EU Tax Policy Strategy
The European Commission's tax policy strategy was explained in a Communication of 23 May 2001 on "Tax policy in the European Union - Priorities for the years ahead" (COM (2001) 260). See also the press release IP/01/737 and frequently asked questions MEMO/01/193 ).
- In this Communication, the Commission reiterated its belief that there is no need for an across the board harmonisation of Member States' tax systems. Provided that they respect EU rules, Member States are free to choose the tax systems that they consider most appropriate and according to their preferences. In addition, any proposal for EU action in the tax field needs to take account of the principles of subsidiarity and proportionality. There should only be action at EU level where action by individual Member States could not provide an effective solution. In fact, many tax problems simply require better co-ordination (see COM/2006/823 of 19.12.2006) of national policies.
- Within this framework, this Communication established as a main priority for tax policy that of addressing the concerns of individuals and businesses operating within the Internal Market by focusing on the elimination of tax obstacles to all forms of cross-border economic activity, in addition to continuing the fight against harmful tax competition and promoting greater cooperation between tax administrations in assuring control and combating fraud.
This focus on the taxpayer is linked to the Commission's general objective of ensuring that tax policy supports wider EU policy objectives, as set out most recently in the "Europe 2020 strategy" for smart, sustainable and inclusive growth in the EU and in the Single Market Act. Increased tax policy co-ordination would help Member States to meet these objectives.
On 20 December 2010, the European Commission, as part of the objective under the Europe 2020 strategy of empowering EU citizens to play a full part in the single market, announced plans to ensure that tax rules do not discourage individuals from benefiting from the internal market. The Communication "Removing cross-border tax obstacles for EU citizens" outlines the most serious tax problems that EU citizens face in cross-border situations, such as discrimination, double taxation, difficulties in claiming tax refunds and difficulties in obtaining information on foreign tax rules, and announces plans for solutions.
See the press release (IP/10/1751 ), the citizens' summary in 22 languages, the Communication (COM/2010/769 ), and the Staff Working Document (SEC/2010/1576 ) which describes the Commission's problem-solving services for EU citizens and the types of tax rules that have been found incompatible with the EU Treaties.
Some co-ordinated action to tackle tax obstacles and inefficiencies has been achieved in the company tax, VAT, excise duties, and car tax areas. Measures have also been taken to tackle tax evasion via the savings tax Directive and via Directives providing mutual assistance between tax administrations. The Commission has also become more pro-active in taking legal action where Member States' national tax rules or practices do not comply with the Treaty.
- Another area for action is Research and Development (R&D), given its impact on growth and jobs. In its Communication COM(2006) 728 of 22 November 2006 (see press release IP/06/1598 , MEMO/06/440 and the study published in 2004), the Commission examines a more effective use of tax incentives for R&D. The Communication clarifies the legal conditions arising from EU case law and sets out some basic principles and good practices for the design of such incentives. Member States are encouraged to improve the use and coordination of those tax measures. The Communication also offers Member States guidance on the main design options.
- The Commission, in its opinion to the Convention on the future of Europe (COM(2003) 548 final), expressed the belief that retaining unanimity for all taxation decisions makes it difficult to achieve the level of tax co-ordination necessary for Europe and made proposals for a move to qualified majority voting in certain tax areas. However, Member States did not agree to these qualified majority voting proposals.
- In addition, the Commission has started to make more use of non-binding approaches such as recommendations instead of legislative proposals where appropriate, as a way of making progress in the tax field. The route of closer co-operation between sub-groups of like-minded Member States is also being explored.
- The Commission has published regular statistical and economic analysis of the tax systems of the EU Member States with a view to providing information to Member States and the public on taxation trends in recent years.
- The Commission has also taken several steps in order to promote good governance in the tax area, i.e. transparency, exchange of information and fair tax competition, as outlined most recently in its Communication of 28 April 2009 (see the the 28/04/09 Communication on good governance (COM (2009) 201)). This Communication is designed to identify the particular EU contribution to good governance in the area of direct taxation, both within the EU and beyond. Agreements with as many third countries as possible on common principles of good governance in tax matters should help EU Member States and their partners to balance the need to protect their revenues and their social and public spending policies with the need to open up their economies so as to promote growth and jobs.
- The removal of tax obstacles in the area of financial services has gained importance as part of the development and implementation of the Commission's Financial Services Policy. The European Commission adopted a recommendation on 19 October 2009 that outlines how EU Member States could make it easier for investors resident in EU Member States to claim withholding tax relief on dividends, interest and other securities income received from other Member States. The recommendation also suggests measures to eliminate the tax barriers that financial institutions face in their securities investment activities while at the same time protecting tax revenues against errors or fraud. The recommendation is designed to provide guidance to Member States in how to ensure that procedures to verify entitlement to tax relief do not hinder the functioning of the Single Market. The recommendation is based on the (2006-2007) reports of the EU Clearing and Settlement Fiscal Compliance Experts' Group (FISCO) ( IP/07/1569 ), follows upon an extensive stakeholders' consultation and has been discussed on several occasions with the financial services industry and tax administrations in Member States.