“We want to give tax authorities crucial information on the individuals behind any company or trust. This is essential for them to be able to identify and clamp down on tax evaders. To do this, tax authorities will now have access to anti-money laundering information.” Said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs. The Commission has welcomed the entry into force of new rules obliging Member States to give tax authorities access to data collected under anti-money laundering legislation. As of 1 January 2018, national tax authorities will have direct access to information on the beneficial owners of companies, trusts and other entities, as well as customer due diligence records of companies. The new arrangements should give a major boost to tax authorities in the fight against the types of structures highlighted in the ‘Paradise Papers’. The new amended rules, enshrined in the Directive on Administrative Cooperation (Directive 2011/16/EU), will give tax authorities much-needed access and enable them to react quickly and efficiently to cases of tax evasion and avoidance.
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“National tax administrations should invest in modern and efficient digital tools if they want to see an improvement in their tax revenues. I call on tax administrations to continue working together for more efficient tax collection and to better fight tax fraud and avoidance. The Commission stands ready to support EU countries in their continued efforts.” Said Pierre Moscovici, Commissioner for Economic Affairs, Taxation and the Customs Union.
The European Commission has today published a series of recommendations for Member States on how to better work together towards better direct tax and VAT collection for national budgets. In particular, the results show that investment in digital and IT systems, as well as investment in human resources, will be crucial if EU countries want to improve their public finances. Today’s reports highlight the overall positive impact of the EU-wide cooperation between tax administrations on tax collection, but also show that Member States have to deploy more resources to improve tax collection – an issue which, for VAT alone, can lead to losses for national budgets of up to €150bn a year. The Commission has this year already put forward far-reaching reforms of the VAT system to create a definitive VAT system and to create a single European VAT area that is simpler and fraud-proof. Cooperation between countries to recover lost taxes should also be improved, the report says, and countries should make better use of new data that is being collected as part of the major reforms on information exchange – an accomplishment which should give the fight against tax avoidance a major boost in the EU. The Commission will now take these findings forward with Member States to see how they can be addressed.
“Cross-border VAT fraud is a major cause of revenue loss for Member States and EU budgets. Today’s proposal will help to strengthen the cooperation between institutions working nationally and at EU level in order to effectively tackle this problem and improve tax collection.” Said Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue.
The European Commission has today unveiled new tools to make the EU’s Value Added Tax (VAT) system more fraud-proof and close loopholes which can lead to large-scale VAT fraud. The new rules aim to build trust between Member States so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities. The most cautious estimates show that VAT fraud can lead to lost revenues of over €50 billion a year for EU Member States – money that should be going towards public investment in hospitals, schools and roads. Revelations in the ‘Paradise Papers’ have again shown how tax avoidance schemes can be used to help wealthy individuals and companies to circumvent the EU’s VAT rules to avoid paying their fair share of tax. Recent reports also suggest that VAT fraud schemes can be used to finance criminal organisations, including terrorists. Today’s proposals would enable Member States to exchange more relevant information and to cooperate more closely in the fight against these activities. Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “The Paradise Papers have again shown how some are taking advantage of lax application of EU VAT rules to get away with paying less VAT than others. And we know that VAT fraud can be a source of financing for criminal acts, including terrorism. Combating this requires far more effective information-sharing than currently exists between the competent national authorities – and today’s proposals will make that happen.“
“Nobody can deny it: our tax framework does not fit anymore with the development of the digital economy or with new business models. Member States want to tax the huge profits generated by digital economic activity in their country. We need a solution at EU level, one which will deliver robust solutions for businesses and investors in the Single Market.” Said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
The European Commission has launched a public consultation on how the EU can ensure that the digital economy is taxed in a fair and growth-friendly way. Taxing the digital economy has become an issue of pressing importance – politically and economically. The Commission is particularly interested in gathering views on the main problems related to taxing the digital economy, for Member States and business. It also asks for feedback on possible solutions to these problems – both targeted, temporary measures and comprehensive long-term solutions. This public consultation will feed into the work underway on the digital taxation proposals for next year and runs until 3 January 2018.
The European Commission welcomes EU Member States’ formal green light for new rules to better resolve tax disputes.
