU there are 27 different corporate tax systems: this creates a highly fragmented landscape for business and generates significant costs.
I intend to propose to the EU Member States to establish a system of common rules for computing the tax base of companies with a taxable presence in the Union, the Common Consolidated Corporate Tax Base.
The possibility to consolidate the corporate tax base across the Union will minimise compliance costs for companies and facilitate cross border commerce. It will allow for cross border loss offset for group of companies, a major step forward for business. It will also provide a uniform basis for the treatment of transfer pricing.
I firmly believe that the CCCTB will be good for the EU and good for US companies with operations located in Europe. They will benefit, once they opt for this scheme, from a single point of contact in tax administrations for all EU corporate tax matters.
Joint transfer pricing forum
However, until we have the CCCTB, transfer pricing remains an obstacle to doing business in the EU. As you may know, some years ago, the Commission set up an EU Joint Transfer Pricing Forum (JTPF).
This dialogue between businesses and tax administrations has achieved very positive outcomes so far. I shall be proposing that the JTPF mandate, which expires next spring, be renewed to contribute even further to improving the business environment.
Our 2020 growth strategy also encourages innovation and creativity. Legal predictability helps, but we also need effective enforcement of IPR. In this regard I should like to pay tribute to the active collaboration of this Chamber. Counterfeiting and piracy threatens the creativity and innovation your members strive for.
Customs provide one important line of defence against this difficult challenge. Events organised by the chamber here and in Brussels are useful for discussing how best to tackle this growing phenomenon. The EU-US Action Strategy for the Enforcement of Intellectual Property Rights aims at promoting strong and effective enforcement in third countries, and fostering public private partnerships to protect intellectual property. This strategy should continue to be translated into policy development and joint operational action.
Second, let me say a few words on secure trade facilitation
I know that many of you here today share my concern about the security of the supply chain.
Let me start by assuring you of my support for open trade policies - international trade remains a major driver of economic recovery. Legitimate trade can, and should, cross our respective borders quickly and efficiently. At the same time, we all recognise that there can be no complacency about security.
In this context, I fully share Commissioner Bersin's view that securing the supply chain must go hand in hand with more – not less - trade facilitation.
A comprehensive and multilayered risk management is clearly preferable to a "security-only" approach, such as, for example, the proposed 100 % scanning. Our views on that are well known. I welcome the active engagement in the debate of this Chamber along the same lines.
I am also glad that more authoritative voices in the United States – notably those of Ms. Napolitano and Mr. Bersin – have taken the risk management approach to heart. We now have a very good basis for a positive agenda for EU/US cooperation on supply chain security. Our partnership with the private sector – the companies who trade – is indispensible here.
When security threats appear and reveal gaps in our systems, we have to take action. This was the case at the end of October when concealed explosives were dispatched from Yemen. Clearly, all actors have a joint responsibility in making sure that customs and other authorities have the right information, at the right time and of a reliable quality in order to carry out an effective risk assessment and take actions.
On both sides of the Atlantic we strive to improve the efficiency of controls, eliminate overlaps and pool resources. In this context, Mutual Recognition of trade partnerships will allow our respective customs authorities to provide faster clearance to those companies which have fully committed to investing in supply chain security.
Third, and finally, let's put things right after the crisis
As shown in the recent debate also here in the US, governments are challenged to design ambitious fiscal consolidation programmes. Beyond the reduction of public expenditure, they also need to ensure that the revenue due is collected properly and to look for new sources of financing.
In this context, the Commission supports further exploration of a Financial Transactions Tax at global level and will promote an agreement on this with the most relevant partners.
There is a wide perception that the financial sector bears a major responsibility for the occurrence and the extent of the crisis. The financial sector is also seen as having been relatively profitable in the last two decades. There is a desire to ensure that it makes today a fairer and more substantial contribution to public finances.
On this basis it is clear that additional or increased taxes on the financial sector are legitimate and could help with increased efficiency and stability of financial markets.
Finally, let me say a few words on the absolute need to maintain our efforts in fighting tax evasion, fraud and harmful tax competition. A key element of this strategy is the promotion of the principles of good governance in the tax area – transparency of tax systems, exchange of information between tax administrations and fair tax competition.
I know that the US is committed to this goal. I am convinced that if we continue to join our efforts and fight non cooperative jurisdictions in the tax area, we will contribute to creating a level playing field for economic relations and investment at international level. This would notably provide more stability and legal predictability for EU and US companies operating and investing abroad.
In relation to the objectives of good governance, allow me to say a few words on the US Foreign Account Tax Compliance Act or FATCA, as it is commonly known.
I strongly support the objective of clamping down on tax evasion by US citizens. I will make this clear to my interlocutors here in Washington.
However, we received complaints that the FATCA legislation will introduce a very onerous new set of reporting requirements for EU financial entities which do business in the US or have US-resident investors on their books.
I am very much looking forward to continuing the dialogue on this issue. It is important to find ways to ensure the provision of all necessary information to US tax authorities on their taxpayers in a way that minimizes the burden on financial institutions.
In conclusion, I would like to say that on customs issues as well as on taxation both the US and the EU have taken steps, and have the possibility, to consolidate their budgets while offering businesses a pro growth environment.
This is essential in order to overcome the crisis and to contribute to the prosperity of our businesses and the security of our citizens.
I am convinced that by reinforcing our collaboration in these fields, we can do it even better on both sides of the Atlantic. And I am keen to hear your views on how we achieve it.