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Speech: EU tax policy: achievements and way forward

European Commission - SPEECH/14/302   07/04/2014

Other available languages: none

European Commission

[Check Against Delivery]

Algirdas Šemeta

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

EU tax policy: achievements and way forward

Committee on Economic and Monetary Affairs (ECON) - European Parliament

Brussels, 7 April 2014

Dear Sharon, Honourable Members,

For the last time, through this structured dialogue, I have the chance to update you on the progress made in my portfolio, and to look ahead at "what next?"

Before I move to the substance, however, let me first say a few words of gratitude to you all.

Few would have believed, 5 years ago, the remarkable progress that could be made in EU tax policy over the course of this mandate.

In some areas – such as the Financial Transaction Tax and the fight against evasion – developments have been unprecedented.

The role of the Parliament – and its support for the Commission on major tax files – has been invaluable.

Your interest and your commitment have helped push the boundaries of ambition and provided necessary political pressure at times.

I thank you wholeheartedly for that.

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Today, I would like to focus on two key themes to outline the progress achieved during my mandate.

These are: Promoting fair taxation and Promoting growth-friendly taxation

Both objectives have been fundamental in our efforts to exit the economic crisis successfully, without losing legitimacy in the eyes of our citizens.

Fair taxation

On the issue of fairness, allow me to start with the fight against tax evasion.

Because that is about every citizen and business paying no more, and no less, than their fair share.

And it is about Member States playing fair amongst each other.

If we look back 5 years, we will remember that this issue was barely on the political radar. Gathering serious interest or momentum for measures to tackle tax fraud was nearly impossible.

Thankfully, that has changed dramatically.

Citizens' demands for fair burden sharing, and Member States' needs in terms of revenues, became too great for national authorities to ignore.

I am proud that, when the political interest awoke to the serious problem of tax evasion, the Commission already had a host of tools ready to respond.

And we were able to quickly present new ones too, when needed.

The inventory of new initiatives to fight against tax fraud and evasion is impressive.

Let's start with VAT. Our study last year on the VAT Gap gave us a concept of the scale of revenue shortfall in this area. And it is unacceptably high.

To tackle this issue, we agreed on a quick reaction mechanism and measures to enable Member States to apply a reverse charge scheme – both of which should make a major difference in tackling large-scale fraud.

Eurofisc is also now well established, ensuring better cooperation between national VAT authorities.

And we have done everything to ensure the smooth introduction of the mini One Stop Shop and change in VAT rules in 2015. Amongst other things, these will ensure fairer revenue distribution between Member States.

I would like to particularly thank David Casa for his cooperation on VAT issues.

Meanwhile, our 2012 Action Plan against tax evasion helped to focus and propel the political momentum in this area. And it paid off.

After 6 long years of deadlock, we finally have agreement on the Savings Tax Directive.

This was a strong signal that every single Member State is now committed to tax transparency, and that the EU will continue to lead by example when it comes to tax good governance.

I expect the Administrative Cooperation Directive – which I proposed last year – to be agreed before the end of the mandate.

Together with the Savings Directive, this will cement the widest automatic exchange of information within the EU.

And it will ensure that we are 100% coherent with the new global standard on automatic exchange, when it comes into effect.

On that note, we cannot overlook the immense progress made at international level in this field.

The world is ready to move to automatic information exchange. The days of bank secrecy are over.

And the EU should take great pride in the active role it played in helping to bring this about. It just goes to show what we can achieve when we speak with one voice!

In parallel, the Commission is continuing negotiations with Switzerland, Liechtenstein, Monaco, Andorra and San Marino on stronger tax agreements, based on automatic exchange.

I have assured Member States that I intend to conclude these negotiations before the end of the year. And our progress so far contributed greatly to Austria and Luxembourg unblocking on the Savings Directive.

In this area, I would like again to thank you for your commitment and ambition.

In particular, I must mention Leonardo Domenici, George Sabin Cutas, Philippe Lamberts, Sven Giegold and Mojca Kleva Kekus, [who, by the way, merits extra congratulations on the recent birth of her baby girl].

The battle against tax avoidance was also kick-started in the EU, with our Recommendation against aggressive tax planning, amongst other things.

Your recent work on the Parent Subsidiary Directive, as well as on Country-by-Country reporting, has supported and reinforced important Commission proposals to clamp down on corporate tax dodging.

Meanwhile, we have responded rapidly to emerging challenges. The changing shape of our economy meant that we can not ignore the digital world in our work to ensure fair taxation.

Developing a level playing-field between internet giants and their more traditional counterparts has become ever more pressing.

The High Level Expert Group I created to examine this challenge will report back by the summer. On that basis, we will decide the best direction to take so that digital companies also contribute fairly to public finances.