“We proposed this new system to improve legal certainty and EU competitiveness by creating a binding obligation on Member States’ authorities to resolve tax disputes in a timely manner. This is an important step to allow EU citizens and businesses alike to have fair tax treatment. I commend the quick action of Member States and the European Parliament to support this upgrade of the current rules.” Said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
The decision taken by EU finance ministers at the ECOFIN Council meeting in Luxembourg today will ensure that businesses and citizens can resolve disputes related to the interpretation of tax treaties more swiftly and effectively. It will also cover issues related to double taxation – a major obstacle for businesses, creating uncertainty, unnecessary costs and cash-flow problems. Double taxation refers to cases where two or more countries claim the right to tax the same income or profits of a company or person. It can occur, for example, due to a mismatch in national rules or different interpretations of a bilateral tax treaty with regards transfer pricing arrangements. The improvements to the current rules agreed by EU finance ministers in Luxembourg will give taxpayers much more certainty when it comes to seeking resolution to their interpretation of tax treaties or double taxation problems.
“Today, we are proposing to renew the current VAT system, which was set up a quarter century ago on a temporary basis. We need a definitive system that allows us to deal more efficiently with cross‑border VAT fraud. At the European Union level, this fraud causes an annual tax revenue loss of around €50 billion.” Said Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue.
The European Commission has today launched plans for the biggest reform of EU VAT rules in a quarter of a century. The reboot would improve and modernise the system for governments and businesses alike. Overall, over€150 billion of VAT is lost every year, meaning that Member States miss out on revenue that could be used for schools, roads and healthcare. Of this, around €50 billion – or €100 per EU citizen each year – is estimated to be due to cross-border VAT fraud. This money can be used to finance criminal organisations, including terrorism. It is estimated that this sum would be reduced by 80% thanks to the proposed reform.
The proposed VAT reform would also make the system more robust and simpler to use for companies. The Commission wants a VAT system that helps European companies to reap all the benefits of the Single Market and to compete in global markets. Businesses trading cross-border currently suffer from 11% higher compliance costs compared to those trading only domestically. Simplifying and modernising VAT should reduce these costs by an estimated €1 billion.
A definitive VAT system that works for the Single Market has been a long-standing commitment of the European Commission. The 2016 VAT Action Planexplained in detail the need to come to a single European VAT area that is simpler and fraud-proof.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “Twenty-five years after the creation of the Single Market, companies and consumers still face 28 different VAT regimes when operating cross-border. Criminals and possibly terrorists have been exploiting these loopholes for too long, organising a €50bn fraud per year. This anachronistic system based on national borders must end! Member States should consider cross-border VAT transactions as domestic operations in our internal market by 2022. Today’s proposal is expected to reduce cross-border VAT fraud by around 80%. At the same time, it will make life easier for EU companies trading across borders, slashing red tape and simplifying VAT-related procedures. In short: good news for business, consumers and national budgets, bad news for fraudsters.”
With today’s package, the Commission proposes to fundamentally change the current VAT system by taxing sales of goods from one EU country to another in the same way as goods are sold within individual Member States. This will create a new and definitive VAT system for the EU.
“Member States should not accept such shocking losses of VAT revenues. While the Commission is supporting efforts to improve collection throughout the EU, current VAT rules date from 1993 and are outdated. We will soon propose to revamp the rules governing VAT on cross-border sales. Our reform will help cut cross-border VAT fraud by 80% and get badly-needed money back to Member State coffers.” Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
EU countries lost an estimated total of €152 billion in Value-Added Tax (VAT) revenues in 2015, according to a new study by the European Commission. The ‘VAT Gap’, which is the overall difference between the expected VAT revenue and the amount actually collected, again demonstrates the need for serious reform so that Member States can make full use of VAT revenues for their budgets. While the collection of VAT revenues shows some signs of improvement, the missing amounts remain unacceptably high. The report comes just ahead of proposals by the Commission to overhaul the VAT system. While average EU figures are improving, individual VAT collection performances vary significantly amongst Member States. The largest VAT Gaps were reported in Romania (37.2%), Slovakia (29.4%) and Greece (28.3 %). The smallest gaps were observed in Spain (3.5%) and Croatia (3.9 %). In absolute terms, the highest VAT Gap of €35 billion was in Italy. The VAT Gap decreased in most Member States, with the strongest improvements in Malta, Romania and Spain. Seven Member States saw small increases: Belgium, Denmark, Ireland, Greece, Luxembourg, Finland and the UK.
