The European Commission is prioritising the fight against tax fraud and evasion, a report says, as countries in the region have come under increased pressure to balance increased revenue needs with the need to support recovery and growth during the economic slowdown.
According to the Commission's 2013 Annual Growth Survey: Towards fair and competitive tax sytems, 'hundreds of billions of euros are lost from national budgets every year due to tax evasion and fraud.'
'Not only does this affect public income, but it also undermines the fairness of tax systems. Honest taxpayers must pay higher taxes to compensate for evaders not paying their share. Member states need to strengthen their administrations to combat this problem, and ensure that the controls and sanctions they have in place are strong enough deterrents,' the report said.
The commission this year urged members of the EU to increase their focus on competitiveness and fairness of their tax systems, in light of how these principles determined the legitimacy of taxation in relation to the public.
The survey recommended that members of the region should continue to maintain their key tax objectives in relation to shifting taxes away from labour and towards more growth, enhancing consumption and property taxes.
'Not only can this create more incentive for workers to work and employers to employ, but it also contributes to a fairer tax system by reducing the burden on the most vulnerable,' the survey said.
The report also called for member countries to broaden the tax base, saying that a smarter way to increase revenue can often be to remove or reduce the number of tax breaks and exemptions.
'Limiting the use of reduced VAT rates could provide member states with important new revenue, without any need for further standard rate increases. In fact, studies show that if all reduced rates were removed, the standard rate could actually be lowered by up to 7.5% in some cases, without any impact on overall revenues,' the report stated.
The report also suggested that member states increase environmental duties - revealing that 20 member states had increased these in 2011 and 2012 - since these are considered to be among the most growth-friendly and supported wider policy objectives relating to climate change, resource efficiency and energy security.
Commenting on the report, Algirdas Aemeta, commissioner responsible for taxation and customs union, audit and anti-fraud, said member states could become more competitive, by breaking down tax obstacles in the single market and addressing mismatches between national systems.
'The proposed common consolidated corporate tax base is a good example of how an EU solution could dramatically cut costs and reduce red tape for businesses. Together, member states can also ensure more fiscal fairness. I already mentioned the need for greater national efforts to tackle evasion and avoidance. But given the cross-border nature of these problems, we must also draw on our collective strength to ensure a coherent and effective response at EU level,' he said.
Aemeta is expected to present a package of measures aimed at strengthening the common stance against tax evasion, tax havens and aggressive tax planning next week.
'I also hope to see quick progress in authorising the financial transactions tax to move ahead under enhanced cooperation. The FTT is the epitome of fair taxation, as it would ensure the financial sector makes an equitable contribution to public finances. Eleven member states are ready to move ahead with it. There is no good reason why they shouldn't be facilitated in doing so,' he said.
