July 10th, 2012 by Angela Offerman
The U.S. tax gap has captured major national attention since the latest figure was released earlier this year, climbing to an astonishing $450 billion, and putting a stop to the growing number has proven to be quite difficult. Now, it looks like tax gap challenges are not limited to the U.S. alone. As several European economies are continuing on a downward spiral, EU countries are also looking to tackle the tax gap to assist in recovery, and they are not doing so alone.
At the March 2012 European Council, Member States asked the European Commission “to rapidly develop concrete ways to improve the fight against tax fraud and tax evasion,” after it was released that the shadow economy across the 27 Member States was estimated to total nearly €2 trillion. The Commission delivered its plan late last month, setting out a 3 tier approach aimed at attacking evasion and fraud from every possible angle.
At a national level, recommendations focus on member states improving their administrative capacity to collect taxes and assisting companies in dealing with multiple VAT obligations. Plans at the European level include strengthening common tools across countries to share information and a possible European cross border tax identification number as a quick mechanism for reducing fraud and evasion. International proposals center on the Commission negotiating stronger savings agreements with neighboring countries and developing a “stick and carrot” approach to dealing with tax havens.
Commissioner for taxation, customs, anti-fraud and audit, Algirdas Šemeta, made it clear the group is serious about their proposal and efforts. “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. The political will to intensify the battle is there. Now it is time to translate that into action. As a Union of 27, we have a powerful advantage—strength in numbers. If we play as a team, with a common strategy, we can defeat the fraudsters and evaders, and reclaim vast sums of money that are legitimately due,” she stated.
The Commission will start developing the ideas set out in last month’s communication and will present an action plan with specific measures by the end of the year. In conjunction, the group will also set forth an initiative on tax havens and aggressive tax planning.
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