10 January 2013

Commissioner Šemeta: Priorities for EU tax policy

I - The European Semester: quality of tax reforms in the Member States

The primary role of taxation is undoubtedly to raise revenues. However, through the European Semester, the Commission has urged Member States not to lose sight of the impact that tax policies also have on wider economic and social objectives.

We have recommended that Member States shape their tax reforms in the most growth-friendly manner possible. This means, for example:

• shifting tax away from labour towards consumption, environmental or property taxation which are known as less harmful to growth;
• broadening tax bases instead of increasing tax rates thereby ensuring simplicity and neutrality of the tax system;
• reducing corporate tax bias towards debt-financing and tax schemes which increase the debt bias of households to avoid financial risks;
• and improving the fight against fraud and evasion as a fair and efficient way to raise expected revenues.

The approach we have taken with the European Semester clearly leaves the main responsibility for tax reforms with the Member States. As long as they comply with EU law, they retain full sovereignty to adapt their tax systems and set their tax rates according to their own national needs. I can assure you that there is no European threat to the tax sovereignty of any Member State.

However, with our extremely interconnected economies, working in isolation doesn't pay off. It undermines national reform efforts, creates tensions and loopholes between Member States' systems and weakens our Single Market. I therefore strongly believe that progress on tax coordination at EU level is in the best interest of every Member State.

In this context, let me now say a few words on how the Irish Presidency can help ensure progress on major tax files on the European Agenda.

II - The European Agenda: Fairness and Competitiveness of tax policy

Competitiveness

Improving the tax environment for businesses is central to EU competitiveness. Investors need stability, legal certainty, less administrative burden and fewer compliance costs. Eliminating unnecessary complexities and mismatches, which create tax obstacles for businesses in the Single Market, must be our focus... 

The Common Consolidated Corporate Tax Base is also a crucial proposal in terms of creating a business-friendly Single Market. Its fundamental objective is to make it cheaper and easier to do cross-border business in the EU, whether it’s an SME looking to expand, or a multinational investor. I would reiterate that the CCCTB has nothing to do with tax rates, and Ireland has nothing to fear in this regard.

Member States must remain free to set rates and this flexibility allows a healthy degree of tax competition to be maintained. Bearing this in mind, I hope that the Irish Presidency will help in pushing forward the CCCTB, as a tool for greater EU competitiveness.

The European Union is currently working towards deepening the euro and forging a genuine Economic and Monetary Union. Taxation cannot be avoided in this debate. Member States can – and must – retain their sovereignty on tax matters. This is essential for them to meet their specific national needs. But, there must be a recognition, too, that the day of isolated tax policy is over. Coming closer together as a Union on tax matters does not threaten Member States' sovereignty. On the contrary, it reinforces their position at home to take the necessary measures for efficient, growth-friendly and fair taxation. It helps our businesses and attracts investment, by improving the Single Market. And it strengthens our common position when addressing international challenges and spreading the principle of fair taxation abroad.

I therefore strongly believe that for taxation, as for other policy areas, the answer to our current challenges lies in more Europe, not less.

Full speech

© European Commission