Coordinated strategy to improve the fight against fiscal fraud (debate) 
President
The next item is the report by Mrs Bowles, on behalf of the Committee on Economic and Monetary Affairs, on a coordinated strategy to improve the fight against fiscal fraud.
Sharon Bowles
rapporteur. - Mr President, may I first take this opportunity to thank colleagues for their input, especially on one or two topics where we still have differences of opinion. I think we have more in common than divides us and that we can reach a satisfactory outcome by not straying too far from the core subject.
The broad principles underlying this report on fiscal fraud are simple, and only fraudsters themselves would disagree. The tax losses due to fraud are difficult to assess. Fraudsters and tax evaders take care to hide their activity from the tax authorities, but estimates put the level of fraud at EUR 200-250 billion or 2-2.5% of the total GDP of the EU.
My question is, do we put 2-2.5% of our collective effort into resolving it? Since the answer to that question is clearly no, there can only be one conclusion. It needs more effort, more attention and in particular it needs more collective cooperative attention by Member States.
Now VAT fraud, particularly the missing trade or carousel fraud, may be the largest single cause of tax loss. It comes about simply because of the loophole in the arrangements for VAT under which it is not levied on cross-border intra-Community trade. So VAT-free purchases can be sold on, the VAT pocketed and then the trader vanishes. In complex carousels innocent traders can get enmeshed, and measures within Member States to combat fraud, such as freezing rebates, can damage innocent businesses. This is a well-known problem in my own country, the United Kingdom. So that is all the more reason to tackle the problem at its root.
Pragmatically VAT will have to remain a consumption tax based on accruing to the fiscal authority of final destination. The report proposes that VAT should be levied on intra-Community supplies at the minimum rate, 15%, with the importing Member State then levying its own domestic rate for subsequent stages.
The 15% collected by the originating Member State then needs to be handed over to the Member State of final consumption by some method of clearing or settlement. This now is technically feasible; all the more so as we move inevitably to real-time recording of transactions. And it does not have to be centralised; it can be done in a decentralised or bilateral manner.
Regarding other ways of combating fraud and tax evasion, the exchange of information and cooperation are central to this and, dare I say it, a 'cash now' attitude of 'What am I getting out of it?' in some quarters does not lead to progress and is a short-sighted view. Payback comes another time when you are on the requesting end.
Tax authorities need to know about assets in order to help track down hidden income which may be undeclared or originate itself from criminal activity. This is undermined if exchange of information between authorities is restricted. Here we also need to act in the international dimension to be most effective.
Finally this brings me to revision of the Savings Tax Directive. It is proper to revisit that Directive, for example to close loopholes such as using alternative legal entities like foundations to escape its provisions. Withholding tax is not ideal, but here we are divided on whether it can be done without undesirable consequences.
These are the issues that we address in this report. I commend it to you and I look forward to the forthcoming debate with interest.
László Kovács
Member of the Commission. - Mr President, first of all I would like to thank the European Parliament and, in particular, the rapporteur, Mrs Bowles, for its very constructive report on a coordinated strategy to improve the fight against fiscal fraud.
In May 2006, the Commission presented a communication aimed at launching a broad debate on the different elements to be taken into account in an anti-fraud strategy in the Community.
I am pleased that the European Parliament recognises and supports the initiatives taken and the approach chosen by the Commission in its communication. Equally, I am pleased to see that the European Parliament invites the Commission to submit further proposals.
The report is a very useful and comprehensive contribution to the ongoing discussion about the fight against fiscal fraud. The Commission fully agrees that fraud is not a problem that can be combated successfully at national level alone.
The Commission will take account of the numerous comments and suggestions made by the European Parliament in the context of its work on the current and forthcoming legislative proposals for conventional measures to combat tax fraud.
As far as actions foreseen in 2008 are concerned, I can confirm that the Commission is planning to present three sets of legislative proposals - one in October, the second in November and the third in December 2008. Those sets of measures include improved procedures for registration and de-registration of persons liable for VAT in order to ensure the swift detection and de-registration of fake taxable persons and to give more security to honest business. The legislative proposals will also cover traders' joint and several liability, the creation of a European network (EUROFISC) aimed at improving cooperation in order to detect fraudsters at an early stage, fixing conditions for VAT exemption at importation, mutual assistance in recovery, automated access to data, confirmation of the name and address of taxpayers in the VAT Information Exchange System database and shared responsibility for the protection of all Member States' revenues.
By October, the Commission will present a communication setting out the coherence of the approach it will present, together with a timetable for further actions. The communication will also address issues relating to a long-term approach, notably the necessity to examine the better use of modern technologies, which has also been underlined in your report.
