Draft report on the European Semester for Economic Policy Coordination: Annual Growth Survey 2013

06 December 2012

This draft report by Rapporteur Elisa Ferreira contains detailed recommendations concerning an alternative strategy, democratic control and legitimacy, and tax evasion.

Recommendation 1 Concerning an Alternative Strategy

The Commission and the Council should adopt a new six-fold alternative strategy as set out below:

  1. The fiscal consolidation should be delayed and spread in due respect of current EU fiscal rules. Instead of nearly €130 billion of consolidation effort for the whole euro area, a more balanced fiscal consolidation of 0.5 point of GDP, in accordance with treaties, the SGP and even the fiscal compact, would give for 2013 alone a concrete margin for manoeuvre of more than €85 billion. By merely delaying and capping the path of consolidation, the average growth for the eurozone between 2013 and 2017 may be improved by 0.7 point per year.
  2. The speculation on the sovereign debt of Member States must be stopped. The European Stability Mechanism (ESM) must be brought as soon as possible into the community management structure with the ECB as a backstop.
  3. The persistent and long-lasting cumulative imbalances that have been increasing throughout the functioning of the common currency due to the asymmetric impact of common policies across different economies need to be adequately addressed through specific convergence instruments to foster the competitiveness of lagging economies, in particular by increasing the conditions for growth-enhancing investment in the latter.
  4. Lending by the European Investment Bank must be significantly increased as well as other measures (notably the use of structural funds and project bonds), so as to genuinely advance the European Union growth agenda. The Compact for Growth and Jobs has to be urgently transformed into concrete investments.
  5. Legal initiatives and policy instruments have to be implemented so that credit flow to the real economy is re-established. Companies, especially SMEs, need to have access to financing and the conditions for such financing should be similar inside the Internal Market, more so inside the eurozone.
  6. A close coordination of economic policies must aim at reducing internal imbalances in the EU and in the eurozone in particular. The adjustment must not only rely on deficit countries. Surplus countries must also take measures to boost their internal demand and receive recommendations from the Commission accordingly.

Recommendation 2 Concerning Democratic Control and Legitimacy

Reiterates the need to fully involve Parliament – the only supranational European institution with electoral legitimacy – in economic policy coordination and in the Annual Growth Survey.

Recalls that the European Parliament must be recognised as the appropriate European democratic forum for providing an overall evaluation at the end of the European Semester; believes that, as a sign of this recognition, representatives of the EU institutions and the economic bodies involved in the process should provide information to the European Parliament when asked to do so; demands that the EP democratic control be enshrined in the Inter-Institutional Agreement on the European Semester.

Recommendation 3 Concerning Tax Evasion

Using consistently credible sources the resulting estimate of tax evasion and tax avoidance in the European Union reaches approximately €1 trillion a year. Tackling both tax avoidance and tax evasion is possible only if Member States are willing to consistently implement actions that build on introducing: country-by-country reporting, a Common Consolidated Corporate Tax Base, a thorough accounting reform, a change in corporate accounting disclosure for tax purposes, more investment in tax audits staff and an upgrade and extension of the European Union Savings Tax Directive.

The Commission presented an action plan on tax fraud, tax evasion and tax havens; this new focus must be unanimously embraced by Member States with a view to agreement on an ambitious while realistic headline target: halving the tax gap by 2020. By moving towards this target, Member States would gradually achieve new tax revenue without raising tax rates at the level of several hundred billion € a year.

The Commission and the Council must act on the following five key issues:

  1. Reforming the accounting rules and corporate accounting disclosure
  2. Upgrading and extending the scope of the European Union Savings Directive
  3. Ensuring compulsory Common Consolidated Corporate Tax Base
  4. Introducing country-by-country reporting for cross-border companies.
  5. Strengthening regulation of company registries and registers of trust

This will have to include adequate EU-wide agreements with key non-EU countries currently providing platforms for financial institutions facilitating tax fraud and evasion activities from within the EU, such as Switzerland.

It is of paramount importance that the Commission deals with non-EU countries on behalf of the EU as a whole without leaving the initiative to single countries engaging in bilateral agreements. Namely the EU must lead the discussion, in the G20 and then G8, on the fight against tax havens.

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