EU Commission hails tax reform as ‘springboard’ for economic recovery

16 Jul 20

Fairer tax systems in the EU would help governments in their fight against the economic crisis caused by Covid-19, the European Commission said as it unveiled a series of new measures to develop tax policy within the union.

 

The ‘tax package’ seeks to step up the fight against tax abuse, curb unfair competition and increase transparency, as well as simplify rules and procedures to make it easier for companies to grow in the single market.

“Fair taxation is the springboard that will help our economy bounce back from the crisis,” said EU commissioner for economy Paolo Gentiloni.

“We need to make life easier for honest citizens and businesses when it comes to paying their taxes and harder for fraudsters and tax cheats.”

The package will be made up of three initiatives.

The ‘Tax Action Plan’ contains 25 actions hoped to make taxation simpler and fairer by removing “obstacles” in the system, as well as helping EU member states better use data to reduce administrative burdens and fight fraud.

Digital platforms will be covered by EU tax transparency rules after the ‘Proposal on administrative cooperation’ comes into effect, which will mean that member states automatically exchange information on revenues generated by sellers on online platforms, along with other measures to strengthen and clarify rules on tax abuse.

And the ‘Communication on tax good governance’ contains recommendations aimed at reforming the EU’s code of conduct on business taxation (a political commitment made by member states, although it is not legally binding) is intended to encourage more work promoting transparency.

“Now more than ever, member states need secure tax revenues to invest in the people and businesses who need it most,” said Valdis Dombrovskis, the European Commission executive vice-president who oversees its work on economic policy.

“At the same time, we need to break down tax obstacles and make it easier for EU companies to innovate, invest and grow.”

Ahead of the announcement, expert bodies Accountancy Europe and CFE Tax Advisers Europe urged policymakers to develop a ‘cooperative compliance’ approach while longer-term reforms are developed.

Cooperative compliance aims to foster better ‘tax morale’ to improve yields rather than implement measures to punish non-compliance, through active engagement between firms and the state and commitments by businesses to implement strong systems of risk analysis and internal controls.

The idea is that it is a waste of resources to closely monitor compliant companies and, although it represents a high initial cost to develop the system – as well as, in some firms, a fundamental change in culture – it is a more efficient way of encouraging tax payments.

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