The Commission is still open to examining alternative systems to the current VAT system, provided that certain conditions are met. The report mentions, in this context, a reverse-charge mechanism and the taxation of intra-Community supplies. The Commission has offered both of these radical options for consideration to the ECOFIN Council, but so far Member States have not shown the political will to take such far-reaching measures.
Regarding direct taxes, the Commission is working on the review of the Savings Taxation Directive, and intends to present the report on the operation of the Directive before the end of September, as requested by the ECOFIN Council of 14 May 2008. During the review process, we have been carefully analysing the current scope of the Directive and the need for amendments in order to enhance its efficiency. The report will be followed by a proposal for such amendments to the Savings Taxation Directive that prove necessary and appropriate. The Commission has also carefully taken note of the ECOFIN Council conclusions of the same date, emphasising the importance of promoting the principles of good governance in the tax area - that is transparency, exchange of information and fair tax competition - and the inclusion of related provisions in agreements with third countries and third country groupings.
Thanks to close cooperation with the Member States in the Anti-Tax Fraud Strategy expert group of the Commission, the idea of an anti-fraud strategy at EU level is taking concrete form. The announced measures will be a big step forward, even if further efforts will have to be made.
Concerning your discussion on tax competition, you will know that we have been working in the Code of Conduct Group on abolishing harmful business tax regimes in the EU. All in all, the Code of Conduct Group assessed over 400 measures by the present 27 Member States and their dependencies and overseas territories, of which over a hundred were considered harmful. Almost all of those hundred have already been abolished and the remainder are set to be abolished, subject to the transitional arrangements. The work conducted under the Code has been successful. It has led to the dismantling of almost all harmful tax measures in the Member States and their dependent or associated territories.
In conclusion, I would like to thank the European Parliament for its constructive contribution to the debate on the coordinated strategy to improve the fight against fiscal fraud.
Othmar Karas
draftsman of the opinion of the Committee on Legal Affairs. - (DE) Mr President, Commissioner, rapporteur, thank you for the good cooperation and your report.
I have four points to make. Firstly, we believe that we need to stress that fiscal fraud is not something that can be combated in isolation and that a coordinated approach is essential, both among the individual Member States and with third countries. Secondly, the planned pilot projects to fight carousel fraud are a good idea and we take note of these, but we would make the point that this must not lead to any deterioration in framework conditions for small and medium-sized enterprises. Thirdly, we expressly support the Commission's proposals for amendment of the VAT Directive and the Council Regulation on administrative cooperation in this area. Fourthly, I am pleased that the discussion on a general lifting of banking secrecy is something which did not command a majority in any committee and has now been resoundingly rejected by a large majority.
Werner Langen
on behalf of the PPE-DE Group. - (DE) Mr President, I should like to add my own congratulations to those expressed to the rapporteur. Combating fiscal fraud has been an ongoing issue for the House for years, and unfortunately, despite numerous initiatives and comprehensive support from Parliament, the Commissioner still has little to show in the way of success - although this is urgently needed - because of blocking, to a greater or lesser extent, by the Member States. One would think that it would be in the interests of the Member States to make progress on fighting fiscal fraud, given that we are talking about recouping a figure in excess of EUR 200 billion a year - in other words, more than the EU budget - without any need to raise tax rates for honest taxpayers. In any discussion of this issue, then, it is essential to underline that some of the responsibility lies with the Member States themselves.
The adoption of the report proved rather difficult, for problems initially arose with one particular issue in committee, but this matter has now been resolved. Mrs Bowles showed a great deal of willingness to cooperate. From our perspective, this was a difficult report because it has involved one amendment which we cannot support. Even now, there are proposals to squeeze the very last drop out of the taxpayer and tax sources. Whether this is a sensible option or will simply lead to new offences remains to be seen. Above all, Amendment 4, which was proposed by two of our fellow Members from the Socialist Group and is aimed at the repeal of the Savings Taxation Directive, is not something that we can support.
This, then, is our position: we fully support Mrs Bowles' report in all other respects, but if Amendment 4 on the abolition of the Savings Taxation Directive gains a majority, we will reject the report in its entirety.
Benoît Hamon
on behalf of the PSE Group. - (FR) Mr President, I too should like to thank Mrs Bowles for the quality of her work and for the result that we were able to achieve in the Committee on Economic and Monetary Affairs on such an important text as this. I should like to remind my fellow Members that the public purse currently loses between EUR 200 and 250 billion due to fiscal fraud in the internal market. These missing billions mean less public investment, fewer schools, fewer public services, more social needs that cannot be met and, of course frequently, in compensation, higher taxes for those honest and humble taxpayers who do not have the time to spend on tax evasion and tax shopping.
