Closing VAT gap should be one of EU's priorities - Polish PM

Radek Pietruszka/PAP

Mateusz Morawiecki, the Polish prime minister, has called for a "global crusade" against tax evasion, and a European convention to help fight the “VAT mafia”.

The call, published by the German economic newspaper Handelsblatt on Thursday, reflects the tough line on tax evasion the Polish government has pushed now for a number of years.

Today, Poland's ambition is "to initiate a global crusade against tax avoidance," Morawiecki wrote. "As a leader in narrowing the VAT gap, Poland proposes a European convention against VAT fraud to fight the VAT mafia. We have shown that there is no dogmatic thinking on how to radically improve the regularity of paying VAT through intergovernmental cooperation at a European level."

He added that according to a report by the Polish Economic Institute, the European Union loses at least EUR 170 billion a year to tax havens.

In Morawiecki's opinion, "reducing the VAT gap in the EU (...) should become one of the European Union's priorities for the next three years."

He pointed out that Poland has managed to reduce the share of unpaid VAT to 8-9 percent from 25-27 percent in 2015, while in the EU it remains at an average of 12 percent.

"How we respond to the Covid-19 crisis and how we take the necessary measures to make the European economy stronger is of the utmost importance for millions of workers and their ability to return to normal," the prime minister wrote.

Citing a report by the Tax Justice Network (TJN), he noted that "of the USD 427 billion in tax losses annually, USD 245 billion is due to tax fraud by large multinationals and USD 182 billion due to tax fraud by private individuals."

Morawiecki pointed out that USD 1.38 trillion in profits were not taxed in the countries where they were generated but transferred to tax havens "with an extremely low or non-existent tax burden."

"The rich have paid less in taxes than they should have paid," he wrote, adding that to combat inequalities in the world, the problem of global tax avoidance must be tackled urgently, so that the costs of the coronavirus crisis do not fall on the weaker and poorer.

At the same time, Morawiecki added that the global activity of VAT evasion carousels is not limited to tax havens.

"The above-mentioned report (TJN) lists four countries and territories among those most responsible for the shadow financial zone: The Cayman Islands (16.5 percent of global tax losses, or USD 70 billion), Great Britain (10 percent, USD 42 billion), the Netherlands (8.5 percent, over USD 36 billion) and Luxembourg (6.5 percent, more than USD 27 billion)," he wrote.

The Polish prime minister proposed a series of steps that can be taken to improve global standards and build a fair tax policy.

"First: public scrutiny of the tax policies of large multinational corporations and transparency of their financial transactions and tax strategies,” said Morarwiecki. “Second: partnerships between states and honest companies, for example in aid measures to combat the effects of the coronavirus pandemic, and public procurement. Third: the same standards of fair taxation in all countries, and thus a clear red card for those countries that permanently favour the transfer of taxpayers' money to tax havens," he concluded.