More than 100 tax academics from 17 EU member states are calling for the creation of an EU agency for tax cooperation to facilitate the exchange of information, particularly regarding VAT and excise taxes.
“The past decade has witnessed significant legislative development, imposing substantial obligations on national administrations in terms of cooperation,” said Edoardo Traversa, a professor of tax and European law at the Catholic University of Louvain, who drafted a letter sent January 22 to EU Tax Commissioner Paolo Gentiloni.
Traversa told Tax Notes that the European Public Prosecutor’s Office has been tasked with dealing with cross-border VAT fraud, and the European Commission has revived a proposal for the harmonization of corporate tax rules. Both of those initiatives rely on national administrations, which generally cooperate bilaterally despite the existence of some multilateral networks, like Eurofisc, for combating cross-border VAT fraud.
The 131 academics who signed Traversa's letter to Gentiloni said the commission's recent proposal to set up an EU customs authority is a milestone because it is the first time the commission has proposed the establishment of an EU agency dealing with taxation. An EU agency that fosters cooperation in other areas of taxation is justifiable on similar grounds, the letter says.
No EU agency exists to support overall tax cooperation, which “poses a problem in terms of the efficiency of tax administrations’ actions and legal certainty for taxpayers," Traversa said. "Due to the absence of a place where national administrations can consult, we end up with different implications from one state to another.”
According to the EU Court of Auditors, information exchanged under EU directives “is lacking in quality, precision, and completeness and often is not properly used, which results in an important loss of tax revenue, both for national and EU budgets,” the letter says. It also cites divergent practices in the implementation of EU tax legislation and limited coordination of tax controls on cross-border transactions “despite long-standing cooperation” among member states.
Setting up a European agency for tax cooperation would follow the usual process in the EU: Once harmonized rules are adopted, it’s quite common to set up an administrative structure to support their implementation, Traversa said. This approach has been followed, for example, with the European Labor Authority, which "ensures that EU rules on labor mobility and social security coordination are enforced in a fair and effective way and makes it easier for citizens and businesses to reap the benefits of the internal market,” according to its website.
The January 22 letter to Gentiloni includes a draft proposal for a regulation that sets out missions and tasks for the agency in connection with EU legislation on direct and indirect taxation. It says the agency should “assist the Member States and the Commission in their effective application and enforcement of Union law related to harmonization of Member States' tax legislations,” and should “contribute to the operational management of taxes harmonized by EU Directives — in particular, value-added tax . . . and excise duties, and thereby coordinate and supervise operational cooperation between Member States' tax administrations and pool and provide technical expertise to increase efficiency and delivery of results.”
The agency would be tasked with facilitating the exchange of information between member states as well as "the follow-up to requests and information exchanges between national tax administrations by providing logistical and technical support and through exchanges on the status of specific cases," the letter says. Other responsibilities would include the support of “concerted and joined inspections,” and the “operational management of EU common platforms based on common communication networks, if so provided by the relevant Union acts.”
The agency would “coordinate, develop, and apply interoperability frameworks to guarantee the exchange of information between Member States as well as with the Authority,” according to the proposal.
“Finally, a European Agency for Tax Cooperation would effectively complement the action of the two EU bodies," the European Anti-Fraud Office and the European Public Prosecutor's Office, "that for some years now have been conferred wide-ranging powers for protecting EU financial interests by fighting against tax frauds and by prosecuting tax criminal offences,” the letter says.
The proposed regulation doesn’t include the number of staff or a budget, but says member states would designate “one National Liaison Officer as a seconded national expert to the Agency and to work at its seat.”
Traversa said the future commission, which will be put in place after the June EU parliamentary elections, will establish its work program based on ideas that are circulating now, hence the timing of the letter. He noted that the initiative "is purely administrative and as such, wouldn’t have an impact on member states' sovereignty.”
The list of signatories to the January 22 letter has not been made public.