I am delighted to see that, on the issue of VAT, there is broad consensus within this House on putting an end to fraud and practices which take advantage of the fragility of the transitional system set up in 1993. We are all well aware since the Liechtenstein scandal that the biggest fiscal fraud is committed by those large savers who place considerable sums of money in third countries, often tax havens, to avoid tax.
The European Union has an instrument for fighting this fraud: the Directive on the Taxation of Savings Income. However, as underlined by Mrs Bowles, there are too many loopholes in this Directive and it only covers savings income in the form of interest payable to individuals. It is therefore currently far too easy to artificially set up a legal entity, sometimes with a single partner or shareholder, or to invent financial revenue that is not strictly interest in order to avoid tax.
It is therefore absolutely vital to widen the scope of this Directive, as proposed by the report, so that, at the very least, fiscal fraud is not so easy. This is in fact a moral imperative.
I must express my astonishment and disappointment at the amendment tabled by the PPE-DE Group which, due to both its timidity and its direction, ends up proposing that nothing should change and that, in terms of fiscal fraud, we should stick with the current situation.
Let us put these positions to the European people, in particular the German people, and let us see how the European and German people judge the choices made here. I have heard big statements made in the media, particularly in the German media, about this issue of fiscal fraud. Here, in the silence of the European Parliament, other choices are being made. I hope that the European people will be the judge of these.
Zbigniew Krzysztof Kuźmiuk
on behalf of the UEN Group. - (PL) Mr President, Commissioner, I should like to highlight three issues in the course of this debate. Firstly, it has been estimated that tax losses due to fiscal fraud relating to VAT and excise duty amount to more than 2% of the European Union's GDP. The losses total between EUR 200 billion and EUR 250 billion. These are enormous sums of money. National incomes are reduced, and there is also an impact on the structure of the European Union's budget income as the proportion of own income based on GNI is increased.
Secondly, despite this diagnosis, the solutions proposed in the report could do more harm than good. I refer, for instance, to the solutions relating to intra-Community transactions, such as the reverse charge mechanism whereby the tax is paid by the recipient, not by the supplier. I am also concerned about the proposal to unify VAT rates, which in effect means eliminating the reduced rates, and about the proposal to set up a clearing house system to apportion tax between Member States.
Thirdly, it would seem that what is really needed in order to combat fiscal fraud is closer cooperation between the fiscal administrations of the Member States. This should involve swifter exchange of information, and perhaps even automatic access to certain data concerning VAT taxpayers and excise duty payers.
Hans-Peter Martin
(DE) Mr President, I rise for two reasons: firstly, because this is an issue - as Mr Langen has said - that has been on our agenda for many years and we really should be asking why no progress is being made, especially when it comes to VAT evasion. Secondly, it is unacceptable to the vast majority of Europeans that here we are discussing tax evasion and fraud - taxpayers' money - so hypocritically without addressing the problems here in our midst.
The European Parliament, as represented by many MEPs, is a hotbed of fraud. We can read about it in the Galvin report and elsewhere, but attempts are being made to sweep this under the carpet. I need only mention Chichester, Purvis or certain Liberal MEPs. It is scandalous. Unless we address the cases of fraud in our own ranks, we lack any credibility and have no right to criticise others.
I urge OLAF, but particularly the parliamentary administration and parliamentary groups, to establish clarity here. It is outrageous that attempts are being made to hush things up, here of all places.
Zsolt László Becsey
(HU) Thank you, Mr President. I am very pleased that a Community strategy is emerging for this issue, albeit slowly, perhaps too slowly. I agree that the fight against fiscal fraud must be incorporated into the individual national obligations of the Member States on the one hand, but it must also be incorporated into the Community's Lisbon programme.
