European Commission: The future of tax policy - A matter for society as a whole

29 April 2015

Moscovici: "In the next few years, I will aim at advancing an agenda focused on fairness, transparency and a truly single market from a taxation point of view."

Speech by Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs

Taxation is not some dry, technical matter: it is part and parcel of the growth agenda President Juncker has been implementing with determination since November. Taxation must support the objectives of the European Union, and in particular help boost economic recovery:

• From a business perspective, today's fiscal rules fragment the internal market along national lines, increase the administrative burden of doing business in several European countries and reduce legal certainty. SMEs in particular, who have limited resources, typically do not resort to tax optimisation techniques, and face a clear disadvantage in competing for market shares beyond national borders.
• From a government's perspective, aggressive tax planning leads to deficiencies in the tax collection mechanism and results in a revenue shortfall - and I completely agree in this respect with the title you chose for your conference today: "the future of tax policy" is indeed "a matter for society as a whole".
• Finally, from a political perspective, aggressive tax planning and the overall lack of transparency across Europe have a corrosive effect on the principle of "no taxation without consent". Democratic accountability is also at risk when large corporations are in a position to make Member States compete to house their headquarters or operations: the prerogative to set the level of taxation is no longer exercised by citizens and their representatives, but by multinational corporations. This is a key issue for all of us.

The European Union needs an ambitious roadmap to put an end to the distortionary nature of its tax policy and regulatory framework. In my view, the way forward is clear:

• The EU must enhance transparency in tax matters;
• And Member States must coordinate their tax systems to counter tax base erosion.

[...]

Both President Juncker and I have already stated that the Action Plan will build on 5 key actions, starting with the relaunch of the Common Consolidated Corporate Tax base (or CCCTB), which would harmonise the tax base for many companies operating across borders in the EU and allow businesses to consolidate their taxable profits across Member States.

The CCCTB is a key building block in the agenda for fairness, transparency and a truly single fiscal market I mentioned earlier. It would make the internal market more competitive, as business would need to comply with just one set of tax rules and would allow them to offset profits in one Member State with the losses made in another. But it would also limit the opportunities for these companies to manipulate their tax position, thereby providing a holistic approach to combatting evasion within the EU. We need to assess the modalities of such a relaunch.

We have a fine line to tread. On the one hand we want to put an end to tax avoidance, evasion and aggressive tax planning strategies and ensure that profits are taxed where the value is generated. On the other hand we must be watchful not to penalise legitimate business, either by imposing disproportionate administrative burdens, by creating legal uncertainty or by generating situations which lead to double taxation. For years we have worked hard to enhance the single market and reduce the barriers to cross border activity: we will be mindful not to create new barriers in our eagerness to put an end to harmful tax practices.

In addition, the Action Plan will build on global developments, in particular the work of the OECD on Base Erosion and Profit Shifting which Pascal Saint-Amans described this morning. The EU must be careful to ensure that the outcome of the BEPS project meets the needs of the internal market and respects Treaty Freedoms.  

Full speech

© European Commission