A bid by the European Union to harmonise tax codes across member states has been welcomed by the Chartered Institute of Taxation (CIOT).
The idea is to boost compliance and make it more difficult for citizens to mitigate their tax bills by moving assets between countries.
Now the CIOT says the concept should also boost confidence in each country’s efforts in tax collection.
The proposal for a pan-EU taxpayer’s code are detailed by the EU in a tax evasion and fraud action plan which was released in December last year.
EU watchers say the model that will eventually be adopted will not be very different from the Model Taxpayer’s Charter which has been put forward by the CIOT and the Confédération Fiscale Européenne (CFE).
Number’s up for TINs
In addition, the charter is backed by the Society of Trust and Estate Practitioners (STEP) and Asia-Oceania Tax Consultants Association.
The charter details the responsibilities and rights that would be expected from a ‘good tax system’.
However, the CIOT is now saying that the EU could save itself time and effort if they simply adopted the charter rather than beginning a long process of discussion and debate.
Jeremy Woolf, who chairs the CIOT’s EU and human rights sub-committee, said the EU should talk to the CFE to help achieve its aim.
He said: “We believe that the taxpayer’s code will not result in something that is significantly different to the charter so we are suggesting that the best use of time and resources is to engage with the CFE.”
In addition, the CIOT has reservations about another EU idea for a new system of taxpayer identification numbers (TINs).
The EU wants a new system that they believe would provide an effective solution for countries to correctly identify their taxpayers – nationals and non-nationals alike – whether they work in their home country or travel abroad for work.
However, the CIOT is flagging up the huge potential cost in adapting the TIN since many countries in the EU do not already use them – though some do.
Mr Woolf explained: “We understand that combating tax evasion and having an efficient tax administration is important but we believe that intruding TINs will raise too many questions to make a sensible proposition.”
There are also implications for civil liberties, says the CIOT.
They add that for the UK to adapt TINs, the sheer cost of administering a changeover would be huge and lead to potentially serious problems for the country’s taxpayers.
This cost, says the CIOT, would outweigh any extra tax being collected under the new system.
Instead, they say, the EU should focus using the existing TINs more effectively and developing an EU portal to share information.