Fighting tax evasion and tax fraud was one of the two main themes at the European Council meeting on 22 May.

According to a statement issued by the council after the meeting, every year EU member states lose around one trillion euros because of tax evasion and avoidance a sum that corresponds approximately to the EU's budget over seven years.

Its President, Herman Van Rompuy (pictured), declared: “It's high time to step up the fight against tax fraud and tax evasion. We have seen headline after headline highlight loopholes in tax systems, fuelling indignation – and rightly so. At a time of fiscal pressure and social tensions, fighting this is a matter of fairness and credibility.

“So I am pleased that today's European Council managed to unblock a number of frozen files. There is movement, a real acceleration, with clear deadlines for result.”

Although taxation is the ‘national competence’ of member states, EU leaders agree that tax evasion is a cross-border problem, which would be most effectively solved by the member states acting together.

In the closing conclusions the EU leaders said that extending automatic exchange of information at both EU and global level is a priority task. To that end, at EU level the Commission is to propose amendments to the directive on administrative co-operation in the field of taxation in June. The changes are intended to enable automatic exchange of information to cover a full range of income.

In addition, the EU intends to promote automatic exchange of information as a new international standard, and will therefore work closely with partners at international forums such as the G8, G20 and the OECD.

The government leaders welcomed the agreement reached at the Ecofin Council on 14 May to begin negotiations with Switzerland, Liechtenstein, Monaco, Andorra and San Marino on taxation of savings income. The aim is to ensure that the five countries continue to apply rules equivalent to those in the EU's directive on the taxation of savings income. The EU directive is currently being updated, and the European Council expects it to be adopted by the end of this year.

They also asked for the adoption of new directives designed to tackle VAT fraud by the end of June. The new rules will introduce a ‘quick reaction mechanism’, which will enable the member states to react rapidly in cases of massive fraud and a ‘reverse charge mechanism’ designed to target so-called carousel fraud.

Other measures include tackling aggressive tax planning and profit shifting, the elimination of harmful tax practices, fighting money laundering both in the internal market and globally and dealing with the challenges in the digital economy. The Commission is to assess the issue and the European Council will discuss it at its meeting in October.