Commissioner hearings: TAXUD Commissioner Šemeta wants to ensure quality of EU expenditure

14 January 2010

Some of the proposals addressed by Lithuanian Commissioner-designate Algirdas Šemeta concern tackling fraud, reducing spending errors, improving Commissioners' code of conduct and harmonizing the corporate tax base and VAT calculation rules.

Šemeta CV, EP press release, written questions

Tackling fraud and reducing spending errors, improving the code of conduct for commissioners, harmonising the corporate tax base and VAT calculation rules, pushing forward "green" taxes and electronic customs - these are some of the proposals addressed during the hearing of the Lithuanian commissioner-designate Algirdas Šemeta. If confirmed, his duties will include taxation, customs, audit and combating fraud.
Members of the EP committees on budgetary control, economic and monetary affairs and the internal market questioned the Commissioner-designate about the future status of the EU Anti-Fraud Office (OLAF), control of EU spending in Member States, combating VAT fraud and dealing with tax havens. Mr Šemeta told MEPs that "efforts to tackle fraud, both in the field of EU expenditure as well as taxes or customs duties, will always be at the centre of my attention."
Ensuring quality of EU expenditure
Several MEPs asked the Commissioner-designate how he planned to reduce the irregularities in EU spending within member states.  Ville Itälä (EPP, FI) asked how they would reduce the error rate in structural fund spending. Mr Šemeta suggested that simplification might be part of the solution: "Many errors appear because the rules are too complicated". He also planned to introduce limits for an acceptable error level - a "tolerable risk of error".
Gerben-Jan Gerbrandy (ALDE, NL) and others urged the Commissioner-designate to step up the pressure on member states to better comply with the rules and improve reporting back to the Commission, such as through annual statements of assurance. According to Mr Šemeta, one has to be realistic and work together with the member states. He stressed the need to improve the quality of the reports coming from national authorities.
Jorgo Chatzimarkakis (ALDE, DE) wanted stronger control and transparency of NGOs receiving EU funding. Mr Šemeta promised to make efforts in this direction, for example, by improving online information about recipients of EU funds.
The Commissioner-designate promised to cooperate with the Court of Auditors and the EP Committee on Budgetary Control, and to take account of EP recommendations in the budgetary discharge procedure.
Future of the EU Anti-Fraud Office (OLAF)
Ingeborg Grässle (EPP, DE) and Jens Geier (S&D, DE) pressed the Commissioner-designate for his opinion on detaching OLAF from the Commission and making it an agency. Edit Herczog (S&D, HU) asked if he agreed that the EU loses control every time an external agency is created. Mr Šemeta said he wanted to find the best way to externalise the anti-fraud office, but that the key point was OLAF's independence and efficiency. He said EU citizens don't "care very much about the institutional setting of the OLAF, but they care about its activities". External agencies could be very efficient, he added.
Commissioners' code of conduct and conflict of interests
Monica Luisa Macovei (EPP, RO) wanted to know how the candidate will remedy the gaps in the current code of conduct for commissioners, such as the lack of definition of a "conflict of interests."  Mr Šemeta promised to work closely with the other institutions in designing an updated code of conduct and to make sure that his fellow commissioners comply with the rules for transparency.  He told Søren Bo Søndergaard (GUE/NGL, DK), he would meet the Budgetary Control Committee annually to talk about possible conflicts of interest in and around the European Commission.
Taxation, "tax havens" and banking secrecy
Mr Šemeta wanted to remove "unsensible barriers and obstacles to free movement of goods and services" as well as avoid double taxation. At the same time he promised to focus on proposals for a common consolidated corporate tax base (CCCTB), a simplification of the tax system and harmonisation of tax calculation rules. He would aim for a CCCTB as soon as possible.
Some MEPs asked about tax evasion and avoidance via "tax havens", both outside the EU (Monica Luisa Macovei, EPP, RO) and within the EU (Philippe Lamberts, Greens/EFA, BE). Mr Šemeta intended to initiate agreements with countries including Lichtenstein, Andorra and Switzerland to prevent tax revenue being lost, but he said that "fair tax competition" within the EU could help the Union's development.  Harmful practices such as profit shifting should be fought against.
Magdalena Álvarez (S&D, ES) asked about options for waiving banking secrecy. Mr Šemeta stressed the importance of automatic exchange of certain banking and said he would try to convince the two opposing member states to change their positions.
Leonardo Domenici (S&D, IT) asked if a European tax on financial transactions was a realistic option. Mr Šemeta said a thorough impact analysis would be needed before any proposal from the Commission in this area.
Energy and "green" taxes
Eija-Riitta Korhola (EPP, FI) asked Mr Šemeta if he would propose a carbon tax to reduce greenhouse gas emissions. "The energy taxation directive is one of my first priorities", he replied, promising to encourage innovation to strengthen energy efficiency and environmental protection.
Customs and excise duties
The candidate also said he would modernise customs, encouraging the development of e-customs, to "make effective use of the potential offered by information technologies" and also "save time and money for enterprises and citizens". He also promised to foster the development of a centralised clearing system, so that importers could benefit from "one window", submitting customs documents in their home Member State only.
Catherine Stihler (S&D, UK) and Regina Bastos (EPP, PT) asked about plans to combat counterfeiting, especially when it comes to medicinal products. Mr Šemeta replied that the Commission would develop risk analysis systems and ensure good sharing of information among member states.
Astrid Lulling (EPP, LU) asked whether excise duties on alcoholic beverages would be raised.  "If we apply higher excise duties, it would be more difficult to combat smuggling", argued Mr Šemeta. He recalled that taxation issues are subject to unanimous decisions by all member states, so it is often difficult to find a single solution.
 
