Thursday

6th Oct 2022

Commission opens debate on tax competition within EU

  • Aggressive tax planning has become an 'unbearable' problem for the EU, said commissioner Moscovici. It is believed to cost €50-€70bn in lost revenue (Photo: European Commission)

The European Commission opened up the debate on tax competition between member states on Wednesday (7 March), by asking seven countries to stop what they called "aggressive tax planning".

Tax policies in Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands "have the potential to undermine fairness and the level playing in our internal market and increase the burden to EU taxpayers," tax commissioner Pierre Moscovici said at a press conference.

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He said that aggressive tax planning had become an "unbearable" problem in the EU and that is was "part of the imbalances that have to be reduced."

"We must ensure that fair taxation becomes the rule without exception, outside of the EU or inside the EU," he added.

Since a series of leaks on tax avoidance, the commission has stepped up the fight against tax havens outside the EU. In the meantime, pressure has increased to also put an end to practices within the EU. 

According to the commission, between €50bn and €70bn are lost each year because of profit-shifting within the EU.

In a text presenting the economic reports on EU countries published Wednesday, the EU executive said that "tax abuse can be reined in by strengthening national tax legislation, increasing transparency, and cooperation among governments."

It insists that member states, and the seven in particular, have to put the anti-tax avoidance directive (ATAD) into their national legislation.

"If you take an interest in Europe you have to think about it, we have to lead by example," Moscovici said, insisting that there is "still a lot to be done."

"It is very good news that the European Commission seems ready to finally tackle harmful tax competition inside the European Union," Oxfam said in a statement.

The NGO's deputy director for advocacy and campaigns, Marissa Rya, welcomed the "naming and shaming" strategy by the commission.



Sven Giegold, the Greens' spokesman for tax issues in the European Parliament, said that "it is great to see the European Commission finally acknowledge the role of EU countries in facilitating tax avoidance."

"The big offenders are not just distant tropical locations like Panama and Bermuda," he added.

Commissioner Moscovici however rejected the comparison.

"I maintain my view that there is no such thing as tax haven in the EU," he said.

He said that there were just "some regions of shade, others of light, there's a lot of different nuances," and that he did not want to "point fingers" at EU countries.

Bettel bites back

But the commissioner's position was already too much for Luxembourg's prime minister Xavier Bettel.

"I think the principle of the European Union is not to point out one country now against another," Bettel said.

He added that "it would have been more opportune and efficient to speak with the countries before and try to have an exchange on these different topics."

The commission's raising of the tax planning issue and the Moscovici-Bettel spat come ahead of the presentation by the commission, later this month, of a proposal to tax internet companies.



Luxembourg, along countries like Ireland and Malta, have been among the most vocal against the idea, which is pushed by countries like France and Germany.

The issue of tax transparency will be on the table of finance ministers at their meeting next Tuesday (13 March).

EU states loosen grip on tax havens

Finance ministers removed eight entities from the tax havens blacklist, while ruling out more transparency or sanctions - prompting criticism from tax-campaigning NGOs such as Oxfam.

EU commission eyes majority tax rules

The commission plans to address tax avoidance schemes in some EU states by shifting tax decisions away from unanimity to a majority system in what amounts to a long shot.

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EU officials were warned of risk over issuing financial warning

The European watchdog for systemic economic risk last week warned of "severe" threats to financial stability — but internal notes show top-level officials expressed "strong concerns" over the "timing" of such a warning, fearing publication could further destabilise financial markets.

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