Tax evasion must be beaten to hasten EU recovery

By The Canberra Times

843 words
3 December 2013
Canberra Times
CANBTZ
B004
English
(c) 2013 The Canberra Times
Tax evasion must be beaten to hasten EU recovery

T he European economy is on the mend - slowly, but surely. First signs of growth are emerging, budget
deficits have been cut, financial markets have stabilised, confidence is up, and two member states - Ireland
and Spain - are on the cusp of exiting their assistance programs. Not long ago, some people, including in
Australia, were predicting the death of the euro; today this isn't up for discussion. In short, the EU has left the
intensive care unit, and is now in the recovery ward.

The approach we took as a union is proving to be the right medicine. Intense efforts to consolidate budgets,
beef up economic oversight, instigate deep structural reforms and overhaul financial regulation are paying off.
Practically speaking, Europe has made remarkable progress in economic integration in a relatively short
period of time. We have created a solid framework of economic governance and deepened co- ordination
within the EU. This will ensure that when the crisis is behind us, the EU will be stronger and more stable than
ever before.

However, we are not out of the woods yet, and won't relax at these first positive signs. Challenges beyond
urgent consolidation now step into the spotlight: tackling high unemployment, restoring bank lending and
modernising public administrations. Without question, we need to sustain the economic recovery, and push
forward with reforms for growth and competitiveness.

Taxation - for which I am responsible at EU level - will be as pivotal in the recovery process as it was in the
time of extreme crisis. In recent years, fiscal policies in Europe have been driven primarily by the need to
consolidate public finances. The result has been an overall rise in the tax burden. But, while the primary role
of taxation

is to raise revenues, it certainly isn't the only one. The impact that tax policies also have on wider economic
and social objectives is immense. So in the context of our deeper economic governance and co-ordination,
the EU is working towards tax reforms that promote growth, competitiveness and fairness. There are a
number of ways to do this.

Shifting the tax burden away from labour to more growth- friendly bases, such as property, environment and
consumption, is one. Removing the debt bias in taxation is another. But perhaps of most interest to Australia,
as it assumes the presidency of the G20, is the EU's intensified fight against tax evasion. Tax evasion and
avoidance costs public budgets around �100 billion ($150 billion) a year in Europe - roughly the annual
gross domestic product of Australia. Clamping down on tax evasion therefore ticks all the boxes when it
comes to implementing good tax policies. It is good for growth, because it can deliver vast new revenues
without the need for higher taxes. It is good for competitiveness, because it protects the EU

economic model, and ensures that our free markets and open economies are not open to abuse. And above
all, it is good for ensuring fairness in our tax systems, which is crucial for public support.

Honest taxpayers should not have to pay more to compensate for fraudsters. Over the past year, the EU has
been leading a drive towards more tax transparency and good governance - both at home and abroad. At EU
level, we launched an ambitious action plan against tax evasion. This includes, among other things,
measures to blacklist tax havens, thwart aggressive tax planning, respond better to VAT fraud, tighten
corporate tax law, and improve co-operation between enforcement bodies.

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At international level, the EU has drawn on its unrivalled experience in tax good governance to considerably
influence the agenda. We have worked closely with the OECD, which of course includes Australia, and
welcomed with open arms the G20's backing for fundamental changes to international tax rules. Automatic
exchange of information has been accepted as a new global standard, mirroring

standards applied in the EU for almost a decade. And the OECD action plan on base erosion and profit
shifting has been endorsed as the international response to corporate tax avoidance. The political
commitment to change has been made.

What is important now is that it translates into real action. We must strike while the iron is hot, and keep to the
ambitious timeline for delivery. This is where Australia carries an immense responsibility. As next president of
the G20, Australia will need to exert strong political will to ensure that momentum doesn't drop in the
international drive against tax evasion.

Fixed milestones have to be set, and deadlines need to be kept, to ensure goals we have agreed are met.
The world is ready to move towards fairer, more open and more effective taxation, but it needs leadership to
bring it there. We look to Australia for this leadership, and the EU will support it in this common endeavour.

Algirdas Semeta is the EU's Commissioner for Taxation, Customs, Anti-Fraud and Audit.

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