EU to Clamp Down on Tax Evasion, Avoidance

The European Commission presented an Action Plan for a more effective EU response to tax evasion and avoidance.

Having adopted two recommendations, the Commission is encouraging Member States to take immediate and coordinated action on specific pressing problems.

A strong EU stance against tax havens

The first of these foresees a strong EU stance against tax havens, going beyond the current international measures. Using common criteria, Member States are encouraged to identify tax havens and place them on national blacklists.

The second recommendation is on Aggressive Tax Planning. It suggests ways to address legal technicalities and loopholes which some companies exploit to avoid paying their fair share. Member States are encouraged to reinforce their Double Tax Conventions, to prevent them from resulting in no taxation at all.

They should also adopt a common General Anti-Abuse Rule, under which they could ignore any artificial arrangement carried out for tax avoidance purposes and tax instead on the basis of actual economic substance.

Other initiatives foreseen in Action Plan include a Taxpayers’ Code, an EU Tax Identification Number, a review of the anti-abuse provisions in key EU Directives, and common guidelines to trace money flows.

Tax Good Governance

In order to ensure that Action Plan is driven forward, the Commission will set up active new monitoring tools and scoreboards, to maintain momentum in the fight against tax evasion and avoidance. A new Platform for Tax Good Governance will monitor and report on Member States’ application of the Recommendations.

The Action Plan and Recommendations will now be presented to the EU’s Council of Finance Ministers and the European Parliament.