EU To Investigate Cross-Border Worker Taxation

By Editorial 06 April, 2012

Tax provisions of European Union member states are to be scrutinized to ensure that they do not discriminate against cross-border workers, in a targeted initiative launched by the European Commission.

Worker mobility has been identified by the Commission as one of the key potentials for increasing growth and employment in Europe. However, tax obstacles remain one of the key deterrents to citizens looking for work in another member state.

It is estimated that more than 1.2 million people work cross-border in the EU. Gross wages paid to cross-border and seasonal workers in 2010 amounted to EUR46.9bn (USD61.3bn).

The Commission plans to carry out a "thorough assessment" of national direct taxes throughout 2012 to determine whether they create unfair disadvantages for workers that live in one member state and work in another. Where such laws are found to be discriminatory or breach the EU's "fundamental freedoms" the Commission will inform national authorities and insist that the necessary amendments are made. Should the problems persist, the Commission intends to launch infringement procedures against the member states, including referring them to the European Court of Justice.

During this initiative, the Commission will scrutinize whether citizens who earn most of their income in another member state are taxed more heavily than the citizens of that same member state. For example, the Commission will check that all the personal and family deductions available to residents are in practice also available to these non-residents. In addition, the investigation will check whether member states differentiate between their own citizens and citizens from other member states who occasionally work in their territory, particularly as regards the right to deduct expenses and the application of different tax rates.

Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-Fraud and Audit, said: "EU rules are clear: all EU citizens must be treated equally within the Single Market. There cannot be discrimination, and workers' right to free movement must not be impaired. Most member states respect these core principles but I am ready to take any measure necessary to ensure that they are reflected in all member states' tax rules."

Tags: Expatriates | Tax | Investment | Business | European Commission | Law | Individual Income Tax | European Union (EU) | Europe |


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