A structure showing the Euro currency sign is seen in front of the European Central Bank.

A structure showing the Euro currency sign is seen in front of the European Central Bank.

The European economy is on the mend - slowly, but surely. First signs of growth are emerging, budget deficits have been cut, financial markets have stabilised, confidence is up, and two member states - Ireland and Spain - are on the cusp of exiting their assistance programs. Not long ago, some people, including in Australia, were predicting the death of the euro; today this isn't up for discussion. In short, the EU has left the intensive care unit, and is now in the recovery ward.

The approach we took as a union is proving to be the right medicine. Intense efforts to consolidate budgets, beef up economic oversight, instigate deep structural reforms and overhaul financial regulation are paying off. Practically speaking, Europe has made remarkable progress in economic integration in a relatively short period of time. We have created a solid framework of economic governance and deepened co-ordination within the EU. This will ensure that when the crisis is behind us, the EU will be stronger and more stable than ever before.

However, we are not out of the woods yet, and won't relax at these first positive signs. Challenges beyond urgent consolidation now step into the spotlight: tackling high unemployment, restoring bank lending and modernising public administrations. Without question, we need to sustain the economic recovery, and push forward with reforms for growth and competitiveness.

Taxation - for which I am responsible at EU level - will be as pivotal in the recovery process as it was in the time of extreme crisis. In recent years, fiscal policies in Europe have been driven primarily by the need to consolidate public finances. The result has been an overall rise in the tax burden. But, while the primary role of taxation is to raise revenues, it certainly isn't the only one. The impact that tax policies also have on wider economic and social objectives is immense. So in the context of our deeper economic governance and co-ordination, the EU is working towards tax reforms that promote growth, competitiveness and fairness. There are a number of ways to do this.

Shifting the tax burden away from labour to more growth-friendly bases, such as property, environment and consumption, is one. Removing the debt bias in taxation is another. But perhaps of most interest to Australia, as it assumes the presidency of the G20, is the EU's intensified fight against tax evasion. Tax evasion and avoidance costs public budgets around €100 billion ($150 billion) a year in Europe - roughly the annual gross domestic product of Australia. Clamping down on tax evasion therefore ticks all the boxes when it comes to implementing good tax policies. It is good for growth, because it can deliver vast new revenues without the need for higher taxes. It is good for competitiveness, because it protects the EU economic model, and ensures that our free markets and open economies are not open to abuse. And above all, it is good for ensuring fairness in our tax systems, which is crucial for public support.

Honest taxpayers should not have to pay more to compensate for fraudsters. Over the past year, the EU has been leading a drive towards more tax transparency and good governance - both at home and abroad. At EU level, we launched an ambitious action plan against tax evasion. This includes, among other things, measures to blacklist tax havens, thwart aggressive tax planning, respond better to VAT fraud, tighten corporate tax law, and improve co-operation between enforcement bodies.

At international level, the EU has drawn on its unrivalled experience in tax good governance to considerably influence the agenda. We have worked closely with the OECD, which of course includes Australia, and welcomed with open arms the G20's backing for fundamental changes to international tax rules. Automatic exchange of information has been accepted as a new global standard, mirroring standards applied in the EU for almost a decade. And the OECD action plan on base erosion and profit shifting has been endorsed as the international response to corporate tax avoidance. The political commitment to change has been made.

What is important now is that it translates into real action. We must strike while the iron is hot, and keep to the ambitious timeline for delivery. This is where Australia carries an immense responsibility. As next president of the G20, Australia will need to exert strong political will to ensure that momentum doesn't drop in the international drive against tax evasion.

Fixed milestones have to be set, and deadlines need to be kept, to ensure goals we have agreed are met. The world is ready to move towards fairer, more open and more effective taxation, but it needs leadership to bring it there. We look to Australia for this leadership, and the EU will support it in this common endeavour.

Algirdas Semeta is the EU's Commissioner for Taxation, Customs, Anti-Fraud and Audit.