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EC’s Semeta is right to demand better European tax cooperation, but blame lies with Austria and Luxembourg

COMMENT: The EU is not united about information exchange, one of the most important global tax policy issues of recent years, and Austria and Luxembourg are to blame.

That is the view of EU Tax Commissioner, Algirdas Semeta, who believes that the two member states are hindering the improvement of tax compliance and information exchange across Europe.

He has a point. The Commission wants to reform the EU Savings Directive to tackle tax evasion and the two countries are standing in the way.

The matter focuses on the bilateral agreements Switzerland has made with EU member states including Germany and the UK. In those deals, the member states have had to revise their accords after concerns that they had made too many concessions to Switzerland, undermining the efforts for stricter rules at an EU level.

So now Austria and Luxembourg have got annoyed with the Commission’s proposals to negotiate all bilateral agreements made by 27 member states.

Luxembourg says it can't agree to let the Commission negotiate savings tax arrangements with non-EU countries until there's more clarity on details of its mandate.

Both member states don’t want to hand more powers to the Commission, claiming that inappropriate rules are pushing capital out of Europe. It seems automatic information exchange is the main sticking point.

But what this argument shows is that getting member states to agree to anything is a very hard task. And a by-product of that is taxpayer uncertainty.

While it would be naïve to think that every Commission proposal will see the light of day and that getting 27 member states to agree to something is easy, what the Commission needs to realise is that taxpayers will stop paying attention to it unless something changes. But though it is the EU executive, it depends on the approval of the member states to get anything done.

A good example of this is the proposal for an EU-wide common consolidated corporate tax base (CCCTB).

Semeta believes the CCCTB will save EU businesses billions of euros and help attract more foreign investors into Europe, as well as eliminating huge administrative burdens, heavy compliance costs and legal uncertainties that companies face when operating in more than one member state.

It may have taken 10 years of debate and political wrangling to put a proposal on the table and it is by no means certain that the proposal will get enough support from member states to be implemented, but at least taxpayers, officials and advisers now have a picture of what it would look like. But knowing what something looks like does not mean anyone cares about it.

While Europe is rarely as united on tax policy as the Commission would like it to be, few issues are more divisive than the financial transaction tax (FTT).

In the upcoming June edition, International Tax Review assesses the prospects of an EU-wide FTT, what it will mean for taxpayers and whether it remains the best option for making the financial sector pay for its role in the economic chaos.

The full article will be available on on Friday.

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