Tackling double non-taxation for fairer and more robust tax systems

Double non-taxation deprives Member States of significant revenues and creates unfair competition between businesses in the Single Market. It occurs when cross-border companies escape paying taxes due to mismatches between national tax systems. Aggressive tax planners often focus on exploiting loopholes between Member States' systems specifically to avoid taxes.

As a first step in combating this problem, the Commission has today launched a public consultation on the double non-taxation of cross-border companies. The aim of the consultation is to gauge the full scale of the problem and see where the main weaknesses lie. On this basis, the Commission will develop the most appropriate policy response before the end of 2012. In order to encourage participation by those who may have insight into real-life exploitation of double non-taxation by companies, anonymous contributions will be accepted. The consultation is available in all official EU languages and will run until May 30 2012.

Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said: "Fairness must be at the heart of our tax policies. Double non-taxation undermines fair burden sharing in taxation and allows an unjust competitive advantage to companies that seek to exploit it.  Tackling double non-taxation will not only deliver important revenues to Member States, but it will also ensure a stronger, fairer Single Market for all EU businesses."

The public consultation covers cross-border double non-taxation of companies i.e. cases where divergent national rules and/or inadequate national tax measures in two countries lead to non-taxation. For example, this may be the case if two countries define entities in a different way, resulting in income not being taxed in either state. The consultation concerns direct taxes such as corporate income taxes, non-resident income taxes, capital gains taxes, withholding taxes, inheritance taxes and gift taxes.

The Commission asks all interested parties including tax professionals in practice, in business and in academia for factual examples of double non-taxation within the EU and in relations with third countries.

Background

In the Annual Growth Survey 2012, the Commission acknowledged that Member States have to consider revenue-raising measures. Better tax coordination at the EU-level has a role to play in this context.

The European Council conclusions of 24 June 2011 asked the Commission to ensure the avoidance of harmful practices and proposals to fight tax fraud and tax evasion.  

The Commission set out in the Communication on Double Taxation in the Single Market that in a period when Member States are looking for secure and additional tax revenues, it is important for their credibility towards their taxpayers that they take the necessary measures to remove double taxation and double non-taxation.

Contributions may be sent to   no later than 30 May 2012.

For the consultation paper see :

http://ec.europa.eu/taxation_customs/common/consultations/tax/index_en.htm