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Algirdas Šemeta

EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud

Shared transatlantic customs and tax ambitions


Brussels, 21st June 2011

Ladies and Gentlemen,

The last time I participated in an AmCham event, in September last year, I outlined the "Priorities and Challenges of an Evolving Customs Union". Today, I would like to thank AmCham for inviting me to speak about customs and tax policy; more specifically about where the EU and the US are today and where we want to go in future.

Customs and tax systems are generally considered very technical and difficult to get your head around. But I am sure you will agree that, from a business perspective, they represent key conditions for engaging in international trade and structuring cross-border activities.

Businesses on both sides of the Atlantic seek and deserve an attractive business environment, characterised by predictability and reliability, ensuring smooth trade flows. Since 2008, the global financial and economic crisis has had very much the opposite effect.

As Commissioner in charge of taxation and customs (as well as anti-fraud and audit), I have set out to redress the situation and improve the business environment, both within the EU and in relations with our trading partners.

In addition to the impact of the crisis, businesses and government administrations are forced to manage a wide range of risks. Society in general is marked by an increasingly global market environment and growing international threats of fraud, organised crime and terrorism.

At this occasion, I would like to highlight three topical customs issues in EU/US relations, and two in the area of taxation. On these issues, I would very much welcome your reflections and suggestions.

My first customs-related issue concerns supply chain security. In short, I am glad to announce that we are about to launch a deeper, more wide-ranging agenda for cooperation with the US.

As you know, in recent years our dialogue with the U.S. has been dominated by the 100% container scanning legislation, and the costs it would imply. The EU continues to encourage the U.S. Congress to repeal, or at least seriously alter this legislation. It is now time to move on to a positive agenda for transatlantic cooperation in the area of supply-chain security.

The potential benefits are substantial. The cross-cutting nature of the threats, risks and challenges for global supply chains requires a coordinated response. National supply chain security policies will be ineffective unless they are supported by enhanced international cooperation to guarantee their coherence, compatibility and cost-effectiveness.

On Thursday, I will meet U.S. Secretary for Homeland Security Janet Napolitano. We will take forward a new cooperation agenda involving customs as well as other authorities in the area of aviation or maritime security, research and development.

Consultation of businesses and other stakeholders is a common priority of both the US and the EU. Both businesses and governments have a shared interest, or even obligation, to address security issues. Only a frank dialogue can ensure that we do so at the lowest possible costs.

Take the example of air cargo security, which has received a lot of attention since the Yemen incident of last October. Improvised explosive devices were transported on and transferred between aircrafts, making it clear that the EU and international rules that apply were inadequate. As a first response we drew up an EU Action Plan, which was endorsed by the Council of Ministers in December. In the customs area, this will mean improving our capacity to assess risks through the availability of reliable and timely advance data. We are therefore reviewing the list of data elements and the time limits for submitting them. So, here is my first question for your reflection: What is feasible, what is required and what are the costs involved? In order to find a cost-effective solution, industry stakeholders have to provide an honest assessment. In return, we will coordinate with the US and other trading partners and work to achieve a level playing field based on international standards.

As the second topical customs issue, let me briefly highlight a longstanding EU-U.S. cooperation project to facilitate the life of our trusted traders.

In the coming months we will have to conclude the process to establish mutual recognition of the EU and U.S. trade partnership programmes, the Authorised Economic Operator (AEO) and Customs-Trade Partnership Against Terrorism (C-TPAT).

I know that this project is of particular interest to the growing ranks of EU AEO operators. More than 3800 companies have already been certified for security, many of which are involved in transatlantic trade.

The pace of work with the U.S. has picked up over the past year, as we agreed on a timetable for the completion of the final steps. In the past months a series of joint validation visits took place in the EU as well as in the US. Bilateral contacts are scheduled in the coming days, and I will take stock with Secretary Napolitano on Thursday. This brings me to my second point for your reflection: In order to bring about real facilitation, we need active support for mutual recognition projects from both businesses and authorities. I would therefore encourage you to contribute to stakeholder dialogues also in our partner countries.

To conclude on customs matters, let me draw your attention to the recent proposal to bring about a stronger, clearer and more up-to-date legal framework for customs enforcement of Intellectual Property Rights.

I presented this proposal last month as part of a comprehensive IPR strategy in partnership with Commissioner Barnier. One specific objective is to respond to the worrying growth in small consignments of IPR infringing goods sent by post. Customs IPR enforcement at the EU border is a powerful tool to fight trade in counterfeit and pirated products. As a consequence, right holders have a clear incentive, whether they are American or European, in engaging in close cooperation with customs administrations.

In parallel with the legislative procedure to improve the legal framework, it appears that there is scope for enhancing the EU-U.S. dialogue and cooperation on IPR enforcement. We have had positive experiences in joint enforcement operations, which are worth pursuing. But experience shows that the success of such operations depend very much on the active involvement of right holders. I would therefore encourage you to maintain close relations with the customs administrations in charge of IPR enforcement. Like me, you must be aware of the substantial benefits to be reaped by effectively enforcing Intellectual Property Rights. IPRs represent crucial building blocks for the future of our society, which we base on knowledge and innovation.

Let me now say a few words on taxation. As you probably know, the EU has a long standing policy on good governance in the tax area. This means promoting, both between our member States and in our relations with third countries, the principles of transparency, exchange of information and fair tax competition.

As a first point here, I would like to mention that, in the global arena, there is a need for closer cooperation between the EU and the US.

In order to build solid tax systems in support of a strong recovery, joint efforts should be developed to create the right conditions for soundly based cross-border investments.

The European Union, its Members States have been actively cooperating with the US in international fora such as the G20 and the OECD Global Forum. This contributes greatly to creating a level playing field for economic relations and investment at international level, for the benefit of American and European companies operating and investing abroad.

I strongly believe that EU and US should reinforce this cooperation notably by defining joint answers towards non-cooperative jurisdictions. I would be happy to hear your views on priorities for actions as seen from a business perspective.

My second point on tax cooperation relates to our bilateral relationships. I am convinced that the EU and the US tax administrations have much to learn from each other regarding cooperation with business. It is legitimate and even desirable for tax administrations to seek cooperation from business in order to ensure that income earned abroad is effectively reported and subject to taxation.

The EU and the US could certainly benefit from exchanges of views on the operation of the various systems currently in place or planned that involve cooperation with financial intermediaries, including the EU Savings Directive and Mutual Assistance Directive and the US legislation commonly known as FATCA.

This cooperation may even be of mutual benefit, by speeding up tax relief provision by tax authorities in return for information provision by business – this is the idea behind the US qualified intermediary (QI) system and the ongoing OECD "TRACE" and EU "FISCO" discussions.

In this context, let me emphasise that the EU financial industry is concerned about FATCA. I share those concerns and I am worried on the high compliance costs and the heavy penalties that such a system would put on business.

I would like to stress that the EU fully supports the objective of tackling cross-border tax evasion by US citizens or residents who try to hide their assets within the UE.

However, as already mentioned, I do not believe that this objective should entail additional excessive administrative burdens on financial institutions. While I wish them to contribute their fair share towards the cost of economic recovery, I also wish to safeguard their competitiveness.

Following my discussions in Washington last year, I welcome the agreement of the US authorities to entering into a formal dialogue on ways to alleviate the negative impact of a legitimate preoccupation.

I hope that it will be the start of a fruitful and long-lasting dialogue, not just on FATCA, but also on wider administrative cooperation and sharing of best practice in the tax field.

Ladies and gentlemen, I have given you in a nutshell the perspectives for our cooperation with the US in the tax and customs area.

I look forward to having a fruitful debate with you.

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