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Speech - EU TAXATION: TAKING STOCK AND LOOKING AHEAD

European Commission - SPEECH/13/977   26/11/2013

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European Commission

Algirdas Šemeta

Commissioner responsible for Taxation and Customs Union, Statistics, Audit and Anti-fraud

EU TAXATION: TAKING STOCK AND LOOKING AHEAD

Econ Committee/Brussels, 26 November 2013

Chair, Honourable Members,

I am very happy to be here again with you today to discuss current and future developments in EU tax policy. The European Parliament's contribution to advancing our tax agenda is invaluable, both in terms of political legitimacy and constructive input on key files. So let me start by thanking you for your continued collaboration and support.

Tax evasion

The last time I stood before you was in May this year, when I outlined my ideas and expectations for an intensified campaign against tax fraud and tax evasion.

I doubt that even the most optimistic among us could, at that time, have anticipated the level of progress we have achieved in this area since then – both within the EU and globally.

International level

At international level, with the backing of the G8 and G20, automatic exchange of information has been accepted as the new global standard. And the OECD action plan on Base Erosion and Profit Shifting (BEPS) has been endorsed as the international response to aggressive tax planning and corporate tax avoidance.

The EU played a pivotal role in securing the remarkable commitments made by world leaders to improve global tax governance.

For me, this is proof of what can be achieved when we truly work as a Union towards a common goal.

But the work is not yet done.

In the area of tax good governance, the EU has unrivalled experience and expertise, as well as the collective weight, to considerably influence international developments. We must use these assets to ensure coherence between the EU and the global approach on these matters.

So we continue to engage actively within the OECD on both the development of the new global transparency standard, and the BEPS project.

Tomorrow I leave for Australia – the next country to hold Presidency of the G20. I will convey the EU's expectations for a strong political steer on their part, to ensure that momentum doesn't drop in the international drive against tax evasion.

EU level

Meanwhile, at EU level, we have had a highly productive 6 months too. The inventory of new initiatives to fight evasion is impressive. Since May, we have:

  • proposed expanding automatic information exchange within the EU

  • agreed on a quick reaction mechanism to fight VAT fraud

  • started talks on stronger tax agreements with our closest neighbours

  • launched the debate on taxing the digital economy

  • proposed a standard VAT form to improve tax compliance

  • set up a Platform on Tax Good Governance

  • and, just yesterday, proposed amendments to the Parent-Subsidiary Directive to safeguard against abusive tax planning

I will come back to some of these initiatives in more detail in a moment. But the general point I wish to make here is that the Commission has used every tool at its disposal to advance our good governance principles in the EU.

Meanwhile, EU leaders gave full backing to the EU's anti-evasion agenda at the May European Council, and demanded clear progress and results in key areas.

So the tools for a better fight against tax evasion are there, and so is the highest political backing. Now it is for the Member States to keep pace.

You are no doubt aware that once again the ECOFIN failed to reach agreement on the Savings Directive.

I have asked the Lithuanian Presidency to put this point on the agenda again in December. A commitment was taken at the Summit in May to agree this file before the end of the year – and it is a commitment that must be honoured. As I told EU finance ministers last week, the world is moving on automatic information exchange and we cannot be left behind.

On this note, I should inform you that negotiations with Monaco, Andorra, Lichtenstein and San Marino have already begun and are progressing well. And we will start with Switzerland as soon as they have their own mandate in the coming weeks. I have personally invested in these talks from the moment we were given the mandate to negotiate, and I can assure you that I will continue to do so to get the best result.

Turning now to the linked, but separate, proposal on the Directive on Administrative Cooperation.

The main aim of our proposal is to ensure the broadest possible scope of automatic information within the EU.

It would also provide a suitable EU legal base to implement the new global standard of information exchange under discussion.

I hope the Parliament will give full support to the extended scope of information exchange when this file is voted in Plenary in December.

Digital

Our battle against tax evasion has also thrown up new, and very interesting, challenges for us to address. Most notable is the question of how to tax the digital economy in a way that ensures fair taxation without hampering the growth of this important sector.

