Dr Andrej Bajuk, Slovenian Minister of Finance and current President of the Economic and Financial Affairs (ECOFIN) Council, today addressed participants at the Brussels Tax Forum, organised by the European Commission, taking place on 7 and 8 April on the theme 'Taxation policy: enhancing competitiveness and growth in a European way'.
In his address, Dr Bajuk outlined possible ways in which taxation policy can contribute to growth in Europe, highlighting five aspects of tax policy in particular. The first, the design of the tax system - including rates, exemptions, special allowances and incentives - is an important instrument for any government trying to use the tax system to foster growth and development. Second, a transparent and simple tax system facilitates compliance by companies and individuals and enhances the efficient functioning of the fiscal administration. Third, when addressing taxation and growth, it is also important to maintain social cohesion within the boundaries of sound fiscal policies, especially in the light of the challenges brought by globalisation and population ageing. Fourth, taxation is one of the core elements in creating and fostering the European internal market, which is an important factor driving growth in Europe. Fifthly, the EU started as a customs union nearly 40 years ago and, recently, a modernised customs code has been adopted, aimed essentially at fostering the competitiveness of European businesses on international markets.
In the European Union, we have witnessed a certain stabilisation in the overall tax burden over the last few years. The EU still remains a relatively high tax area, and tax rates in some Member States are amongst the highest of developed countries. The tax-to-GDP ratio, including social security contributions, ranged in 2005 from 50% in Sweden to 28% in Romania. The tax revenue structure indicates that indirect taxes are the main source of tax revenue, accounting for about 35% of the total.
The role of taxation in growth in Europe is also defined in documents which deal with broad European economic policy issues, such as the Lisbon Strategy, for example, concerning the economic growth and competitiveness of the European economy in comparison to global economies, or documents on measures to combat climate change.
In this context, Dr Bajuk pointed out several tax items on the ECOFIN agenda during the Slovenian Presidency. "We are working on proposals for modernisation and simplification of Community tax rules in the area of VAT and excise duties. We believe that adequate efforts must be taken to combat tax fraud effectively, especially in the area of VAT. We have taken an active role in debates on climate change and the possibilities of using the tax system to foster environmentally-friendly behaviour. In this respect, special emphasis should be given to interaction between tax and other market-based instruments with a view to diminishing excessive costs and ensuring the overall effectiveness of all measures undertaken at national and Community level."
In conclusion, Dr Bajuk stressed that "Taxation policy must play a part in endeavours to promote economic growth in Europe, and coordinated measures must be taken in this respect at national and Community level. Such measures must be complementary and should, on the one hand, improve the functioning of the internal market and the position of the EU economy on the world market while also allowing each Member State to pursue its own policy goals."
