Coordinated strategy to improve the fight against fiscal fraud

May I first take this opportunity to thank colleagues for their input, especially on one or two topics where we still have differences of opinion. I think we have more in common than divides us and that we can reach a satisfactory outcome by not straying too far from the core subject.

The broad principles underlying this report on fiscal fraud are simple, and only fraudsters themselves would disagree. The tax losses due to fraud are difficult to assess. Fraudsters and tax evaders take care to hide their activity from the tax authorities, but estimates put the level of fraud at EUR 200-250 billion or 2-2.5% of the total GDP of the EU.

My question is, do we put 2-2.5% of our collective effort into resolving it? Since the answer to that question is clearly no, there can only be one conclusion. It needs more effort, more attention and in particular it needs more collective cooperative attention by Member States.

Now VAT fraud, particularly the missing trade or carousel fraud, may be the largest single cause of tax loss. It comes about simply because of the loophole in the arrangements for VAT under which it is not levied on cross-border intra-Community trade. So VAT-free purchases can be sold on, the VAT pocketed and then the trader vanishes. In complex carousels innocent traders can get enmeshed, and measures within Member States to combat fraud, such as freezing rebates, can damage innocent businesses. This is a well-known problem in my own country, the United Kingdom. So that is all the more reason to tackle the problem at its root.

Pragmatically VAT will have to remain a consumption tax based on accruing to the fiscal authority of final destination. The report proposes that VAT should be levied on intra-Community supplies at the minimum rate, 15%, with the importing Member State then levying its own domestic rate for subsequent stages.

The 15% collected by the originating Member State then needs to be handed over to the Member State of final consumption by some method of clearing or settlement. This now is technically feasible; all the more so as we move inevitably to real-time recording of transactions. And it does not have to be centralised; it can be done in a decentralised or bilateral manner.

Regarding other ways of combating fraud and tax evasion, the exchange of information and cooperation are central to this and, dare I say it, a 'cash now' attitude of 'What am I getting out of it?' in some quarters does not lead to progress and is a short-sighted view. Payback comes another time when you are on the requesting end.

Tax authorities need to know about assets in order to help track down hidden income which may be undeclared or originate itself from criminal activity. This is undermined if exchange of information between authorities is restricted. Here we also need to act in the international dimension to be most effective.

Finally this brings me to revision of the Savings Tax Directive. It is proper to revisit that Directive, for example to close loopholes such as using alternative legal entities like foundations to escape its provisions. Withholding tax is not ideal, but here we are divided on whether it can be done without undesirable consequences.

Tax fraud is the business of the EU because fraudsters make use of cross-border loopholes, and that is what we are trying to close.

As the Commissioner says, the savings tax issues are complex. I think it is possible for us to reach agreement through our voting that we do not pre-empt too much the more detailed discussions that we are going to have to hold on that topic when the Commission comes out with their further proposals. Likewise I think that we can also avoid reference to tax competition where we are divided but which is not core to this report. Therefore I think we can achieve some harmony amongst ourselves.

On all these fronts, colleagues and Commissioner, I do not think that inaction or tentative action is an adequate response. 2.5% of GDP is at stake. That is a huge chunk of the tax base. As our colleague, Mr Sánchez Presedo, points out, that is possibly 5% of tax.

If any politician here or in any Member State campaigned on the basis of putting up tax by 5% to pay for nothing, they would not get very far. So, and I say this to Member States in particular, getting prickly about exchange of information, doing the minimum, being fearful, is just the same as taxing 5% for nothing, for that is what it costs the honest taxpayer. That is the message that I wish to send in this report and I believe it is the collective message that this Parliament wishes to send in this report supporting the Commissioner in his efforts and urging him to be bold.