European Union's Annual Growth Survey 2012 and Tax Reform Initiatives
THE European Commission is accelerating its efforts for economic renewal, with moves to address three interwoven challenges facing the EU and the Euro area in particular: a divergent but generally lacklustre growth and employment performance; insufficiently coordinated and disciplined budgetary policies; and unstable sovereign debt markets suffering from a lack of liquidity.
The package contains four elements: the 2012 Annual Growth Survey (AGS) setting out the economic priorities for the coming year; two Regulations to tighten economic and budgetary surveillance in the Euro area; and a Green Paper on Stability Bonds.
In this context, EU Tax Commissioner Algirdas Semeta said that in the coordination of fiscal policies, a new element is recognised this year in the AGS. According to Šemeta, "Tax policy is fundamental for economic recovery. Moreover, the quality of taxation will determine whether we sink or swim. Tax reform must go hand in hand with structural reform if we are to see sustainable public finances and financial stability."
The AGS 2012 advises Member States to take a close look at how the quality of their revenues can be improved, focussing on a number of important areas in particular:
Raising revenues in a smarter way: Instead of arbitrarily raising rates, Member States should look at how to improve their current tax systems to raise revenues - for example, reconsidering tax breaks, broadening tax bases and phasing out hidden tax subsidies.
Tackling tax evasion and fraud: Many billions of Euros are lost from national budgets every year due to tax evasion and fraud. Member States need to strengthen their administrations to combat this problem, and ensure that the controls and sanctions are strong enough deterrents. Coordination at EU level is also crucial. It can ensure that aggressive tax planners can't exploit loopholes between Member States' systems and that there is a consistent EU approach to third countries when it comes to tackling uncooperative jurisdictions.
Creating a better environment for business: Member States are advised to examine whether they could shift taxes away from areas that impede growth (labour, corporate taxes) towards more growth-friendly taxes (consumption, environment). Member States should also agree on proposals that would remove obstacles for businesses such as the Common Consolidated Corporate Tax Base and the Energy Tax Directive.
Coordinating at EU level to maximise reforms: EU coordination on taxation prevents distortions and obstacles to the Internal Market, limits non-taxation and abuse, and prevents a "race to the bottom" approach which can curtail national reform efforts. It also allows the exchange of best practices and strength in numbers when tackling common problems such as harmful tax competition from third countries.
While EU has some plans including tax reforms and is initiating steps for economic revival, what do we have in India? A stalled Parliament, with no clue as to what will happen to all the crucial reform oriented Bills especially Tax Reform Bills pertaining to DTC and GST. If all is well as stated by our FM, why is rupee degenerating against the dollar so rapidly and why is there so much of uncertainty in stock markets. Can they be brushed aside by linking them to turmoil in the EU and US economies?