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H2020

FairTax Report Summary

Project ID: 649439
Funded under: H2020-EU.3.6.

Periodic Reporting for period 1 - FairTax (Revisioning the ‘Fiscal EU’: Fair, Sustainable, and Coordinated Tax and Social Policies)

Reporting period: 2015-03-01 to 2016-02-29

Summary of the context and overall objectives of the project

Since the outbreak of the economic and financial crisis in 2008, the aims of taxation policy in the EU have changed – at both individual Member State and EU level. As the globalisation of the economy substantially has increased the mobility of tax bases, EU Member States are striving to preserve tax revenues and consolidate public finances, whilst calling for coordinated, international action in tax competition and global tax policy more generally. Additionally, both climate change and the increasing inequality of income and wealth in many Member States have presented further challenges in EU tax policy.
Enhanced tax compliance is a concomitant to fair, sustainable and effective taxation. The design of improved compliance initiatives may enable recapture of lost resources, in particular those connected to labour income and private consumption. This is important because of their inherent connection with employment, economic growth, and perceptions of tax fairness. The BEPS (base erosion and profit shifting) initiative provides an example of coordinated effort by both the OECD and the EU, and involves foci on both transparency and enhanced exchange of information. Such coordination enables tax avoidance and aggressive tax planning to be targeted in a coordinated, harmonized way.

Based in this context the FairTax project will carry out in-depth interdisciplinary research using constitutional, legal, technical, institutional, qualitative, and quantitative methods to address four core issues:
-Options for expanding EU legislative competences or governance mechanisms for effective harmonization of member tax and social policies;
-Reform options for state-level coordination of fairer, more stable, and more sustainable tax and social policy regimes;
-Strategies for the increased effectiveness and harmonization of tax administration and compliance structures within the EU and non-EU areas; and
-Recommendations for true own- source EU revenues.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

The current priorities of the EU Commission informed the development of the first phase of our project, “Revisioning the ´Fiscal EU´: Fair, Sustainable, and Coordinated Tax and Social Policies”.
An exploration of tax policy norms served as starting point. Work package one (WP1) executed a comparative analysis of dominant tax policy principles, and challenges, in a targeted selection of jurisdictions, revealing the existing gaps between normative aspirations and essential outcomes in key areas of policy challenges. An important theme of this portion of the research involved the imperative for the restoration of the social contract, and trust, within the EU.
Work package two (WP2) targeted the aims set by the Europe 2020 strategy - smart, inclusive and sustainable growth – by constructing an innovative model for the evaluation and measurement of the sustainability of the taxation system. This model represents a unique modular diagnostic tool which is capable of indicating the extent to which the current tax system of the EU Member State contributes to economic, social, environmental and institutional/cultural sustainability. The distinctive design of the model identifies those policy areas which lag behind in their support for the individual pillars of sustainability.
The research in work package 3 (WP 3) covers one, central aim of the Europe 2020 strategy – social inclusion. Based on the comparative analysis conducted so far, the EU-based EUROMOD, in conjunction with the Canadian Social Policy Model and Database, have been identified as as the most suitable simulation software for critical assessment of gender inequality as well as social inclusion.
The interaction between sustainability of the fiscal system and social inclusion is addressed in the work conducted within work package four (WP 4). As a methodological basis from which to investigate contemporary pension policies in the EU as factors which may have altered the social contract, interview guides were designed, and consultations were held. The interview guides will serve to clarify options which may make pension systems both fiscally sustainable and socially inclusive.
Base erosion and profit shifting and aggressive tax planning are addressed in work package five (WP 5). The model constructed here calculates the budgetary impact of the introduction of a CCCTB in the EU. The EU Action plan for fair and efficient corporate taxation, and the budgetary impact of cross-border loss offsetting under CCCTB, are addressed by this model.
Tax compliance as a crucial precondition of fair, sustainable and effective taxation is the topic of the research within work package six (WP 6), which aims to afford insight into the new compliance initiatives developed by the governments of the Scandinavian countries. The research reveals that this new, enhanced cooperation framework aims to develop the active engagement of taxpayers, business and third parties before the submission of tax statements.
Work package seven (WP7) also addresses tax compliance issues, mainly focusing on the evaluation of the new tax compliance initiatives and associated changes in working practices in tax advisory companies. A initial result of the research is that even though the European regulatory framework for tax advisors appears quite heterogeneous, in practice the systems are more convergent. Thus it is necessary to perform multidimensional analyses which comprises all regulations affecting tax advisory work in order to understand the complex relationship between tax advisors and taxpayers.
The potential contribution of EU taxes to fair, sustainable and effective taxation is at the core of work package eight (WP 8). An innovative conceptual basis for sustainability-oriented evaluation of possible candidates for EU taxation has been developed in accordance with the Europe 2020 strategy, which prioritises smart, inclusive and sustainable growth. Taking into account the main criticism of the current EU system of own resources, and in particular the concern that current own resources do not support central EU objectives, an innovative framework of sustainability-oriented criteria for evaluation of potential EU taxes is being developed. This framework will be the basis for the evaluation of a number of candidates for EU taxes as a next step.
In summary, all deliverables were completed as planned. The objectives of the WPs established in the project proposal remain relevant. However, some were developed further in response to recent developments of EU taxation policy, as a means of further enhancing the potential of this project to formulate policy recommendation for the European Commission. Reflecting the many, current challenges that the European Commission is endeavoring to address through taxation policy, the research carried out in the first reporting period identifies unique tools and innovative solution frameworks for the evaluation of the impact of tax policies, and proposes solutions for the current challenges in taxation at both Member State and EU level.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

