Removing cross-border tax obstacles for EU citizens
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On Monday, the Commission published a Communication which outlines the most serious tax problems that EU citizens face in cross-border situations and announces plans for solutions. When individuals move or work or invest abroad, they can encounter double taxation and other difficulties such as in claiming tax refunds and in obtaining information on foreign tax rules. The Communication announces plans in some areas such as cross-border income, inheritance taxes, dividend taxes, car registration taxes and e-Commerce. Today’s Communication also aims to see where further action could be taken, at both EU and national level, to make Member States’ tax systems more compatible so that citizens will not be deterred from engaging in cross-border activities.
Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said, “Taxation has a crucial role to play in strengthening the Internal Market and re-building a strong and sustainable European economy. Good tax policies can promote employment, investment and growth. Today’s Communication is another step forward in overturning tax obstacles and promoting fair taxation within the EU, so that citizens can enjoy all the benefits that the Single Market has to offer.”
Every year, cross-border tax issues make up a substantial part of all complaints and queries that EU citizens send to the Commission. The complaints cover a whole range of issues from the difficulties caused by complex foreign tax rules, to lack of clear information for foreigners, to conflicting systems in different Member States. Cross-border workers face difficulties in getting tax allowances, relief and deductions from foreign tax authorities, and are frequently subject to double taxation. Citizens buying foreign real estate often miss out on tax exemptions or must pay higher property taxes than residents, while those moving or buying cars cross-border face double registration taxes. People with foreign investment income find it difficult to claim entitlements to relief from withholding taxes applied by foreign countries. Many people with foreign pension funds experience problems with deductions and cross-border transfers, while inheritances from another Member State are often subject to higher succession duties or double taxation. E-shopping is also severely hampered by tax obstacles such as complicated VAT rules and reporting requirements, with the result that only 7% of goods traded within the EU are bought online from another Member State.
Half of the tax infringement proceedings that the Commission opens every year in the tax area relate to citizens’ complaints. However, infringements do not solve everything. The best way to solve issues such as double taxation and administrative complexities lies in proper cooperation between Member States. According to today’s Communication, Member States should design and implement their tax measures and practices in a way which does not deter citizens from engaging in cross-border activities. They should also coordinate more closely with each other in order to prevent mismatched tax rules from creating obstacles and barriers to the Internal Market.
The Commission intends to step up its activities to help make Member States’ tax systems more compatible, and to propose concrete measures to prevent or remove tax problems for EU citizens. The Communication sets out a number of initiatives in this field. These include:
A Communication on Double Taxation in 2011, examining the extent and gravity of this problem across the EU, followed by legislative proposals in 2012, proposing solutions.
Proposals in mid-2011 to address cross-border inheritance tax problems.
Measures to resolve the double taxation that can arise when a car that is first registered in one Member State is then moved to and re-registered in another Member State.
Extension of a “one-stop-shop” system for e-Commerce, in order to make reporting obligations for businesses much simpler and easier for them to offer goods and services online to foreign consumers. Obstacles to e-Commerce will also be addressed within the review of the EU’s VAT System for which a consultation is now open (see IP/10/1633).
Proposals in 2012 to solve problems related to the taxation of cross-border dividend payments.
In addition, the Commission intends to promote a wide dialogue amongst national authorities and stakeholders to see what else could be done to simplify tax measures to the benefit of citizens and the Internal Market. Ideas include standardised tax claim and declaration forms throughout the EU, single info-points where workers and investors could get clear and reliable tax information, and special tax measures at national level to cater for the needs of mobile and border workers.
The Commission will give feedback on the progress made in tackling cross-border tax problems within the Citizenship report in 2013