'Pervasive' tax fraud needs EU response, says commission

Greater cooperation is needed at the European level to claw back €1 trillion that is lost to tax fraud and evasion every year, the European Commission said today as it outlined a series of proposals to tackle the problem.

Among the ideas are cross-border identification numbers for taxpayers, common minimum sanctions for tax crimes, more sharing of information between member states, and measures to take on tax havens.

At a press conference in Brussels, tax commissioner Algirdas Semeta said: "Let there be no illusion: tax evaders steal from the pockets of ordinary citizens and deprive member states of much-needed revenue. If we want fair and efficient tax systems, we must stamp out this activity." He said the political will to "intensify the battle" existed and had to be translated into action at national, European Union, and international levels.

The suggestions will be discussed by EU leaders at their Brussels summit Thursday and Friday. Meanwhile Semeta said that before the end of the year the commission would publish an action plan including specific proposals, as well as an outline of how the EU can use its "collective muscle" to deal with tax havens.

"Tax evasion is not a problem that any member state can tackle alone," the commissioner said. "Fraud and evasion are pervasive, and they thrive on national mismatches and insular thinking. Therefore using our strength as a union is the best weapon that we have to fight these activities and to reclaim enormous sums of public money for honest EU citizens." A first step would be improving the administration of tax collection, he said.

But he also called on member states to "go the extra mile in terms of transparency" by granting each other access to their tax databases. "There must be more trust, solidarity and more coordination at EU level," he said. In addition, national governments should be "mindful" of the impact their tax policies might have on other EU countries, and should "refrain from measures that unfairly steal revenues".

Agreeing a revised savings directive and strengthened deals with havens such Switzerland – designed to recoup unpaid tax on earnings – remains "the most pressing priority" at EU level, the commissioner said. In May, Austria and Luxembourg blocked EU talks following a dispute over the automatic sharing of information about deposits. "Blocking agreement is akin to blocking much needed revenue for all the other member states," Semeta said.

The EU needs to take on the "pay as little as you can" attitude of some companies, he added. "Paying taxes may not be pleasant, but it is what holds our society together. Why should teachers, nurses and shopkeepers carry a heavier tax burden just because large companies can employ clever tax planners to avoid paying their share?"

Jean-Paul Gauzès, from the European People's Party in the European Parliament, said the commission should "show courage and ambition" when it presents its legislative proposals. And Alliance of Liberals and Democrats MEP Olle Schmidt said the EU needed a "strong framework to reinforce the fight" against tax fraud and evasion.