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Other ways in which EU countries could benefit by better coordinating their tax systems are set out in a separate resolution, also voted on Tuesday, on the annual tax report.
"The scope for cross-border tax fraud is scandalous, and unilateral national measures will not suffice to defeat it", said Mojca Kleva Kekuš (S&D, SI), the lead MEP on the resolution on tax evasion.
"We need a common platform to exchange tax information in years to come and tax systems that foster growth. What we need is not more taxes, but more people and more companies paying them'', said Ildiko Gáll-Pelcz (EPP, HU), the lead MEP on the annual tax report.
Close the tax gap
The key need is to close the "tax gap", i.e. revenue lost to tax fraud and evasion, which are illegal, but also to legal tax avoidance and aggressive tax planning that exploits loopholes, mismatches between tax systems and a lack of intra-EU and international cooperation, says the Kekuš text. Uncollected taxes amount to roughly €2,000 per EU citizen per year, it adds.
Tax haven blacklist
To combat tax fraud and avoidance, the resolutions urge Member States to agree a clear EU-wide definition of "tax haven" and draw up a joint blacklist of these jurisdictions.
No public funding for tax cheats
The duty placed upon Member States seeking financial assistance to improve their capacity to collect taxes and tackle tax fraud should be extended to money laundering, tax avoidance and aggressive tax planning, say MEPs. No EU funding or state assistance should go to firms that breach EU tax standards, and any firm bidding for a public procurement contract should be required to disclose details of any tax-related penalties or convictions. Public authorities should also be entitled to terminate the contract if a supplier subsequently breaches tax compliance obligations, they add. Finally, to help nail tax evasion, Member States should use data bases on motor vehicles, land and yachts and use protected whistleblowers and journalistic sources, say MEPs.
Customs and VAT
As taxes are not administered at EU level, it is mainly up to Member States to step up the fight against the tax fraud. MEPs urge them to work together to harmonise tax bases, enforce measures to prevent firms from shifting profits to tax havens to avoid paying tax and improve the cross-checking of customs and tax data so as to reduce VAT fraud.
Finally, MEPs urge the EU to lead the efforts of multinational fora to improve tax transparency and information exchange. It notes that tax avoidance forces upon developing countries an estimated loss of €125 billion a year, i.e. almost twice what they receive in international aid.
To boost the potential for EU economic growth and keep harmful tax competition to a minimum, in the annual tax resolution MEPs propose a "tax-snake" system to facilitate EU coordination, provide tax information and keep track of cuts and increases made within each country's tax structure.
Both resolutions were approved by a show of hands.
See also:
Addressing the EP, President Barroso highlighted that tax fraud and tax evasion are equally important, not just for their economic impact but for the legitimacy of our efforts as well: "The total loss of revenue due to illegal fraud and unacceptable evasion is estimated to be around one trillion euros a year. How can we explain to honest households and businesses who are feeling the squeeze yet still paying their fair share of taxes, that there are other parts of society and enterprise who are deliberately avoiding paying up? How can we justify that fiscal consolidation is requiring Member States to make difficult choices to reduce expenditure, yet at the same time there are whole piles of cash that should be in the public purse but are never collected?"
President Barroso highlighted the need to come to concrete conclusions and commitments: "At a time when debate about Europe is all too often a futile shouting match between believers and non-believers, this is a discussion that separates those who like to talk from those who are willing to act, and those who prefer to attract attention to themselves from those who are determined to achieve results for citizens".
Full speech © European Commission
In his opening remarks at the European Council on 22nd May, President van Rompuy said: It's high time to step up the fight. We've seen headline-after-headline highlight loopholes in tax systems. We know it's a problem none of you can solve on his or her own. And that, Europe-wide, hundreds of billions of euro are at stake. So we need to channel the momentum and keep up the pressure.
Just to be perfectly clear: we're not talking about harmonising taxes, or Europe taxing more or taxing less. No. We're talking about jointly fighting unacceptable practices that allow some people to avoid paying taxes altogether. It's simply a matter of fairness. We have limited time, so let's get down to business!
Full remarks © European Council