New, better and fairer taxation

Taxation is needed as a contribution from each and every person to make society work. It is not only a civic duty, but also a tool for social fairness.

In fact, taxation is a major determinant of the allocation of rights and resources within and across societies. It is also a crucial instrument to fight inequalities, achieve social justice, strengthen well-being in our societies and promote sustainable economic development.

The sovereign debt crisis and the resulting budget consolidation processes on the one hand, and large-scale tax avoidance and aggressive tax planning on the other hand, have strongly limited the capacity of public authorities to invest in sustainable growth.

To restore this capacity, it is essential that European public authorities are given back the means to accomplish their missions.


We need decent minimum wages in all member states.

PES proposals:

  • We must adopt a common consolidated corporate tax base! This is long overdue. It would reveal the actual level of taxation of companies, enabling governments to identify potential tax fraud and effectively tackle aggressive corporate tax planning.

  • We must have progressive income tax! The OECD has recognised that tackling inequality through tax and transfer policies does not harm growth. So ensuring the progressivity of income taxation in the EU, with stronger wealth taxation and consistent inheritance taxation, would help ensure all citizens contribute according to their capacities.

  • We must have progressive tax on transactions! Progressive real estate taxation, taxation on bonuses, dividends and stock options can also generate additional fiscal revenue, while reducing inequalities.

  • We must have harmonized minimum taxation levels! The EU and its member states could work towards the convergence of corporate taxation rates to prevent further fiscal competition, with an agreement on harmonised minimum taxation levels. Such corporate taxation should be progressive enough not to over-burden small and medium enterprises and should take into account the need for economic, social and territorial convergence.

  • We must eradicate sweetheart tax deals! Bilateral company-to-country specific fiscal agreements unfairly lower the effective tax rate of the company. Eliminating these ‘sweetheart deal’ tax rates would be a way to ensure both transparency and efficiency in taxation of multinationals. It would limit aggressive tax planning, as well as tax competition between member states.

  • We must tax environmental harm! Ambitious environmental taxation on energy, linked to CO2 emissions, can increase public revenues while address environmental challenges at the same time. Taxation on environmental impact is also a relevant tool to use as new source of revenues supporting a shift to a more sustainable economic model.

  • We must create fiscal incentives! The use of fiscal incentives can support specific policies, for example tackling youth employment or energy consumption. Special attention should be paid for such incentives not to create distortions between different kinds of benefiters, notably between multinational corporations and SMEs.

An efficient fiscal system that ends tax fraud and regulates the financial sector

Tax fraud, tax evasion and tax avoidance are estimated to cost EU governments €1 trillion a year.

Governments lose so much through tax evasion that the total amount exceeds what they spend on healthcare. It amounts to more than four times spending on education in the EU.

When people and companies don’t pay their fair share, it means that money is not available for governments to invest in jobs and growth. It prevents them from implementing their economic and social policies, with consequences both on public services and the economy.

Tax fraud and tax evasion also distort competition between those who can avoid taxation and those who play by the rules. It is not responsible to keep allowing multinationals to evade taxes, may it be from the economic perspective or the budgetary one.

The European Union has to close loopholes, eliminate distortions in tax policies and crack down on tax havens. The EU can take a step in this direction by implementing the OECD’s Base Erosion and Profit Shifting (BEPS) action plan.

The rescue of the financial sector cost €1.6 trillion of EU taxpayers’ money between 2008 and 2011. To protect taxpayers in the future, the financial sector needs to focus on investment in the real economy. Further financial instability must be prevented through sound regulatory principles avoiding that financial shocks affect public finances.

To this end, we need adequate regulation to address the unresolved too-big-to-fail problem, and for completion of the banking union.


Reinforce the European social model.

PES proposals:

  • We must swiftly implement the FTT! The Financial Transaction Tax should be swiftly implemented and extended to all EU member states, as a way to increase public revenue.

  • We must have transparent financial reporting! A compulsory and transparent country-by- country reporting by multinational companies in all sectors would help reflect the level of taxation companies actually pay.

  • We must make keep track of our tax policies! To better reflect the reality of tax fraud, tax evasion and tax avoidance, an EU inventory of income, wealth and tax regimes could be put in place. Such inventory would reflect the difference between the legal and the actual tax rates on companies and individuals.

  • We must force companies to share financial information! The adoption of EU rules on mandatory exchange of personal and corporate financial information that cover all types of income, including dividends, capital gains, other financial income and account balances would allow greater transparency.

  • We must make companies pay where they earn! The country of profit for a company must be the country of taxation. Transfer pricing regulations that prevent transnational companies to artificially reduce the amount of tax they pay can ensure a more efficient tax system.


  • We must create a tax evasion blacklist! The creation of a convincing definition and black list of tax havens, associated with sanctions, would strongly reinforce the fight against tax evasion.

  • We must prevent tax dodging! At both national and European level, financial regulation and supervision that ensure transparency and prevent tax dodging could be adopted together with stricter sanctions on tax evasion and tax fraud. Similar regulation increasing transparency, supervision and reducing risks within the shadow banking sector could further complement financial regulation and prevent a transfer of activities from the regulated banking sector to shadow banking.