I still hold out hope for agreement on the CCCTB too. Its value lies in the fact that it can both eliminate opportunities for profit-shifting, while also simplifying the business tax environment.

Your strong support and the devoted work of Marianne Thyssen helped keep the CCCTB on the political agenda, despite the resistance of some Member States.

Meanwhile, the Commission will continue to use every tool at our disposal – whether state aid rules or the Code of Conduct on Business Taxation – to entice Member States to play fair and refrain from encouraging tax optimisation.

Looking beyond our borders, I am very pleased that similar ambition to tackle corporate tax avoidance is being shown at international level.

First, we are making good progress on the dialogue that we have with Switzerland on harmful corporate tax regime.

Second, the work of the OECD on Base Erosion and Profit Shifting (BEPS) will fundamentally overhaul global tax rules, making them fairer, more efficient and better equipped for the 21st century.

The fight against tax evasion is not won overnight. Political momentum will have to be sustained and commitments will have to turn into actions.

Thanks to our past experience on tax transparency and following calls from the European Council, we have now a better coordination process of the EU Member States’ positions in the OECD and a stronger capacity to impact the outcome globally.

Let me repeat that this Committee has been integral to the successes we have had so far. I hope you continue to play an active role in the future, and keep this issue high on the political agenda.

Fairness is central to the fight against tax evasion. And this principle has guided much of our work during this mandate.

In particular, we must single out the Financial Transaction Tax, as the epitome of a fair tax.

Your Committee, and in particular Anni Podimata, gave the support and impetus needed to advance this project.

The FTT is remarkable for its huge popularity amongst citizens.

And the FTT is remarkable for triggering – for the first time ever - enhanced cooperation in the field of taxation.

Its fate now is in the hands of the 11 Member States signed up to it. I strongly hope that they deliver on their commitments and agree on the FTT as quickly as possible.

Growth and Competitiveness

Dear Sharon, Honourable Members,

Greater fairness in taxation was accented by the crisis.

But so too was the need for tax policies and decisions that could support Europe's return to growth and competitiveness.

This has been the second overarching theme of my mandate.

Taxation is about much more than collecting revenue. As highlighted in the Olle Schmidt and Idiko Gall-Pelcz reports, taxation holds a much greater potential.

This is a potential we have worked to harness.

First, through the European Semester, we have encouraged Member States to pay particular attention to designing growth-friendly tax policies.

We recommended a tax shift away from labour towards taxes that are less detrimental to growth, such as those on consumption, environment and property.

These recommendations are now being implemented by Member States, with special attention being paid to the most vulnerable citizens and businesses.

At European level, we have also sought to create a tax environment more conducive to growth and investment.

For example, we know that the administration around VAT can pose major headaches to businesses.

That is why I put forward a standard VAT declaration, for which I thank Ivo Strecjeck for his strong report. We should not let Member States water down this initiative which offers major benefits to companies.

It is also why the new rules on VAT invoicing – which facilitate e-invoicing and make special provision for micro-companies - are so significant.

Our focus has been on cutting compliance costs, particularly for SMEs, and easing their expansion in the Single Market.

The proposal to review the Energy Tax Directive also very much reflects the growth-friendly taxation we should be implementing.

Your committee, under the sound guidance of Astrid Lulling, advocated a balance between taxing polluting activities and promoting green-growth innovation.

However, to my big regret, this proposal hasn't enjoyed the same investment from the Member States. The next Commission may therefore need to review its approach towards environmental taxes and their interaction with other EU legislation.

Tax reforms can only be growth-friendly if they work. They should not be undermined by a lack of policy co-ordination.

Coordinated action at the EU level should, therefore, continue to support Member States in eliminating mismatches and removing tax obstacles to the Single Market.

In this context, I believe that stronger links between the European parliament and national parliaments in taxation could deliver great progress.

This Committee could make a major impact by seeking deeper cooperation and alliances with national legislators in the area of taxation.

Dear Sharon, Honourable Members,

Over this mandate, EU tax policy has risen high in the political agenda, and we have made substantial progress.

However, these progresses have often been too slow.

The reality of our unanimity based decision-making process is that the convoy currently moves at the pace of the slowest ship. We have to ask whether that is sustainable in the long-term, as our economic and monetary integration becomes ever deeper.

Whatever the future institutional evolution brings, the next Parliament will continue to have a crucial role in pushing tax issues forward.

May they be as active, as engaged and as efficient as you have been.

Let me conclude by wishing you all the best in your future, be it here in the Parliament or elsewhere.

Many thanks again for these 4 years of intense and fruitful exchanges on EU tax policy.


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