EU to clamp down on tax evasion

(BRUSSELS) - EU governments lose a "scandalous" one trillion euros ($1.3 trillion) a year to tax dodgers and that has to stop now to prevent further damage to state finances and the economy, the European Commission said on Thursday.

Unilateral action alone is not enough, however, and the EU must act in a coordinated way so as to tackle the root causes of the problem, EU Tax and Customs Commissioner Algirdas Semeta said.

"Around one trillion euros is lost to tax evasion and avoidance every year in the EU. Not only is this is a scandalous loss of much-needed revenue, it is also a threat to fair taxation," Semeta said.

"While member states must toughen national measures against tax evasion, unilateral solutions alone won't work" because in globalised economy, "national mismatches and loopholes become the play-things of those that seek to escape taxation.

"A strong and cohesive EU stance against tax evaders, and those that facilitate them, is therefore essential," Semeta said.

As a first step, the EU should take a tougher stance against tax havens, going beyond current international measures to identify them and have them put them on national blacklists.

Secondly, member states should clamp down on "Aggressive Tax Planning" so as to close legal technicalities and loopholes which some companies exploit to avoid paying their fair share," Semeta said.

The Commissioner also called for member states to adopt more common tax treatments so as to minimise the room for avoidance, while there should be changes too to "include special tax regimes for wealthy individuals."

Taxation, especially at a time when the debt crisis has put governments under intense pressure to increase revenues, is a hot topic after reports that some major international companies have avoided large tax bills.

Earlier this week, Britain announced a campaign against "tax dodgers" and "cowboy advisers" to claw back GBP 2 billion a year and many other countries are looking at the issue to see what can be done.

Tax evasion and avoidance - background guide