The State of the European Union 2017

EU ECONOMIC POLICY IN 2016. AN INCOMPLETE EMU: TOWARDS A FISCAL UNION

mering on the back burner. A prime example is

the European Semester’s lack of fiscal indica-

tors. Annual national stability and growth and

reform programmes should address taxation is-

sues. The European Semester should also incor-

porate reporting on the measures taken by

member states to reduce tax avoidance and

avoidance.

What happens without fiscal convergence:

unfair competition between member states

and higher levels of corporate tax avoidance

The lack of a common tax policy has created

favourable conditions for corporate tax avoid-

ance and fiscal dumping between member

states. As a means of attracting investment, cer-

tain EU countries have resorted to lowering cor-

porate taxes to ridiculous levels or creating spe-

cial tax regimes for particular companies or

income categories. In order to protect their tax

bases, others have adopted unilateral anti-

avoidance measures that often create new legal

loopholes.

The EU has nevertheless made some pro-

gress on this front by means of a Commission-

driven anti-avoidance strategy partially based

on the OECD’s approved Base Erosion and Prof-

it Shifting (BEPS) programme

that fosters

broader coordination between states.

The shared objective of the Union and the

OECD is to achieve fair and effective taxation

and ensure that companies pay taxes in the

countries in which they make their profits and

generate value.

Programme initiated by the OECD in October 2015 to

address flaws in international tax laws.

The EU anti-tax avoidance strategy

In January 2016, the Commission presented its

Anti-Tax Avoidance Package, an initiative it had

previously outlined in its June 2015 Action Plan.

This package contained a number of measures

intended to make corporate taxation in Europe

fairer and more effective and to boost transpar-

ency regarding taxes and taxation.

The central component of the package is the

Anti-Tax Avoidance Directive (ATAD), adopted in

July 2016, which laid out a series of rules against

tax avoidance we will describe in detail going

forward. First and foremost, ATAD gives an im-

portant number of points laid out in the BEPS

programme legal force by incorporating them

into community law. It must be remembered

that community directives are legally binding

and that questions regarding compliance are

settled in the European Court of Justice. Al-

though some BEPS reports contemplate mini-

mum standards, those that regulate matters cov-

ered by ATAD do not

. What the OECD initiative

offers is a set common methods and best prac-

tices. Countries participating in its programme

do so voluntarily and are not bound to imple-

ment or enforce programme recommendations.

ATAD also regulates certain areas not ad-

dressed by the OECD BEPS programme. At a

time when multilateralism is being called into

question by a number of big players, it is more

important than ever for the EU to assume lead-

ership on issues of fiscal governance rather than

waiting to reach global agreements on meas-

ures that require supranational action. Another

important point is that while ATAD establishes

minimum standards, member states are free to

Certain aspects of the BEPS programme such as country-

by-country reports do establish minimum standards.