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Revisioning the ‘Fiscal EU’: Fair, Sustainable, and Coordinated Tax and Social Policies

Periodic Reporting for period 3 - FairTax (Revisioning the ‘Fiscal EU’: Fair, Sustainable, and Coordinated Tax and Social Policies)

Reporting period: 2017-09-01 to 2019-02-28

Globalization of the economy 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.

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.
An exploration of tax policy norms and principles in targeted jurisdictions, served as starting point in WP 1, revealing the existing gaps between normative aspirations and essential outcomes in key areas of policy challenges. The second report from WP2 not only substantiates the concept of sustainable taxation from a legal perspective, but expands the debate to European hard and soft law tax measures in general and reveals gaps in mechanisms to implement social and environmental objectives.
WP 2 started out by constructing an innovative model for the evaluation and measurement of the sustainability of the taxation system, and continued during this period presenting results stating that tax policies focusing on a more equal distribution of post-tax incomes has a close relation to the different sustainability dimensions (economic, social, environmental and cultural).
The research in WP3 has scanned the tax and benefit interface regarding joint and individual assessments of taxes and social transfers, and also finalized a report on gender equality and taxation in the EU.
The interaction between sustainability of the fiscal system and social inclusion is addressed in the work conducted within WP 4. Life course method of enquiry draws on the Irish pension system to illustrate problems typically being addressed in pensions reform considerations across Europe.
Base erosion and profit shifting and aggressive tax planning are addressed in WP 5. The model constructed here calculates the budgetary impact of the introduction of a C(C)CTB in the EU.
Tax compliance as a crucial precondition of fair, sustainable and effective taxation is the topic of the research both in WP 6 and 7. WP 6baims to afford insight into the new compliance initiatives developed by the governments of the Nordic countries.
WP7 focus on the evaluation of the new tax compliance initiatives and associated changes in working practices in tax advisory companies. An 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.
WP 8 presented during the first period an innovative conceptual basis for sustainability-oriented evaluation of possible candidates for EU taxation, developed, taking into account the main criticism of the current EU system of own resources. On the basis of this framework six candidates for EU taxes has been investigated during this report period.
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 second phase of our project, “Revisioning the ´Fiscal EU´: Fair, Sustainable, and Coordinated Tax and Social Policies”.
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