EU Commission Discusses Need to Improve Action Against Fiscal Fraud

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Tuesday, August 1, 2006
Bruce Zagaris
On May 31, 2006, the European Commission adopted a communication to start a debate on a European strategy to combat tax fraud. The communication proposes new EU mechanisms and a new Community approach to administration cooperation with third countries. The Commission observes that fraud accounts for approximately 2 to 2.5 percent of GDP. As a result, the interests at stake in the fiscal fraud are extremely important. While the functioning of the fiscal systems is primarily the responsibility of EU members, fiscal administration, tax auditing and the recovery of taxes is in the hand of the EU members and the Commission has the duty to stimulate and facilitate cooperation between EU members in order to guarantee proper functioning of the internal market and to protect the financial interests of the Community. Fiscal fraud undermines the smooth functioning of the internal market in that it leads to distortions of competition between those that pay taxes and those who do not.