My observations are as follows: first, I do not agree with the phrasing of the Parliament's report according to which the strengthening of tax competition would distort the internal market unnecessarily and undermine the social model. This reflects the obsession with stipulating minimum levels of taxation for every area of taxation that exists, which would in fact cause unfairness in addition to the impact of inflation, since it would hit those who have otherwise put their houses in order and are able to lower taxes. Concerning indirect taxation that falls under the Community's jurisdiction too, the policy of referring exclusively to minimum values without having us regulate the maximum is unacceptable. I would like it to be noted that the hotbed of abuse occurring with excise duty is due to the increase in minimum levels, since it stimulates the spread of the black-market economy and the manufacture of home-made produce, which contradict all the Community's policies. Next, in the area of VAT, I am pleased with the policy of taking slow steps and with the experimental idea of the reverse charge, but resolute steps forward are also needed here. In my opinion, given the level of technology we have today, this could easily be done for cross-border transactions within an internal market, and the supplier's VAT for the destination country could easily be collected and transferred to the destination country. In order to do this, of course, there must be improved willingness for cooperation between the tax authorities of the Member States, which is still lacking, and we can take a deep breath and achieve this now that the euro has been introduced and the Payments Directive has come into being. Finally, I feel that it is important to take action concerning the operations of primarily offshore companies outside the Union, since the tax base is often channelled there before taxation and is then returned from there to companies in the Union through messy transactions in order to evade tax, and this is not in the interests of selecting a favourable tax location. Thank you.
Antolín Sánchez Presedo
(ES) Mr President, Commissioner Kovács, ladies and gentlemen, according to some estimates, fiscal fraud in Europe exceeds 6% of tax revenue. It has a corrosive effect on confidence in tax systems, on the capability and fairness of treasury departments and on the wellbeing of citizens. It is a breeding ground for the informal economy and organised crime.
Within the European Union, it affects the proper functioning of the internal market, distorts competition and harms the financial interests of the EU and also fulfilment of the Lisbon Strategy.
If tax were paid on the one-quarter of global wealth that is hidden in tax havens, according to data from the International Monetary Fund, the Millennium Development Goals of the United Nations could be covered with money to spare.
The European Union must be tough in its fight against fiscal fraud. This can be done safely and responsibly, without imposing exorbitant burdens on our economy. The increase in cross-border trade and the effects of globalisation demand that we be determined in promoting a European strategy against fiscal fraud. National actions are not enough.
This strategy must have an internal dimension, tackling problems posed by fraud in VAT and special taxes, and also tax evasion issues in terms of direct taxation, as well as an external dimension, by asserting the economic weight of the European Union.
We cannot disappoint those of our citizens who scrupulously comply with their tax obligations and who expect leadership from the European Union.
In this context, we demand that the package of measures against VAT fraud that the Commission will present next month is ambitious and that the report announced for the end of this month on the application of taxation to savings is useful for making definite progress in the fight against fraud in this area in Europe. We welcome the general contents of the report produced by Mrs Bowles who we congratulate. We trust that this report will be adopted in plenary and that, if improvements are not made, then at least we do not go backwards.
Desislav Chukolov
(BG) Ms Bowles, I admire your desire to overcome tax fraud at European level.
Consider, though, what this will cause to those who govern Bulgaria now. If cases of tax fraud stop in Bulgaria I assure you that at the next elections the liberals from the Muslim party Movement for Rights and Freedoms (MRF) will not win even half of the percentage they win at the moment. If the theft of public funds in my country is terminated once and for all, the socialists can no longer sponsor their campaigns or, respectively, their absurd initiatives.
As a member of the Attack party I will support this report of yours, for Attack is the only party in Bulgaria which works for stopping the syphoning of state funds and Attack is the party, whose platform includes the firm commitment to review all shady and tainted deals, which resulted in damages for the state budget and which have so far benefited not one or two political forces. Thank you.
Astrid Lulling
(FR) Mr President, please allow me first of all to say to Mr Hamon that his blackmail does not impress us at all, and I regret that he has clearly been the victim of a huge misunderstanding.
Mr President, while agreeing with the broad outlines of the report by Mrs Bowles, I believe that two points must be highlighted. Firstly, the transitional system of VAT, which dates back to 1993, is now showing its limitations. I do not believe that we can any longer accept the continuation of this transitional system. Fiscal fraud, which we all condemn due to its direct and indirect effects, is partly attributable to failures in the current system which should therefore be changed. Obviously I am aware that there are certain problems. That is why I recommend to the Commission that it promotes the solution devised by the RTvat organisation which should allow a tax loss of EUR 275 million per day to be avoided, while reducing administrative costs for SMEs.
The second point concerns the issue of tax evasion in connection with the Directive on the Taxation of Savings Income. The report contains unjustified remarks that have led me to table amendments in order to rectify the situation. The legitimate and necessary fight against fiscal fraud must not cause us to call into question the principle of tax competition. I absolutely reject this as the two have no connection. Furthermore, experience shows that the system of tax deduction at source for the taxation of savings is the most efficient system, rather than trying to impose, across the board, the information exchange system which has its own problems.