The intangible and mobile nature of digital companies, together with outmoded tax rules, makes tax avoidance an especially pressing problem in this sector.

But the youth of the digital sector, and its unique features, means that we have no experience to draw on in deciding how to tax it.

There are no easy answers or quick-fix solutions to this problem.

That is why I am establishing a high level expert group to identify the key challenges related to digital taxation and present solutions by summer 2014. The final selection of the members of this group – selected from the best and the brightest in both the tax and the digital worlds – was announced yesterday. The group will be chaired by Victor Gaspar, former Portuguese Finance Minister, in whom I have full confidence.

VAT

Another area of great relevance to the fight against tax evasion is our VAT reform. However, this has broader relevance too, in that it is central to improving EU competitiveness by creating a more business friendly Single Market.

I would like to take this opportunity to thank Sharon Bowles for her valuable contribution to the Brussels Tax Forum last week, where VAT was the topic of the day.

Our work for a more efficient, more robust and more fraud proof VAT system progressed considerably in recent months.

In October, the Commission published a report on the VAT Gap in Europe, which was estimated at €193 billion in 2011.

While this is a very alarming figure, it also confirms that our VAT reform goes in the right direction.

Closing the VAT Gap requires both intensifying the fight against fraud, and also facilitating those who want to comply but are hampered by the complexity of the system.

We've advanced on both fronts since I was last here.

Important new measures have been taken to fight VAT fraud more effectively, notably with the adoption of the Quick Reaction Mechanism.

And significant steps have also been taken to cut red tape for businesses and ease compliance. The Standard VAT Declaration, which I proposed in October, should reduce costs for businesses by about €15 billion a year and simplify the process of filing VAT declarations across the EU. I would like to thank Mr Strejček for his very supportive report on this proposal.

I know some of you will be interested in where we are on the issue of VAT rates, so let me quickly update you. Our review of the general system of VAT rates is well underway. We have gathered input from a wide range of stakeholders, experts and policy-makers on this topic. No conclusions have yet been drawn. The next step will be an Impact Assessment early next year, which should help us to identify the right approach to take.

CCCTB, FTT, ETD

Allow me now to turn to some of our other key tax files where, I must admit, I would like to see a lot more progress.

Starting with the CCCTB. This file is advancing at technical level. But if I'm honest, I am getting impatient with the pace of discussions.

It is time that we moved to a real political debate on the CCCTB, especially given its pertinence in our wider work against corporate tax avoidance.

The CCCTB offers a “double-dividend”. It could eliminate many opportunities for profit shifting by multinational companies – as is recognised in BEPS - while also simplifying corporate taxation for cross-border businesses.

Some political momentum therefore needs to be injected into the negotiations if we don't want to miss the boat.

Moving on to the Financial Transaction Tax, the onus now lies with the 11 MS to move – and move quickly. There is nothing to be gained by protracted delays.

The Commission has done everything it can to support negotiations, and the Parliament's input has been highly constructive.

It is clear that changes will be needed to the proposal in order to reach a compromise – and that is fine, so long as the core objectives are maintained and they create don't opportunities for circumvention.

Plenty of feasible options are open for discussion. Now it's time for a political push.

Finally, on the Energy Tax Directive, I fear we may be losing a valuable opportunity. The ETD proposal is the epitome of growth-friendly taxation which supports wider goals. But the latest compromise texts are disappointingly unambitious. The Commission is currently reflecting on the solutions for this file.

Remaining Work Programme

Honourable Members,

As you know, the list of new proposals for 2014 has been kept very short, given that both the Commission and Parliament's mandates end next year.

But that by no means implies that our work stops. On the contrary – we have much to finalise and deliver in the next 12 months.

We do have some new initiatives planned in taxation, notably related to talking cross-border problems for EU citizens.

But we also have to press ahead with all our current files – maintaining momentum where it is present, and injecting it when lacking.

I look forward to hearing your views today on how you see things progressing, and what you expect.

Your input has always been much appreciated, and I hope I can rely on your continued support in the coming year.


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