8 Taxation
| (30613)
9281/09
COM(09) 201
| Commission Communication: Promoting good governance in tax matters
|
| Legal base | — |
| Document originated | 28 April 2009
|
| Deposited in Parliament | 1 May 2009
|
| Department | HM Treasury |
| Basis of consideration | EM of 18 May 2009
|
| Previous Committee Report | None
|
| Discussed in Council | 9 June 2009
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
8.1 The Commission says that with the current financial and economic
crisis the need for international tax cooperation and common standards
has become a regular feature of international discussions.
The document
8.2 In that context the Commission introduces this Communication
by suggesting that:
- globalisation, "or the increasing economic integration
of markets that is being driven by rapid technological change
and policy liberalisation", has brought great benefit to
many countries;
- a downside is, however, that tax havens and insufficiently
regulated international financial centres can facilitate or encourage
tax fraud and avoidance, affecting the tax sovereignty of other
countries and their revenues;
- rejecting globalisation and closing markets because
of these negative effects would be counterproductive;
- and a better Community response would be agreements
with third countries to include promotion of "good governance
in the tax area".
It continues by recalling OECD, G-20, European Council
and ECOFIN Council activity in this area and says that the aim
of the Communication is to identify a Community contribution to
good governance in the area of direct taxation and that it considers:
- how good governance could be
improved within the Community;
- the tools which the Community and Member States
may have to promote good governance internationally; and
- the scope for more coordinated action by Member
States so as to support, streamline and complement international
action taken in other for a, such as the OECD and the UN.
8.3 In the following section, "Elements of good
governance in the tax area", the Commission first discusses
existing tax cooperation within the Community:
- recalling that ECOFIN has defined,
at its meeting of 14 May 2008, good governance in the tax area
as meaning "the principles of transparency, exchange of information
and fair tax competition";[31]
- noting administrative cooperation through the
Mutual Assistance, Recovery of Tax Claims and Savings Taxation
Directives;
- noting political agreement on limiting harmful
tax competition through the "Code of conduct for business
taxation";[32]
- saying that state aid policy as applied to fiscal
state aids has contributed to removing distortions of competition;
and
- saying that these tax initiatives are complemented
by company laws and rules that ensure corporate and financial
transparency.
Secondly, in this section the Commission notes, in
relation to international tax cooperation discussions, that much
Community progress on tax cooperation has been driven by OECD
activity in this field, the continuing work of OECD — supported
by the G-20 and the Commission's wish for coordinated action by
Member States in taking this work forward in international discussions.
8.4 In the section, "EU international policy
on good governance in the tax area", the Commission:
- recalls, commitments made at
Community level, citing ECOFIN and European Council support for
incorporating provisions on good governance in the tax area into
agreements with third countries; and
- notes application of Savings Taxation Directive
type measures to third countries, application of the code of conduct
for business taxation to dependent or associated territories of
Member States, agreements on these matters with members of the
European Economic Area and Switzerland, the relevance of the European
Neighbourhood Policy, enlargement and development cooperation
policy and ongoing implementation of May 2008 ECOFIN Conclusions
on these matters.
8.5 In the section, "How to strengthen the principle
of good governance in the tax area within the EU and internationally",
the Commission discusses:
- internal activities, urging
Council support for its proposed amendments to the Mutual Assistance,
Recovery of Tax Claims and Savings Taxation Directives and continued
implementation of the code of conduct for business taxation;
- external activities, seeking appropriate Council
political priority for securing agreements with third countries
and allowing the Commission greater flexibility in negotiating
such agreements;
- the use of development cooperation incentives;
and
- international tax policy coordination.
8.6 The Communication concludes with the Commission
recapitulating its case for promoting good governance in the tax
area and urging Council support for its suggestions. It says that
it "intends to pursue constructive dialogue with all stakeholders
concerned in connection with the principles and practical implementation
of the measures identified in this Communication, and it will
review and report on the situation in 2010."
The Government's view
8.7 The Financial Secretary to the Treasury (Mr Stephen
Timms) says that the Government broadly welcomes the principle
of this Communication and is pleased to see the issue of good
governance and tax transparency so prominent on the international
agenda, that there is read-across between the Community and G-20
agendas, so it will be important to ensure broad consistency of
approach, and that the document contains no legislative proposals,
but the Government will want to consider the specific implications
of individual proposals.
Conclusion
8.8 The question of good governance in relation
to taxation policies is important. So, whilst clearing this Communication,
we draw it to the attention of the House.
31 See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/100339.pdf,
page 22. Back
32
See http://ec.europa.eu/taxation_customs/taxation/company_tax/harmful_tax_practices/index_en.htm.
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