How fairer tax policy could achieve stability and solidarity
EU-funded researchers believe that better coordinated tax regimes will increase economic stability and prevent a damaging race to the bottom, where countries compete for the lowest tax rates.
© adrian_ilie825 #211500901, source: fotolia.com 2018
The EU-funded FAIRTAX project, which is carrying out a comprehensive review of EU fiscal policy, is using its findings to put forward a series of recommendations on tax issues. One recommendation is that legislators should address these issues more positively.
Policymakers should concentrate on active measures to encourage tax compliance rather than focus on the distortive effects of tax regulations, says project coordinator Åsa Gunnarsson from Umeå University in Sweden. Our findings also reaffirm the importance of traditional revenue sources, such as income tax and corporate tax, but recognise the potential of other tax bases, too, like wealth-related taxes, value-added taxes and environmental taxes.
One suggestion FAIRTAX researchers have put forward is an EU-wide carbon tax on flight tickets. At the same time, this links taxation with a central aim of the EUs Europe 2020 strategy: promoting smart, inclusive and sustainable growth in the EU.
A key message from the project would be that in order to fight climate change and promote equality, policymakers should concentrate on the tax base issue, says Gunnarsson. This message will hopefully be one of the projects key long-term impacts.
Recent project discussions with stakeholders in Brussels also confirmed the benefits of a holistic and collaborative approach to sensitive issues such as tax competition and corporate taxation. We think there is much to gain if tax policy interaction between Member States and the EU could be increased, considering that taxes are one of the most efficient instruments to achieve social and welfare policy outcomes, says Gunnarsson.
This would help to address the issue of divergences in national tax laws and the difficulties in enforcing cross-border transactions. Although the EU is the worlds largest economic bloc, limited tax harmonisation can allow international companies to decide where to base their offices according to which country offers them the best tax deal.
The FAIRTAX project aims to address the burden on citizens and companies which may result from this apparent lack of solidarity. The project ends with a final conference in Brussels in February 2019.