Direct Taxation: The European Commission proposes an EU co-ordinated approach of national direct tax systems

(see MEMO/06/499)

The European Commission has adopted a Communication announcing a series of initiatives to promote better co-ordination of national direct tax systems in the EU. The aim is to ensure that national tax systems comply with Community law and interact coherently with each other. The initiatives seek to remove discrimination and double taxation for the benefit of individuals and business while preventing tax abuse and erosion of the tax base.

"Discrimination and double taxation prevent individuals or business from reaping the full benefits of the Internal Market and undermine the EU’s competitiveness. There is an urgent need to improve coordination of national tax rules to allow them to interact more coherently" said László Kovács, the Commissioner responsible for Taxation and Customs Union. "Moreover, I am convinced that coordination would help Member States to prevent unintended non-taxation or abuse and hence avoid undue erosion of their tax bases"

The main objectives of a coherent and coordinated tax approach are to:

• Remove discrimination and double taxation,
• Prevent unintended non-taxation and abuse, and
• Reduce the compliance costs associated with being subject to more than one tax system.

Linked to this Communication, the Commission is presenting two Communications on cross-border loss relief (IP/061828/) and exit taxation (IP/06/1829), which provide the first two examples of specific areas which could benefit from a coordinated approach.