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Written questions to the EP:
Policy-related questions
I see my portfolio as a strong motor for economic recovery and sustainable progress. It can make an important contribution to the exit strategy from the economic crisis and become an economic lever for ensuring fair competition within the EU and its global competitiveness.
Under my responsibility, taxation will focus on promoting the proper functioning of the Internal Market for the benefit of citizens and business, supporting new EU challenges and helping member states to protect their national tax bases, in particular, by fighting tax evasion. Turning these political priorities into concrete policy action means that existing tax obstacles – such as double taxation - need to be identified and eliminated. To support global efforts to address climate change - one of the most pressing challenges - I will promote the development of a new "green" taxation framework.
The security and safety of the European citizens will be high on my agenda in dealing with customs policy. I will also endeavour to further improve the business environment and reduce administrative burdens for industry and operators. To achieve these goals, I will prepare a strategic framework for customs up to 2020, including working with colleagues to address the question of coordinated border management, and work to ensure – in cooperation with member states – that the novelties introduced by the Modernized Customs Code will become operational, enabling the Union to exploit the potential of Information and Communication Technologies to the full (e-customs).
My portfolio is also about building confidence in the way taxpayers' money is collected and spent. Strengthening that confidence will be my priority. The reinforcement of the fight against tax and customs fraud and tax evasion within the EU and at international level will be at the centre of my policy. This will help support economic recovery. In parallel, I will work towards ensuring the highest quality of budgetary spending at EU level through greater transparency and less bureaucracy, thorough control, and full accountability and responsibility in case of mismanagement. Further progress towards a positive statement of assurance (DAS, "déclaration d'assurance"), aiming to reduce error rates to a tolerable level and optimising the cost-benefit ratio of controls to ensure sound financial management, will also be of critical importance. In this context, I will further develop the open and constructive dialogue with the Court of Auditors and the Parliament to ensure common understanding on all issues at stake and agree on the best manner to address them. The role of both the European Anti-Fraud Office (OLAF) - as an independent, multi-disciplinary and modern anti-fraud service - and the Commission's Internal Audit Service will continue to be crucial in this respect. These are the major tasks in hand. These are my top priorities.
My intention is to modernise energy taxation policy so that it more effectively supports the high priority objective of getting climate change under control, notably by proposing to revise the Energy Taxation Directive to complement the Emission Trading System with a CO2-tax element within the broader perspective of a green taxation framework. In order to enable European companies to fully benefit from the single market, reduce their compliance costs and reinforce their competitivity, I believe we need to take a fresh look at the option of a Common Consolidated Corporate Tax Base. In order to improve the efficiency of indirect taxation, I will also propose measures to improve the VAT system and revisit the approaches chosen in the excise duty area.
My approach to the fight against fiscal fraud and evasion will be twofold: first I want to further promote good governance within and outside the EU, notably by closing any loopholes in the savings directive and enhancing the EU action towards third countries and tax havens. Secondly, I will push for substantial improvement of tax cooperation between member states' administrations through, for instance, the setting up of an operational network "Eurofisc" and the Fiscalis programme, and provide them with better tools to detect and prevent fraud. In addition, I will work with other colleagues to explore the feasibility of an internationally coordinated tax on financial transactions and other possible sources of innovative financing.
In order to protect the EU, its citizens and its environment against potential dangers developing with international trade, I will implement the EU anti-counterfeiting Action Plan 2009-2012 and review the Intellectual Property Rights customs enforcement legislation.
