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ECON Article

ECON Article by Maria salomé (PT) for EPR3-Coimbra "Evasion contra avoidance? How should Member States tackle tax avoidance, and at the same time respecting their citizens’ right to privacy and Third-Party State’s sovereignty?"

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44 views3 pages

ECON Article

ECON Article by Maria salomé (PT) for EPR3-Coimbra "Evasion contra avoidance? How should Member States tackle tax avoidance, and at the same time respecting their citizens’ right to privacy and Third-Party State’s sovereignty?"

Uploaded by

Pedro Antonio
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Presided by Afonso Loureiro and Pedro Ferreira

Head-Organised by Joo Bernardo Gonalves

ECON
Evasion contra avoidance? How should Member States tackle tax
avoidance, and at the same time respecting their citizens right to privacy
and Third-Party States sovereignty?
Stopping tax fraud and tax evasion could put extra billions into the public
purse across Europe, said the former president of the European Commission,
Duro Barroso back in 2012. Three years later, this is still a major concern in the
European Union, since the loss of revenue prevents member-states from meeting
their social responsibilities. Which measures should the Euopean Union adopt to
tackle tax fraud?
The creation of the Single Market allowed the free movement of goods and
services, and therefore the settlement not only of individuals but also companies in
the territory of other member states.
However, lack of harmonization of tax
laws promotes unfair competition and
trade. There cannot be double taxation,
so a company can produce its goods
and declare its income from an
offshore foreign corporation, in a
country where there are low, or
sometimes even zero taxes rates (the
so called tax havens), and therefore not
pay the taxes in the countries where
the product is sold.

ES Jos Falco

7th to 9th of October

Presided by Afonso Loureiro and Pedro Ferreira


Head-Organised by Joo Bernardo Gonalves

This can lead to situations as the LuxLeaks scandal, when in 2014


Luxembourg was revealed to have approved questionable corporate
schemes to avoid tax bills by
major companies as Ikea. But
how exactly should this concern
citizens? Well, in order to be able
to provide public services, such
as health care, education,
environmental protection and
security, the state asks citizens
in return for taxes. So when
individuals or companies disguise their income in order to pay lower taxes, they are
preventing people from getting those services.
There are two ways to escape taxes, evasion and avoidance one is on the
wrong side of the law and the other on the right. When there is a deliberate attempt
to deceive the system, by faking documents with exaggerated expenses, not
reporting the full income or hiding money, it is called tax evasion, and it is against
the law. Tax avoidance, on its turn, is not a crime, but neither is it necessarily
ethical. It is a way of using the law into someones advantage, in order to reduce
their tax bill, and it can reach a level where studies are carried in order to find
loopholes in the law.

ES Jos Falco

7th to 9th of October

Presided by Afonso Loureiro and Pedro Ferreira


Head-Organised by Joo Bernardo Gonalves

Harmonization of tax laws amongst member-states is required,


since so far each one has the sovereignty to implement their own rules, both on
taxes and on fiscal matters. This is why in 2012 the Commission fought for a revision
of the savings tax directive, intended to negotiate stronger savings tax agreements
with third countries, since their completion would be a major source of legitimate
tax revenues, given tax havens outside EU they cannot be influenced by regulation.
However, the outdated system led to the reform of corporate taxation in the EU,
presented in June of 2015 the Action Plan for Fair and Efficient Corporate
Taxation. The five main elements consist of re-launching the Common Consolidated
Corporate Tax Base, ensuring fair taxation where profits are generated, ensuring
that companies active in the EU are effectively taxed in the EU, improving EU
coordination and increasing transparency. However, how citizens right to financial
privacy will be upheld that gives the customers of financial institutions the right to
some level of privacy from government searches is yet to be known.

By Maria Salom (PT)

ES Jos Falco

7th to 9th of October

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