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Speech: The changing landscape in global taxation

European Commission - SPEECH/14/379   13/05/2014

Other available languages: none

European Commission

[Check Against Delivery]

Algirdas Šemeta

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

The changing landscape in global taxation

Macao-EU Chamber of Commerce

Macao, 13 May 2014

Ladies and Gentlemen, good afternoon.

I would like to start by thanking the Macao-European Chamber of Commerce and the President of the Board of Directors, Mr. Franklin Willemyns for this invitation.

This is not my first visit to Macao during the mandate. I was here in 2010. However, I understand yours is a very young Chamber, created by an integration of a number of national Chambers of Commerce, at the end of last year. As this is probably my last visit to the region during this mandate, I am delighted to have the opportunity to be here to meet with you here today.

Above all, I wish to listen to your views and concerns about the business environment and the EU-Macao relationship. But let me start by briefly telling you about the context of my current trip.

Later this week, I will attend the 7th meeting of the EU-China Joint Customs Cooperation Committee in Beijing. We will sign a number of key deliverables. I am also using this opportunity to visit Macao and Hong Kong. This trip is in many ways about improving the global business environment, particularly for European interests. Specifically, of course, in relation to customs and taxation issues.

First, a few words briefly about the customs cooperation issues related to this trip.

This coming Friday, Chinese Minister Yu and myself will sign three important documents in Beijing. We will adopt a new Strategic Framework for EU-China customs cooperation, running until 2017. The Framework is underpinned by the priorities we have already been working towards. It is more ambitious than its predecessor.

The signature of the new Framework provides a reinforcement of the mutual commitment to these mutual priorities. These goals include ways and means to facilitate trade between the EU and this region.

We will also adopt a new IPR Action Plan, for the period 2014 to 2017. IPR infringing trade is a plague for the international business environment and for our societies. Re-invigorating IPR cooperation with China is an absolute priority for the EU. I expect the Chinese authorities to confirm that it is so for China, as well.

IPR enforcement is also one of the key topics of my visit to Hong Kong. Hong Kong has unfortunately become a hub for counterfeits heading for the EU. I am confident that we will achieve a common understanding with Hong Kong authorities, and that Hong Kong sees a shared interest in curbing this trend. We hope that we will soon be reinforcing and formalising cooperation on IPR customs enforcement with Hong Kong.

Although Macao does not show up in statistics as a particular problem for EU imports, I will certainly also discuss the topic with Macao authorities today.

And finally, we will agree on Friday to the full mutual recognition of trusted traders programmes between EU and China. The technical preparatory work has been under way for years. So implementation can get under way quickly. I hope we have the agreement operational by the beginning of next year. This will provide a significant benefit for EU AEOs doing business in this region.

So I dare say this is a very satisfying state of play for our customs relations with China. I believe our efforts have significantly improved the environment to trade between the two regions. The three agreements we sign on Friday will provide a visible boost.

During my visit I will also be encouraging Macao and Hong Kong authorities to a full commitment to the WTO Agreement on Trade Facilitation, and expedient ratification as soon as the agreement is signed in Geneva this summer.

Now a few words on taxation. After the OECD Ministerial meeting in Paris last week, this is a very topical issue. I am sure you all follow with keen interest the changes that are happening in the global tax arena. They will affect Macao, just as they will the EU.

In the European Union, ensuring a common EU position in the global tax debate and translating global developments into consistent EU tax policies lies at the heart of my daily work as Tax Commissioner.

In the wake of the global financial crisis, and its enduring impact on the tax revenues of governments around the world, the focus has clearly shifted towards international cooperation and tax good governance.

Although legitimate, this evolution should not create disproportionate administrative burdens on businesses. I remain convinced that tax policy has an important role to play in creating a competitive business environment and in fostering growth and jobs.

At the G20 Summit in St Petersburg last September, G20 leaders agreed on two key initiatives concerning international taxation:

  • Firstly, they fully endorsed the Action Plan on Base Erosion and Profit Shifting (BEPS) of the OECD to make sure that taxation takes place where the economic activity is performed;

  • And secondly, they agreed on the need to establish a single global standard on automatic exchange of information, to ensure fair taxation.

On corporate taxation, a sustainable solution for these issues arising at international level will require a truly global approach. Only a global approach will effectively safeguard the level playing field. While global financial centers such as Singapore, Malaysia, Hong Kong and Macao are not OECD/G20 members, the BEPS Action Plan will no doubt have repercussions on multi-nationals in these countries. It could affect their activities in areas such as transfer pricing, intellectual property and treasury management.

As business representatives, I am sure you are also following closely global developments on corporate taxation.

This is not to be seen as a fight against the business world. It is about fairer taxation and fairer competition between businesses. It is about clarifying rules and closing loopholes, to create greater legal certainty for companies.

And, certainly, questions of corporate social responsibility and honest practices arise around the tax planning activities of some companies.

As such, aggressive tax planning is not only an issue of lost revenue for national governments. It is also a reputational risk to be managed by businesses.

The fact that our tax rules are out of sync with the modern economy creates ambiguity and grey lines. Which tax planners can choose to cross. Policy-makers have a responsibility, therefore, to ensure clear and airtight tax rules for all businesses.

If our rules don't match the reality, then we need to fix them. That’s what the BEPS project is all about.

And that’s what businesses expect: legal security, stability of rules and a global approach to ensure level playing field.

And it is what we have also intensely focused on within the EU over the past year. Tackling aggressive tax planning is a core component of the EU’s own Action Plan to fight tax evasion. We have already taken steps to close loopholes in EU corporate tax rules and to seek solutions for digital taxation, amongst other things.

Another issue of interest, specifically for a financial center like Macao, is the evolving situation in the field of tax transparency. Countries around the world are demonstrating unprecedented political support for automatic exchange of information as a tool to combat tax fraud and evasion. Commitment of the EU and the US has certainly influenced this development.

The European Commission strongly supports automatic exchange, which is already the European standard of cooperation between tax administrations in certain areas.

The recent unanimous adoption by the Council of the European Union of the Amended Savings Directive is a clear confirmation that the EU stands united and remains a frontrunner in this area.

On 6 May, 47 jurisdictions, including 24 EU Member States, Mainland China and key financial centers like Switzerland and Singapore gave a public commitment, at Ministerial level, to actively participate in and to promote this global standard.

My message to the Hong Kong and Macao authorities today is that no one can stay in the global race and ignore this evolution. And the financial industry has every interest to prepare for what will soon be a truly global standard.

We have been trying to strike a balance in the design of the global standard. Enhanced transparency cannot happen with disproportionate extra costs and burdens for the financial industry.

The OECD has provided a forum where jurisdictions, including the EU, have worked tirelessly over the past 6 months. They have carefully examined comments received from the business sector and tried to reflect them in the global standard to the greatest extent possible.

On our side, in the EU, we have been working very closely with the financial sector to prepare the technical implementation plan. We want to make sure that the objective of transparency is met without creating useless burdens.

So these were a few remarks about the context of my trip to this region. However, the idea today was not for me to do all the talking. Rather, I am here to listen. I am keen to hear your news, your views and your concerns. Most specifically, what are the issues on your mind? And what are the things you would like to see us focussing on in the future? Thank you.


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