“Today’s decision by the Council is a recognition of the tremendous efforts and sacrifices the Greek people have made to restore stability to their country’s public finances. The turnaround since 2009 has no parallels in Europe. We now need to ensure there is constructive cooperation between all institutions and the Greek authorities to ensure a smooth and swift conclusion of the third review. That will pave the way for a successful conclusion of the programme next summer and for the opening of a new and optimistic chapter for Greece and for the euro area as a whole.” Said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
The Commission welcomes the Council decision to close the Excessive Deficit Procedure (EDP) for Greeceadopted at today’s meeting of the General Affairs Council. This decision follows the Commission’s recommendation to close the EDP in July. The Commission made this recommendation on the basis of the substantial efforts undertaken by Greece to consolidate its public finances coupled with the progress made in the implementation of its ESM stability support programme. The general government balance has improved from a deficit of 15.1% in 2009 to a surplus of 0.7% in 2016. This is well below the 3% threshold set out in the Treaty on the Functioning of the European Union. According to the Spring 2017 Economic Forecast, the positive fiscal performance of Greece is expected to be durable, with the deficit projected to remain below 3% over the forecast horizon. This progress is in addition to the substantial and wide-ranging structural reform packages that Greece has adopted as part of its commitments under the Greek stability support programme, reforms that are being implemented. Following today’s Council decision, only three Member States now remain under the corrective arm of the Stability and Growth Pact (France, Spain and the United Kingdom), down from 24 countries during the financial crisis in 2011.
“Modern taxation rules are essential to leverage the full potential of the EU’s Digital Single Market and to encourage innovation and growth. This means having a modern and sustainable tax framework which provides legal certainty, growth-friendly incentives and a level playing field for all businesses. The EU continues to push for a comprehensive revision of global tax rules to meet the new realities.” Said Andrus Ansip, Vice-President for the Digital Single Market .
The European Commission is today launching a new EU agenda to ensure that the digital economy is taxed in a fair and growth-friendly way. The Communication adopted by the Commission sets out the challenges Member States currently face when it comes to acting on this pressing issue and outlines possible solutions to be explored.
The aim is to ensure a coherent EU approach to taxing the digital economy that supports the Commission’s key priorities of completing the Digital Single Market and ensuring the fair and effective taxation of all companies. Today’s Communication paves the way for a legislative proposal on EU rules for the taxation of profits in the digital economy, as confirmed by President Juncker in the 2017 State of the Union. Those rules could be set out as early as spring 2018. Today’s paper should also feed into international work in this area, notably in the G20 and the OECD.
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue said: “There is broad agreement that the growing digitalisation of the economy creates huge economic opportunities. At the same time, our tax systems should evolve to capture new business models while being fair, efficient and future-proof. It’s also a question of sustainability of our tax revenues as traditional tax sources come under strain. Not least, it’s about maintaining the integrity of the Single Market and avoiding fragmentation by finding common solutions to global challenges.”
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs added: “The goal of this Commission has always been to ensure that companies pay their fair share of tax where they generate profits. Digital firms make vast profits from their millions of users, even if they do not have a physical presence in the EU. We now want to create a level playing field so that all companies active in the EU can compete fairly, irrespective of whether they are operating via the cloud or from brick and mortar premises.”
The current tax framework does not fit with modern realities. The tax rules in place today were designed for the traditional economy and cannot capture activities which are increasingly based on intangible assets and data. As a result, the effective tax rate of digital companies in the EU is estimated to be half that of traditional companies – and often much less. At the same time, patchwork unilateral measures by Member States to address the problem threaten to create new obstacles and loopholes in the Single Market.
The first focus should be on pushing for a fundamental reform of international tax rules, which would ensure a better link between how value is created and where it is taxed. Member States should converge on a strong and ambitious EU position, so we can push for meaningful outcomes in the OECD report to the G20 on this issue next spring. The Digital Summit in Tallinn will be a good occasion for Member States to define this position at the highest political level.
“Thanks to the determined policy response to the crisis the EU economy is now firmly recovering and the Economic and Monetary Union is stronger than before. We need to build on this progress, completing the financial union, reforming our economies to foster convergence, inclusiveness and resilience, and maintaining sustainable public finances. In doing so, we should pursue a balanced approach where risk reduction and risk sharing go hand-in-hand and the unity of the single market is preserved.” Said Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue.
The global financial crisis began 10 years ago and led to the European Union’s worst recession in its six-decade history. The crisis did not start in Europe but EU institutions and Member States needed to act resolutely to counter its impact and address the shortcomings of the initial set-up of the Economic and Monetary Union. Decisive action has paid off: today, the EU economy is expanding for the fifth year in a row. Recent economic developments are encouraging but a lot remains to be done to overcome the legacy of the crisis years. The European Commission is fully mobilised to deliver on its agenda for jobs, growth and social fairness.
Commissioner Pierre Moscovici, responsible for Economic Affairs, Taxation and Customs, said: “Ten years after the global crisis began, the recovery of the European economy has firmed and broadened. We must use this positive momentum to complete the reform of our Economic and Monetary Union. Not all legacies from the past correct automatically. We have seen greater social and economic divergences develop in and among Member States. It is essential that our work going forward contributes to the real and sustained convergence of our economies.”