Finally, the demands to reform this Directive, in terms of widening its scope to all legal entities and all other sources of financial revenue, are also very badly thought out because they will simply have the effect of hounding savings out of the European Union. That is why I want these points to be amended. If they are not amended, we will be unable to vote for this report.
Andrzej Jan Szejna
(PL) Mr President, fiscal fraud has been a global problem for some time now. Estimates suggest that the losses incurred are in the order of 2% to 2.5% of GDP, which is between EUR 200 billion and EUR 250 billion at European level. There is therefore an urgent need to coordinate action at Community level and to tighten up cooperation between Member States.
Article 10 and Article 280 of the Treaty establishing the European Community state that the Member States shall take all appropriate measures to ensure fulfilment of the obligations arising out of the Treaty and to coordinate their action aimed at protecting the financial interests of the Community. It is important to bear in mind, however, that although the free movement of goods and services within the Community's market makes it difficult for countries to combat this type of fraud on their own, the actions taken should not hamper economic activity and place unnecessary burdens on taxpayers.
László Kovács
Member of the Commission. - Mr President, first of all I want to thank the Members of the House for the comments and views they expressed during the debate.
As I said in my opening remarks, the Commission very much appreciates the contribution made by the European Parliament to the debate on a coordinated strategy to improve the fight against fiscal fraud. The Commission has assumed its responsibility and will take further initiatives to strengthen the legal framework and administrative cooperation between Member States. Member States certainly have to do the same.
Some of you have referred to the review of the Savings Taxation Directive, and I can assure you that the ongoing review is a very thorough one, where we are examining in detail whether the current scope is effective, and the pros and cons of extending it. It is a complex matter where many factors have to be taken into account: efficiency from a tax compliance point of view; the administrative burden for market operators, and also for tax administration; the need for a level playing field both inside the EU and in relation to the outside world - to name just a few. As I mentioned earlier, we will soon present the report. It will be followed by a proposal for amendments to the Savings Taxation Directive, and we will do our utmost to strike a proper balance.
It is clear that there exists no single and global solution for eliminating tax fraud. Each individual measure should bring an added value, but it is only their implementation as a whole which provides the tax authorities with an enhanced framework for combating tax evasion and tax fraud.
Sharon Bowles
rapporteur. - Mr President, tax fraud is the business of the EU because fraudsters make use of cross-border loopholes, and that is what we are trying to close.
As the Commissioner says, the savings tax issues are complex. I think it is possible for us to reach agreement through our voting that we do not pre-empt too much the more detailed discussions that we are going to have to hold on that topic when the Commission comes out with their further proposals. Likewise I think that we can also avoid reference to tax competition where we are divided but which is not core to this report. Therefore I think we can achieve some harmony amongst ourselves.
On all these fronts, colleagues and Commissioner, I do not think that inaction or tentative action is an adequate response. 2.5% of GDP is at stake. That is a huge chunk of the tax base. As our colleague, Mr Sánchez Presedo, points out, that is possibly 5% of tax.
If any politician here or in any Member State campaigned on the basis of putting up tax by 5% to pay for nothing, they would not get very far. So, and I say this to Member States in particular, getting prickly about exchange of information, doing the minimum, being fearful, is just the same as taxing 5% for nothing, for that is what it costs the honest taxpayer. That is the message that I wish to send in this report and I believe it is the collective message that this Parliament wishes to send in this report supporting the Commissioner in his efforts and urging him to be bold.
President
The debate is closed.
The vote will take place on Tuesday.
Written statements (Rule 142)
Siiri Oviir  
in writing. - (ET) Fiscal fraud is a problem for both the EU and the Member States, distorting competition and reducing the revenue base of the EU and the Member States alike.
One of the roots of the problem is cited as being the current transitional system of VAT, which is complex and outmoded. It needs updating. In that regard the EP proposal that the European Commission should put forward a decision on a new VAT system in 2010 is undoubtedly welcome.
The working out of a new VAT system obviously means ensuring that the current tax system is not replaced by a more complex and bureaucratic one. It is obviously also important to stress that, before it is applied Europe-wide, it must be piloted to ensure that it works in practice because this will prevent many problems which may emerge later.
An equally important step in the fight against fiscal fraud is to update the availability of inter-State information, a process which would be assisted by the establishment of a pan-European e-tax administration information centre.
The balance between the public interest and the fundamental rights and freedoms of the individual will not be disregarded when personal data is processed.
Finally, the term 'tax haven' must also, in view of the point at issue here, be regarded as important. I welcome the ideas set out in the report that the EU should make the elimination of tax havens at worldwide level a priority.
