Šemeta: Tax systems can be designed in a competitive way without engaging in harmful tax competition.

27 October 2011

Šemeta stressed that by focusing on a sound tax policy that enhances the quality of taxation and involves coordination and cooperation at EU level, a competitive tax system can be combined with a sustainable level of tax revenues.

Tax competition between Member States can be productive, to the extent that Member States benefit from each others' best practices. It can contribute to developing simpler, more transparent growth-oriented tax systems which maintain re-distributional capacities.

This can be achieved by respecting some general principles, to the extent feasible:

• First, simplicity and efficiency: a broad base with lower rates is easier to manage and understand than a higher general rate with many complex incentives.
• Second, provisions discriminating against either residents or non-residents must be eliminated. This would ensure the neutrality and fairness of the tax system.
• Third, the administrative burden for potential investors should be reduced by simpler rules. Tax administrations should be attentive to taxpayers' needs as much as possible, by adopting facilitation instruments like one stop shops.
• Finally, investors should be offered certainty and stability by avoiding frequent amendments to tax laws.

By implementing, in a coordinated way, those principles in the European Union, the single market will become attractive for long-term, tangible investments. That type of investment brings much more economic benefit than highly-mobile activities that are easily lured in, but that will also leave easily.

Full speech

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