14 October 2022

AccountancyEurope: EC’s consultation on tax evasion and aggressive tax planning in the EU

The impact of aggressive tax planning and evasion are matters of crucial importance to governments, especially in view of the potential impact that recent and current global crises will have on tax yields andgovernment spending.

We have no empirical evidence of our own to provide on this topic but the European Commission’s Annual
Report on Taxation (https://op.europa.eu/en/publication-detail/-/publication/22508340-1149-11ed-8fa0-
01aa75ed71a1/language-en/format-PDF/source-262413960 ) states that EU revenue lost to international tax
evasion was 124 billion euro in 2018 and the VAT gap was 134 billion euro in 2019. Estimates of the EU tax
revenue lost annually to corporate income tax avoidance are up to 37 billion euro, and royalty flows towards
zero or low tax jurisdictions could cost up to 11.9 billion euro per annum. These estimates indicate that tax
evasion and aggressive tax planning are a substantial problem in the European Union.

However, these figures are estimates and the potential impact of many forms of tax avoidance and evasion
on specific taxes is not well researched. Determining the impact of aggressive tax planning on Member
States’ economies is also complicated by the lack of a harmonised definition of the term.

The comments immediately below relate to both this question and the questionnaire as a whole.
Tax evasion and aggressive tax planning are not the same and should not be conflated. Tax evasion is
illegal (OECD: “A term that is difficult to define but which is generally used to mean illegal arrangements
where liability to tax is hidden or ignored”), and most countries have established laws and procedures for
identifying, prosecuting, and punishing such illegal acts. Aggressive tax planning is not illegal, although it
does exist in the grey zone of legality and there are ethical and social responsibility issues with developing
and promoting tax structures that exist in this grey zone.

Furthermore, there is no common approach to defining such activities and legislating against them. Unless
otherwise stated, our responses refer to aggressive tax planning only.

This distinction is important as it directly impacts the questions in this survey on policy options on such
issues as penalties. Fighting tax evasion and aggressive tax planning also require different tool kits – to fight
tax evasion authorities require investigation and discovery tools. To fight aggressive tax planning, disclosure
tools are effective if supported by tax officials with the appropriate technical skills.
We refer to 'tax intermediaries’ in this survey - by which we mean any individual or organisation involved in
advising on, implementing, and facilitating tax services. It would include accountants, lawyers, notaries,
banks, and company service agents, for example, and this list is not exhaustive. All tax intermediaries
involved with tax services that take place within the EU must be included in any proposed measures to
ensure a level playing field. This includes tax intermediaries that are not members of professional bodies or
otherwise regulated....

more Full paper

AccountancyEurope

© Accountancy Europe