  • We must take banking out of the shadows! Reducing interlinkages between the shadow and the regulated banking sector, specifically by limiting exposure of banks to alternative investment funds, would reduce the risk of contagion and con- tribute to deleveraging of shadow banks.

  • We must have adequate capital requirements! Such requirements ought to be implemented throughout the financial sector as an effective regulatory tool to internalize risk and reduce modelling risks exposure. This would increase financial stability.

  • We must eliminate the debt-equity bias! The tax deductibility of interest payments in most corporate income tax systems coupled with no such measure for equity financing creates economic distortions and exacerbates leverage. It should be eliminated to enhance economic resilience.

  • We must address the sovereign bank loop! The sovereign-bank-loop must be addressed effectively, not least by completing Banking Union and by means of strengthening large exposure limits.

  • We must make the financial sector more socially responsible! The financial sector could be made more socially responsible by limiting information asymmetry and conflict of interest, as well as by enhancing consumer protection. Innovative financing mechanisms such as crowdfunding and peer-to-peer lending should be promoted within a sound regulatory framework. Criteria on human, social and environmental sustainability, reflecting the concerns of a broad set of stakeholders, need to be much better integrated in rating reports, risk analyses and assessments of investment products.

Making the best use of tax revenue

In most EU Member States, healthcare, education, social services and elder care are mainly or partly in the hands of the state. They are thus vulnerable to budgetary pressure.

It is therefore essential to guarantee the highest minimum standards for these services. There should be universal and equal access for citizens, and they should have local autonomy with adequate geographical and social equalisation principles.

Public services benefit all citizens, but they particularly help the most vulnerable. On one hand, it is important that public services adapt to the needs of citizens to guarantee a consistent level of protection. On the other hand, in its interaction with economic actors, an efficient, transparent and accountable public ad- ministration is an important factor for, among other things, productivity and growth.

In our view, it is crucial that the state shows a clear sense of public interest, and that it answers the concerns of taxpayers on how their contribution to public services is used. It is essential to ensure good debt management, to enhance the quality of public spending, to cut out waste and to direct expenditure where it can get the best value for citizens.


Social partners’ involvement is essential

PES proposals:

  • We must self-reflect! Introducing a culture of permanent independent evaluation of public policies, in terms of both economic and social outputs, could help reinforce and improve the design and implementation of future reforms and ensure greater democratic accountability.

  • We must modernize public services! We need to digitalise public services and create one-stop-shops. This would usher in more transparency and efficiency, contain administration costs and benefit both citizens and economic actors. However, such modernisation should not hamper the quality of services provided, nor reduce their scope.

  • We must simplify procedures! The smart organisation of public services in an integrated way can contribute to better answering the needs of citizens and economic actors.

  • We must let citizens participate in decision-making! Citizens’ participation in decision-making and spending choices can strongly improve citizens’ understanding and acceptance of public decisions.

  • We must reduce duplication! Reducing duplicated administrative structures and burdens and streamlining bureaucratic processes can facilitate the interaction between the state, citizens and private companies. It should nevertheless never undermine existing rights, in particular social rights.

  • We must simplify legislation! Simplifying legislation and making the speed and efficiency of the justice system, to guarantee both the protection of citizens’ rights and a safe economic environment, can contribute to improved economic governance and public trust.

  • We must make public institutions cooperate! The cooperation among public institutions, particularly through sharing resources and knowledge, can strongly contribute to the efficiency of the public sector. To facilitate this cooperation it is important to develop experiences of shared services and extend them to new areas.

  • We must fight corruption! Fighting against all kinds of corruption, with the development of effective preventive policies and adequate control mechanisms to manage corruption risks, are essential to re-establish people’s trust and ownership of democracy, and to ensure the credibility of public action.


Taxation is a tool for social fairness.

A fair & efficient fiscal system to better invest

Name: Sara
Age: 28
Carrer wish: To earn a good salary and hold a senior position.
Hobbies: Playing guitar

Better and fairer taxation: a tool for social fairness

  • Common tax base for companies
  • End “sweetheart deal” tax rulings
  • Progressivity of taxation on income and real estate
  • Taxation of bonuses and stock options
  • Environment-friendly taxation

Name: Tom
Age: 45
Carrer wish: Flexible work which allows him to enjoy a good work life balance.
Hobbies: Jogging

End tax fraud and regulate the financial sector

  • Country of profit = country of taxation
  • Better cooperation between states to fight fraud
  • A black list of tax havens
  • Transparent reporting by multinationals
  • Financial Transaction Tax
  • Transparency and regulation of shadow banking
  • Protect taxpayers from the banks’ failures

Governments and tax authorities that follow the path of fair taxation and transparent public expenditures

Efficient spending for quality public services

  • Modernisation of public services
  • Simplification of procedures
  • Citizens’ participation
  • Transparency on public expenditure
  • Reduce unnecessary administrative burdens
  • Fight against corruption
  • Quality public procurement