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Fighting tax evasion

By George Markopouliotis

Tax evasion and avoidance deprive public budgets of billions of euros a year, create a heavier tax burden for citizens and cause competitive distortions for businesses that pay their share.

They also undermine the EU goals of growth, competitiveness and a stronger Single Market.

The cross-border nature of tax evasion and avoidance means that action only at the national level cannot tackle these problems and can even lead to further problems.

Unilateral efforts by Member States to protect their tax bases may create burdens for tax payers, legal uncertainty for investors and new loopholes for aggressive tax planners to exploit.

The Juncker Commission is pursuing an ambitious campaign for a coordinated EU approach against tax evasion and avoidance.

We want to boost the Member States’ collective stance against these problems, restore fairness in taxation, allow authorities to detect and prevent tax abuse and ensure stability for citizens and businesses in the EU.

This campaign is more pertinent following the recent media leaks: the so-called Panama Papers have exposed loopholes in the international tax system, which need to be urgently addressed.

This is why the Commission has set out the next steps to boost tax transparency in order to fight tax evasion and avoidance in the EU, building on the far-reaching transparency initiatives it has already delivered.
First of all, it has become clear that individuals and companies can still escape taxation by hi-ding funds and assets offshore, often in opaque companies, trusts and funds.

Therefore, the Commission has proposed strengthening and extending the EU transparency requirements for beneficial ownership, so that tax authorities can pro-perly identify the true beneficiary behind a trust or company.
Secondly, the role of intermediaries (e.g. financial institutions, law firms, tax advisors) in promoting and assisting in tax evasion schemes has been put in the spotlight through the recent revelations.

In line with calls from the European Parliament to subject tax advisors to greater scrutiny, the Commission will examine the most appropriate measures to create more transparency and accountability in this sector.

Thirdly, despite important advances in the international tax good governance agenda, certain countries still facilitate or even encourage tax evasion and avoidance.

As foreseen in the Commission’s External Strategy, work has already started to develop a common EU list of tax jurisdictions that do not respect tax good governance standards which should be ready in 2017.

The preparatory work on this list is expected to have a strong dissuasive effect on third countries that refuse to respect tax good governance standards or enable aggressive tax planning.

Finally, many cases of tax evasion and avoidance have recently come to light, thanks to the actions of whistle-blowers.

The European Parliament and other civil society groups have called for stronger measures to protect those that expose such wrong-doing in the public interest.

Current EU law contains protection of whistle-blowers in sectorial legislation, for example on market abuse.
The Commission will assess the need for horizontal or additional sectorial measures in order to increase the protection of whistle-blowers.

The writer is head of the European Commission representation in Cyprus

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