New EC tax policy harmonisation plan
On 1 July 2015, the European Commission (EC) will launch a Structural Reform Support Service (‘Service’) to support EU Member States in reviewing and improving legislative, policy and administrative tax matters in their countries, to productively grow revenues and promote EU tax harmonisation.
The Service is being co-ordinated by VP Valdis Dombobrovskis, who is responsible for initiatives to deepen economic and monetary union, including fiscal convergence.
The Service’s focus will be to assist Member States in developing their VAT, income and corporate tax regimes and administration in accordance with EU best practices. It has been developed from the work and findings of major tax taskforce projects in Greece and Cyprus.
In establishing the Service, the EC wishes to ensure that it retains and promotes the knowledge and execution established in these reviews, and make ensure it is easily accessible to other Member States.
Areas of focus for the Service include:
- Revenue management and public financial management
- Improving the business environment and helping businesses
- Helping to facilitate and promote exports
- Assistance on employment, social inclusion and public health
- Developing efficient, modern, service-oriented public administrations and public procurement practices
- Effective rule of law and combatting corruption.
The creation of the permanent EC tax service appears to be a sensible retention of best practices, to be made available to struggling Member States to help avoid another crisis like the current situation in Greece. However there may be concern that the EC’s work becomes seen as intrusive in state affairs, and its recommendations become seen as conditions to future funding support from the EC or the European Central Bank (ECB).
Background – 2013 Greek Taskforce Project
The EC has supported extensive tax policy and administrative reform work in Greece in 2011-13 via The Task Force for Greece, July 2011. Tax evasion has been estimated to cost Greece up to 6% of annual GDP – over €10 billion per annum.
It had 60 people at its peak including: the EC, EU Member States, IMF, World Bank, Council of Europe, UN and EBRD. This was the basis of the above Service, addressing concerns about resources and technical knowledge retention, while organisers did not want to wait for the next crisis.
Issues covered included:
- Legislation and how it is supported by administration of taxes
- Independence from political influence (are there ‘secretariats’ emerging to control tax offices)
- Disputes and appeal management
- Organisation structures and efficiency of finance and tax departments
- The use of IT in managing tax administration, but also increasingly to help identify errors and fraud through sophisticated analytics
- Reform program models and effectiveness
- Metrics such as tax recovered vs. tax due, charted against KPIs across the rest of the EU
- Budget, cash and human resource planning
- Effectiveness of collections procedures
What improved as a result of above programme:
- Debt collections went from €1.4bn 2011 to €3.2bn in 2013 (Greek Public Revenue Administration)
- A dispute resolution function was introduced