Fighting inequalities through policies against tax fraud and tax evasion
Tax fraud and tax evasion represent a complex challenge for European countries. Also voluntary schemes for tax optimization and tax heavens in Europe and globally are significant in this regard. The scale of the lost revenue is staggering, with possible consequences for the fight against inequalities.[[There are many different estimates and reports on the scale of tax avoidance generally, and in relation to certain companies in particular, coming from tax administrations, NGOs, academics and press. There is no conclusive figure quantifying the scale of corporate tax avoidance, although the general consensus is that it seems to be substantive. One of the highest estimates refers to the amount of € 860 billion a year for tax evasion and € 150 billion a year for tax avoidance.]] First, unpaid taxes limit the capacity of Member States to invest in and implement social and economic policies and services as well as social protection systems. Second, tax fraud and tax evasion also constitute a direct impediment to equal treatment and in fact exacerbate inequalities as they lead to additional and potentially excessive fiscal burdens on those who fulfil their tax obligations. The foregone revenue could help to stimulate economic growth, prevent cuts in public services and mitigate fiscal and social inequalities. Moreover, the fact that well-off or well-connected people benefit from privileged tax treatment decreases and potentially undermines the trust citizens have in the fairness of policies and democratic institutions. The specific challenge is to identify and analyse deficiencies in tax law and enforcement at EU level and across Member States in a context of economic globalisation, including the role of (off-shore) tax havens and to obtain a clearer picture on perpetrators’ attitudes.[[COM(2015) 136 Communication from the Commission to the European Parliament and the Council on tax transparency to fight tax evasion and avoidance.]]
The research to address this challenge should in particular focus on the two dimensions described below. Proposals can comprehensively address one dimension or combine them. They may include additional aspects which are relevant to addressing the specific challenge.
1) The state dimension: the role of governments; tax law and tax enforcement regimes
2) The perpetrators’ side: practices, motivations and attitudes across Europe
The Commission considers that proposals requesting a contribution from the EU in the order of EUR 2.5 million for each dimension would allow this specific challenge to be addressed appropriately. This does not preclude submission and selection of proposals requesting other amounts.
Research will significantly enhance the knowledge base of various tax law and enforcement systems among Member States in general and identify their deficiencies in a comparative way in particular. It will make recommendations and suggest practical options which help redress and reverse tax fraud, optimisations, evasions and avoidance. Furthermore, research will considerably improve understanding of practices, motivations and attitudes of perpetrators, both individual and corporate, with the role of the intermediary financial sector better understood. Recommendations will be made on how tax compliance can be improved, and how it could to a greater extent be portrayed and seen as a virtue. Research is expected to propose readily applicable instruments and strategies to reduce tax fraud, tax optimisation, tax evasion, money laundering and to incentivise tax compliance, whereby national circumstances should be taken into account. The quantitative and qualitative data collected will contribute to increasing the efficiency of tax administrations in European countries by enabling them to better target their compliance and inspection efforts on the individual and company level as well as in sectors of economy with a higher probability of non-compliance. Research should also set out best practices for enhancing cooperation, trust and confidence between tax administrations and taxpayers.