I will work on a progress report to Council and Parliament on the implementation of the far reaching customs reform that has been launched by the Modernised Customs Code and the e-customs Decision. To make sure that we do the right things in the right way, I will enhance the contacts with the business community through the Trade Contact Group and will inform thoroughly the Parliament at an early stage.
As regards the execution of the EU Budget, further reducing global error rates and addressing in particular the problems of specific areas like the structural funds is a key priority. Therefore, on my side, I will consider strengthening the role of the annual summaries, if necessary through the upcoming review of the Financial Regulation, and continue to support Member States' voluntary initiatives and assess the assurance we can draw from genuine national management declarations. Together with my colleagues, it will be an early priority to make concrete proposals for the tolerable risk of error in the areas of research, energy, transport, rural development, external aid, development, enlargement and administrative expenditure. Other proposals will be made later on, culminating with cohesion policy.
I believe there is a strong case that eligibility criteria for expenses should be simplified on the top of simplifications already made to regulations for the 2007-2013 programming period. Raising ceilings for flat rates or simplifying rules on interest produced by pre-payments are examples of possible simplifications. I believe that this new approach including the definition of a tolerable level of error, a reinforced legal framework for member states' accountability in shared management and a simplification of the financial rules, will be instrumental to further progress towards a positive statement of assurance from the Court of Auditors and to follow up effectively the discharge recommendations addressed by the Parliament.
I consider transparency inseparable from accountability. The existing on-line system, partly de-centralized, enables anybody to know who benefits from EU funding. However, this system can be made more user-friendly and concrete improvements could already be envisaged through streamlining the Commission's portal query functionalities and, in parallel, standardizing the structure and presentation of the national, regional and international sites accessible from the central portal.
Whatever form the European External Action Service (EEAS) will take, from the perspective of my portfolio I am clear that the new Service and the relevant changes to the Financial Regulation should in no way diminish the scrutiny right of the Parliament as discharge authority.
Concerning OLAF, I am happy to underline that after 10 years of existence, OLAF has consolidated its expertise and reputation. I will be particularly pleased to be responsible, in full respect of its operational independence, for an Office that has gained important successes in matters such as the fight against smuggling and counterfeiting. OLAF's future is important, and the Commission and the European Parliament share the same objective of preserving its independence and consolidating its efficiency. The President of the Commission proposed in his Political Guidelines that OLAF should be given full independence outside the Commission. In order to progress towards a solid and satisfactory reform of OLAF, we will need to examine all the different options thoroughly in order to find the best possible solution, taking also into consideration the proposals currently on the table and the Commission's more general reflection on the possibility introduced by Article 86 of the Treaty on the Functioning of the European Union (TFUE) to establish a European Public Prosecutor's office. I will be guided by two key principles throughout this process. Firstly, any reform of OLAF must ensure its operational independence, efficiency and accountability, and further strengthen the protection of European taxpayers' money, including by helping effective follow-up at national level. Secondly, any proposal that I will make will involve the full consultation of stakeholders, in particular the Parliament which has already made very important and valuable contributions on this issue.
Finally, to ensure the good quality of legislative proposals in the fields that are under my responsibilities, I will make sure that thorough impact assessments and evaluations are carried out whenever necessary.
 
 

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