Taxes claim between a half and a third of national income in the member states of the European Union and carry a weight which cannot be overlooked. In the context of the minimisation of the overall tax burden of the European Union, the several fiscal divergences between Member States give rise to several important legal and economic implications for Member States and have made a case for a drive for the approximation of taxation systems.

Mutual assistance between EU member states in the tax sector has been established for a long time. In fact, mutual assistance in the field of direct taxation has been possible in accordance with Council Directive 77/799/EC since 1977. This directive complements the existing provisions on mutual assistance in bilateral tax treaties concluded between the member states, and was extended to cover VAT in 1981 and excise duties in 1993.

When the internal market was created and physical border controls were abolished, it was necessary to set up a control system to manage the VAT aspect of intra-community trade. To this end, the VAT Information Exchange System (VIES) was set up by the European Council to facilitate administrative cooperation between liaison offices within all Member States. This has catered for the steady increase in cross border trade, increased mobility as well as the ascension of electronic markets. It has also made it necessary to continuously modernise the legal instruments for mutual assistance and make cooperation between tax administrations more efficient.

Further intiatives have also been taken forward, reflecting the need to update previous legal instuments. Administrative cooperation in the fields of VAT and Excise have been reformed by the Council and mutual assistance in the field of direct taxation and recovery of claims have also been modernised.

It is within this context of collective concern and awareness that alongside other Members of the European Parliament I presented an urgent written declaration on the harmonisation of the tax system within EU member states through the introduction of a family allowance.

Whilst the institutions within the European Union have repeatedly strived to harmonise tax systems with special reference to corporate affairs, this written declaration tends to the most important facet of the effects reflected by our economic policies... the family unit.

The European Parliament has very aptly responded to our express apprehensions. The Parliament has recognised that the current financial crisis has placed social categories on middle-to-low income families in serious difficulty, affecting the purchasing power of these families. Consequently, the EU poverty rate is growing alarmingly to the detriment of the family unit, the community fabric and the economic sector.

Having said this, with an aggressive readiness and energy to undertake such hardships, economic recovery can be expected in a relatively short period of time.

A system of tax exemption based on a family allowance is already in existence in some EU countries as an instrument of social policy to help families. The family allowance is an instrument which takes into account the number of members in a given family for income tax purposes and is related to the taxpaying capacity of each citizen while taxation of a given family income should drop as the number of family members increases.

Subsequently, in its venture to safeguard the family unit, the European Parliament calls on member states to take all necessary legislative initiatives for the introduction of a family allowance in order to improve economic conditions and thus restore the social dignity of the least well-off families. All member states are to provide for a decreasing scale of taxation based both on income and the number of dependent persons in a family home when calculating income tax. Furthermore, the European Parliament instructs its President to forward this declaration, together with the names of the signatories, to the Council and the Commission and to the national parliaments of the member states.

The EPP-ED Group strongly upholds that there is a need for a coherent and shared overall strategy with regard to economic policy. This will in turn encourage a rapid return of growth throughout Europe with contained inflation. We must support the purchasing power of European households as a priority, and prevent undue complication in the tax system, which creates unnecessary concern and discourages initiative.

David Casa is a Nationalist MEP

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www.davidcasa.eu