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New Methods to PRevent, Investigate and Mitigate COrruption and TAX Crimes in the EU

Periodic Reporting for period 2 - PROTAX (New Methods to PRevent, Investigate and Mitigate COrruption and TAX Crimes in the EU)

Periodo di rendicontazione: 2019-11-01 al 2021-07-31

Tax crimes severely affect public revenues and services. The magnitude of tax crimes, corruption, organised crime and money laundering make them a priority issue for the EU and its Member States (MS). In the last decade, the EU has developed laws and established agencies to tackle cross-border tax fraud and to protect the financial interests of the EU. Nevertheless, the limited competence of the EU, the lack of harmonisation between MS and the institutional, legal and human factors hinder countering tax crimes. PROTAX promoted harmonised levels of organisation and networking and developed validated and tested set of law enforcement tools to counter tax crimes. Firstly, PROTAX investigated tax crimes and the role of human factors enabling them. Law enforcement agencies (LEAs) and financial sector play a key role in countering or enabling tax crimes. The way they organise, network, share information and their ability to combine individual and collective work influence the future of Europe’s tax systems. Secondly, PROTAX identified the legal frameworks and gaps therein for addressing tax crimes. Thirdly, PROTAX promoted the improvement of the operational effectiveness of legal frameworks through the development of toolkits for policy-makers and LEAs. PROTAX provided solutions and capacity building tools, to create legally sound and harmonised investigation methods. Finally, PROTAX investigated the constraints that influence the development of cross-border action against tax crimes and provided recommendations for policy-makers and LEAs.
PROTAX contributed to the development of a European Security Model in the area of taxation. In WP1, PROTAX analysed case studies involving tax crimes and illicit money flows which provided insights into the daily work of LEAs and the judiciary including the challenges in preventing, investigating and prosecuting cross border tax crimes. VAT-Fraud was found to inflict significant losses to MS. This analysis showed dual use of enablers tax crimes. The most significant challenge was the lack of an effective inter-agency and transnational cooperation among the EU MS. In WP2, focus groups (FGs) were conducted with experts. A detailed questionnaire explored institutional practices in anti-money laundering and tax evasion. These FGs demonstrated that tax crimes are fuelled by legal, institutional, socio-economic, cultural, and behavioural factors. PROTAX explored these and added a new dimension, the human factors. In WP3, PROTAX provided a comparative analysis of the legislative and institutional approaches to tax crimes in 16 jurisdictions. This analysis revealed the differences in the volume of tax crimes; scope and definitions; thresholds; sanctions; investigation and prosecution routes; liability of legal entities; money laundering; organised crime; and whistleblower protection. By doing so, PROTAX created taxonomies of tax crimes and underlined the need to harmonise their treatment in the EU. Secondly, PROTAX developed a pioneering investigation into the relationship between tax crimes and corruption offences and analysed the legal frameworks to counteract “fiscal corruption” and suggested a whole-of-government approach against tax crimes and corruption. Thirdly, PROTAX explored the human factors through an analysis of the extra-legal, social, institutional and organisational aspects. In WP4, PROTAX explored why some countries are more successful than others in convicting tax crimes; and found that each country addresses tax crimes differently, and the statistics collected and analysed in each jurisdiction in the EU are fragmented. This study recommended that all countries shall standardise and publish their statistics. Additionally, PROTAX created a set of benchmarks for the adequacy of specific enforcement practices. In WP5, the PROTAX addressed the challenges in information-sharing. PROTAX analysed the current state of frameworks for cooperation and information sharing at national, EU, and international levels and developed a Policy Paper calling for an EU agency for countering tax crimes; and offered alternatives for positioning and operationalising a suitable agency. In WP6, PROTAX addressed data protection, privacy, ethical and social issues arising from the prosecution of tax crimes. These considerations are relevant as surveillance of individuals and data sharing between LEAs are keys to investigating tax crime. They impact privacy rights, data processing and control over personal data, and must therefore be proportionate and legitimate. In WP7, PROTAX developed toolkits for policy-makers, LEAs, and a risk assessment methodology. The toolkit for policy-makers provided a novel and proven policy streams from which actionable plans and laws can be developed to overcome common policy problems. The tax fraud investigation toolkit sets common standards and methods for LEAs and tax authorities. It was co-created with expert stakeholders. PROTAX also developed a tax crime risk assessment methodology which aims to offer a model of assessment of suspicious behaviours and warning signs as well the legal and institutional risks across the EU. In WP8, PROTAX conducted workshops with stakeholders across 19 European countries to demonstrate and discuss the toolkits. Additionally, PROTAX developed training materials and run masterclasses for the European Financial and Economic Crime Centre and various ministries. These efforts ensured that the toolkits were validated in a significant number of EU MS. Furthermore, PROTAX developed a series of recommendations for the EU Commission, and political institutions of the EU. In WP9, PROTAX developed various activities aimed at ensuring the take-up of the project’s results. Press releases and short articles were published on the project website and the social media. Additionally, PROTAX developed digital resources; clustered with relevant EU-funded projects and published its findings in prestigious books and journals.
PROTAX toolkits can contribute to the protection of financial interests of the EU. The toolkit for policy-makers sustains the development of a European Security Model and can be used by the authorities of the EU and its MS to identify gaps and promote innovative solutions to counter tax crimes. The risk assessment methodology is a tool for assessing risks in countering tax crimes in the private and public sectors. It will support the EU and MS to prevent victimisation of the public through tax crimes. The toolkit for LEAs is already promoting the detection and investigations of tax crimes in the EU since it offers practical solutions for end-user stakeholders. The Tax Fraud Investigation Toolkit has been already used during workshops and masterclasses with law enforcement officers and training and education programmes. PROTAX deliverables can foster knowledge about tax crimes and promote information-sharing in the EU. A book informed by the early findings of the project has already been published by Hart Publishing. Another book of the project will be published by Oxford University Press.
Professor Umut Turkens discussing ProTax Goals
Image of members at KoM
Consortium members at KoM Vienna