European Parliament report on fair and effective taxation notes tax fraud as a problem for public finances

In the resolution, the European Parliament broadly welcomes the European Commission’s Action Plan for Fair and Simple Taxation and supports its implementation.

As regards VAT, in particular, the European Parliament positively notes the European Commission’s proposal to modernise, simplify and harmonise VAT requirements, using transaction-based real-time reporting and e-invoicing, given that such reporting needs to be taxpayer-friendly while allowing tax administrations to have an overview of the various transactions in real-time – to facilitate the prevention and detection of fraud and risky economic operators.

The report underlines that the diversity of the Member States’ tax regulations constitutes a cumbersome challenge. It is noted that particularly affected are the SMEs and start-ups, as they have to cope with up to 27 different tax systems.

In the report, the European Parliament stresses the importance of the Next Generation EU programme for the economic recovery in the Member States and highlights the opportunity that its Recovery and Resilience Facility represents pursue fiscal reforms and investments leading to a fairer, more sustainable and better digitalisation of the fiscal system.

In order to reach a stable mutual trust between tax payers and tax administrations, the principles of tax transparency, fairness and certainty based on clear respective rights and duties are emphasised in the report as being of fundamental importance.

The European Parliament also stresses that the current taxation systems could lead not only to uneven or inconsistent applications of tax regulations among Member States, but also to sensible delays in the harmonisation of tax practices or standards across the Union. For this, it calls on the European Commission and the Member States to take action in order to ensure more harmonised and consistent tax rules and their implementation.

CESI Secretary General Klaus Heeger said: “The report rightly stresses the need for more coordination and cooperation in taxation among Member States and their tax admnistrations. However, this necessitates accompanying investments in facilities, equipment, digital infrastructure and not least the staff of tax administrations – both in qualitative and quantitative terms. Rules on paper are nothing without sufficient and well-trained staff that can also executive planned coopeteration. The report could have been more clear on this.”