© Rafal Pelc – Fotolia.com
Fighting tax evasion and tax fraud was one of the two main themes at the European Council meeting on 22 May 2013.
Every year EU member states lose around one trillion euro because of tax evasion and tax avoidance. This sum corresponds approximately to the EU's budget over 7 years.
"It's high time to step up the fight against tax fraud and tax evasion. We have seen headline after headline highlight loopholes in tax systems, fuelling indignation - and rightly so. At a time of fiscal pressure and social tensions, fighting this is a matter of fairness and credibility," said President of the European Council Herman Van Rompuy after the meeting.
"So I am pleased that today's European Council managed to unblock a number of frozen files. There is movement, a real acceleration, with clear deadlines for result", he continued at the final press conference.
Although taxation is the member states' national competence, EU leaders agree that tax evasion is a cross-border problem, which would be most effectively solved by the member states acting together.
Enhancing automatic exchange of information
Extending automatic exchange of information at both EU and global level is a priority task in fighting tax evasion and tax avoidance, say the EU leaders in the summit conclusions.
To this end, at EU level, the Commission is going to propose amendments to the directive on administrative cooperation in the field of taxation already in June. The changes are intended to enable automatic exchange of information to cover a full range of income.
In addition, the EU intends to promote automatic exchange of information as a new international standard, and will therefore work closely with partners at international fora such as the G8, G20 and the OECD.
Taxation of savings income
EU leaders welcomed the agreement reached at the Ecofin Council on 14 May to begin negotiations with Switzerland, Liechtenstein, Monaco, Andorra and San Marino on taxation of savings income.
The aim is to ensure that the five countries continue to apply rules equivalent to those in the EU's directive on the taxation of savings income. The EU directive is currently being updated, and the European Council expects it to be adopted by the end of this year.
Tackling VAT fraud
The leaders asked for the adoption of new directives designed to tackle VAT fraud by the end of June 2013. The new rules will introduce a "quick reaction mechanism" which will enable the member states to react rapidly in cases of massive fraud and a "reverse charge mechanism", which is designed to target carousel fraud.
Other measures
- tackling aggressive tax planning and profit shifting – work will be taken forward on the Commission's recommendations and on the revision of relevant EU directives;
- elimination of harmful tax practices – the existing code of conduct on business taxation will be strengthened;
- fighting money laundering (both in the internal market and globally) – the revised anti-money laundering directive should be adopted by the end of the year; amendments to directives on disclosure of non-financial and diversity information by large companies will be examined rapidly;
- dealing with the challenges in the digital economy – the Commission is to assess this issue and the European Council will discuss it at its meeting in October.
Next steps
The EU heads of state and government expect a progress report on these files by December 2013.
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