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Algirdas Šemeta

EU Commissioner for taxation, Customs Union, Anti-Fraud, Audit and Statistics

Country specific recommendations

Press Conference on European Semester

Brussels, 30 May 2012

The quality of taxation can be a "make or break" factor in Member States' efforts to consolidate budgets and establish sustainable economic growth.

Our recommendations today in the field of taxation are focussed largely on 5 areas which are fundamental to quality tax systems.

First, labour taxation in many Member States is still too high, and not enough has been done to shift this burden towards more growth-friendly taxes. Taxation can incentivise work and employment, but only if smartly designed. The opportunity for a smart tax shift is too frequently being missed.

Second, within the context of this tax shift, environmental taxes are among the most growth-promoting. In fact, not only do green taxes support our goal of a low-carbon, resource-efficient economy, but they also encourage new industries, green innovation and job creation. Many Member States are still not exploiting the full potential of environmental taxes.

Third, we have asked some Member States to look again at their property taxes. Without a doubt, the debt-fuelled consumption of the past decades has failed us. Therefore, taxation which incentivises debt and encourages housing bubbles must be phased out. Sensible taxation of property is growth-friendly, but it is not being utilised enough.

Fourth, Member States should look for the untapped potential in their tax systems. Where the base can be broadened and tax gaps closed, this should be done. A tax system full of tax breaks means less revenue and unfair burden-sharing across society.

Finally, ordinary citizens could potentially carry a lighter tax burden if everybody paid what they owed. However, tax evasion and avoidance lead to revenue losses of around €1 trillion a year. Many Member States could do a lot more to improve tax compliance and collection. Coordination at EU level is also crucial, which is why tackling tax evasion remains one of the priorities for my mandate.

Before I conclude, it is worth noting that most Member States did take on board the Commission's recommendations from last year in the area of taxation. Some have already used them to implement improvements in their tax systems. Others are still working on tax reforms.

I would urge Member States to also follow the tax recommendations we have made today. Their implementation will support the work for a stronger and more sustainable economy, and help to put Europe back on the path of growth and employment.

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