European Taxes and Tax Evasion

Report Outline
Foreign Aid and European Tax Reform
European Tax Burdens and Tax Systems
Tax Evasion Problem in France and Italy
Special Focus

Foreign Aid and European Tax Reform

Calls in United States for Tax Reform in Europe

Since the end of the war, substantial foreign aid appropriations—first for relief, then for recovery, and finally for defense assistance—have become a regular feature of the annual federal budget. United States foreign aid outlays since mid-1945 are estimated at $35 billion. Meanwhile, huge expenditures to expand the nation's own armed forces, as a part of the common defense effort, have pushed federal taxes to heights previously unsurpassed except in time of full-scale war. With no relief in sight, either from high taxes or from the need to provide aid to America's allies in Europe, Congress has been paying increased attention to tax levies and collections in countries aided by the United States. It may be assumed that when the question of foreign aid comes up again next year, the new Congress will display as much interest as its predecessors in whether Europeans are bearing as heavy a tax load as Americans, and in what certain European nations are doing to reform their tax systems.

Even before Korea stepped up rearmament and brought sharp tax boosts, members of the House Foreign Affairs and Senate Foreign Relations committees queried Economic Cooperation Administration officials about reports of widespread tax evasion in some continental countries. House and Senate subcommittees visited Europe in 1951 and made on-the-spot inquiries into tax policy and tax enforcement. Hearings on extension of the Mutual Security Act this year elicited additional testimony on such questions.

The House Foreign Affairs subcommittee which went abroad on a study mission late last year declared, in a report to the full committee on Apr. 10, 1952, that “there should be a drastic revision and positive reform in the tax systems of Europe”. The subcommittee sharply criticized “inadequate and archaic tax structures” under which “the rich become richer and the poor poorer”. It proposed that future American aid be conditioned, among other things, on the progress made by European countries in tax reform.