Since the outbreak of the economic and financial crisis in 2008, the aims of taxation policy in the EU have changed – at both individual Member State and EU level. As the globalisation of the economy substantially has increased the mobility of tax bases, EU Member States are striving to preserve tax revenues and consolidate public finances, whilst calling for coordinated, international action in tax competition and global tax policy more generally. Additionally, both climate change and the increasing inequality of income and wealth in many Member States have presented further challenges in EU tax policy.
Enhanced tax compliance is a concomitant to fair, sustainable and effective taxation. The design of improved compliance initiatives may enable recapture of lost resources, in particular those connected to labour income and private consumption. This is important because of their inherent connection with employment, economic growth, and perceptions of tax fairness. The BEPS (base erosion and profit shifting) initiative provides an example of coordinated effort by both the OECD and the EU, and involves foci on both transparency and enhanced exchange of information. Such coordination enables tax avoidance and aggressive tax planning to be targeted in a coordinated, harmonized way.
These current priorities of the EU Commission informed the development of the first phase of our project, “Revisioning the ´Fiscal EU´: Fair, Sustainable, and Coordinated Tax and Social Policies”.
An exploration of tax policy norms served as starting point. Work package one (WP1) executed a comparative analysis of dominant tax policy principles, and challenges, in a targeted selection of jurisdictions, revealing the existing gaps between normative aspirations and essential outcomes in key areas of policy challenges. An important theme of this portion of the research involved the imperative for the restoration of the social contract, and trust, within the EU.
Work package two (WP2) targeted the aims set by the Europe 2020 strategy - smart, inclusive and sustainable growth – by constructing an innovative model for the evaluation and measurement of the sustainability of the taxation system. This model represents a unique modular diagnostic tool which is capable of indicating the extent to which the current tax system of the EU Member State contributes to economic, social, environmental and institutional/cultural sustainability. The distinctive design of the model identifies those policy areas which lag behind in their support for the individual pillars of sustainability.
The research in work package 3 (WP 3) covers one, central aim of the Europe 2020 strategy – social inclusion. Based on the comparative analysis conducted so far, the EU-based EUROMOD, in conjunction with the Canadian Social Policy Model and Database, have been identified as as the most suitable simulation software for critical assessment of gender inequality as well as social inclusion.
The interaction between sustainability of the fiscal system and social inclusion is addressed in the work conducted within work package four (WP 4). As a methodological basis from which to investigate contemporary pension policies in the EU as factors which may have altered the social contract, interview guides were designed, and consultations were held. The interview guides will serve to clarify options which may make pension systems both fiscally sustainable and socially inclusive.
Base erosion and profit shifting and aggressive tax planning are addressed in work package five (WP 5). The model constructed here calculates the budgetary impact of the introduction of a CCCTB in the EU. The EU Action plan for fair and efficient corporate taxation, and the budgetary impact of cross-border loss offsetting under CCCTB, are addressed by this model.
Tax compliance as a crucial precondition of fair, sustainable and effective taxation is the topic of the research within work package six (WP 6), which aims to afford insight into the new compliance initiatives developed by the governments of the Scandinavian countries. The research reveals that this new, enhanced cooperation framework aims to develop the active engagement of taxpayers, business and third parties before the submission of tax statements.
Work package seven (WP7) also addresses tax compliance issues, mainly focusing on the evaluation of the new tax compliance initiatives and associated changes in working practices in tax advisory companies. A initial result of the research is that even though the European regulatory framework for tax advisors appears quite heterogeneous, in practice the systems are more convergent. Thus it is necessary to perform multidimensional analyses which comprises all regulations affecting tax advisory work in order to understand the complex relationship between tax advisors and taxpayers.
The potential contribution of EU taxes to fair, sustainable and effective taxation is at the core of work package eight (WP 8). An innovative conceptual basis for sustainability-oriented evaluation of possible candidates for EU taxation has been developed in accordance with the Europe 2020 strategy, which prioritises smart, inclusive and sustainable growth. Taking into account the main criticism of the current EU system of own resources, and in particular the concern that current own resources do not support central EU objectives, an innovative framework of sustainability-oriented criteria for evaluation of potential EU taxes is being developed. This framework will be the basis for the evaluation of a number of candidates for EU taxes as a next step.
In summary, all deliverables were completed as planned. The objectives of the WPs established in the project proposal remain relevant. However, some were developed further in response to recent developments of EU taxation policy, as a means of further enhancing the potential of this project to formulate policy recommendation for the European Commission. Reflecting the many, current challenges that the European Commission is endeavoring to address through taxation policy, the research carried out in the first reporting period identifies unique tools and innovative solution frameworks for the evaluation of the impact of tax policies, and proposes solutions for the current challenges in taxation at both Member State and EU level.

Related information

Record Number: 190245 / Last updated on: 2016-11-14
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