Tax reforms needed for consolidation and growth
Brussels, 23 November 2011 – The European Commission is accelerating its efforts for economic renewal, with moves to address three interwoven challenges facing the EU and the euro area in particular: a divergent but generally lacklustre growth and employment performance; insufficiently coordinated and disciplined budgetary policies; and unstable sovereign debt markets suffering from a lack of liquidity. The package contains four elements: the 2012 Annual Growth Survey (AGS)setting out the economic priorities for the coming year; two Regulations to tighten economic and budgetary surveillance in the euro area; and a Green Paper on Stability Bonds.
Commissioner Šemeta, responsible for Taxation in the press conference today said that in the coordination of fiscal policies, a new element is recognised this year in the AGS: "Tax policy is fundamental for economic recovery. Moreover, the quality of taxation will determine whether we sink or swim. Tax reform must go hand in hand with structural reform if we are to see sustainable public finances and financial stability."
The AGS advises Member States to take a close look at how the quality of their revenues can be improved, focussing on a number of important areas in particular:
Raising revenues in a smarter way: Instead of arbitrarily raising rates, Member States should look at how to improve their current tax systems to raise revenues - for example, reconsidering tax breaks, broadening tax bases and phasing out hidden tax subsidies.
Tackling ta x evasion and fraud: Many billions of euros are lost from national budgets every year due to tax evasion and fraud. Member States need to strengthen their administrations to combat this problem, and ensure that the controls and sanctions are strong enough deterrents. Coordination at EU level is also crucial. It can ensure that aggressive tax planners can't exploit loopholes between Member States' systems and that there is a consistent EU approach to third countries when it comes to tackling uncooperative jurisdictions.
Creating a better environment for business : Member States are advised to examine whether they could shift taxes away from areas that impede growth (labour, corporate taxes) towards more growth-friendly taxes (consumption, environment). Member States should also agree on proposals that would remove obstacles for businesses such as the Common Consolidated Corporate Tax Base and the Energy Tax Directive.
Coordinating at EU level to maximise reforms: EU coordination on taxation prevents distortions and obstacles to the Internal Market, limits non-taxation and abuse, and prevents a "race to the bottom" approach which can curtail national reform efforts. It also allows the exchange of best practices and strength in numbers when tackling common problems such as harmful tax competition from third countries.
Commissioner's speaking points in the press conference: click here.
IP/11/1183 New action for growth, governance and stability
MEMO/11/820 European Commission Green Paper "Feasibility of introducing Stability Bonds"
MEMO/11/821 The 2012 Annual Growth Survey: Frequently Asked Questions
MEMO/11/822 Economic governance: Commission proposes two new Regulations to further strengthen budgetary surveillance in the euro area