European Parliament Suggesting Action Against Tax Evasion

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The TAX3 committee, which was created by the European Parliament after several fiscal evasion scandals in the EU, released a report detailing the several ways the European tax system can be circumvented.

The report, which was approved by 505 votes in favor, explains how about 200 million euros managed to get out of the system and accuses seven European Union Members (Belgium, Cyprus, Ireland, Hungary, Malta, The Netherlands, and Luxembourg) of being tax havens.

Despite not being binding, the document, which is the result of a year's work by the committee on financial crime and tax evasion, provides detailed information about the different ways the companies bypass the European taxation systems, such as intra-EU money laundering and letterbox companies. It also recommends the European Parliament to create financial police in order to counter money laundering, which according to their estimations is about 110 billion euros per year in the Eurozone.

Stronger rules against tax avoidance and tax evasion are among the other recommendations we can find in the publication, making reference to the already mentioned seven countries that “facilitate aggressive tax planning.” This particular practice makes the EU lose between 50 and 70 million euros every year.

Among other ways of tax evasion, the report mentions letterbox companies, which are companies who establish themselves in certain countries just because of fiscal purposes without contributing significantly to the local economy. Those companies benefit from special instruments offered by the already mentioned EU members.

In the same way, about 60 million euro fade every year because of Value Add Tax matters and since this is an important source of funding for the members the report suggests them to try to harmonize the VAT rules across the continent. Countries like Italy, Greece, Cyprus, and Malta were already punished for providing tax exemptions for bying yachts and private jets.

Other practices, like providing the so-called "golden visas", establishing free zones (there are about 80 of them in Europe), Asset Freezing and tax amnesties, are also mentioned in the report.

Some critics state that the suggested changes would affect certain countries economically in the perimeter.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.