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04/12/2016

Lawmakers push to fast track legislative tax evasion proposals

Euro & Finance

Lawmakers push to fast track legislative tax evasion proposals

Leftist MEPs are trying to set up a committee to tackle tax evasion.

[European Parliament/Flickr]

In the light of new revelations in the Luxembourg tax evasion schemes, some MEPs will push to fast-track the European Parliament’s legislative reports being drafted by the legislature’s economic committee.

“The new revelations show this is a European problem that needs a European solution. Citizens and SMEs pay their taxes, while big corporations seem to have a wide range of possibilities to avoid taxes,” said Liberals leader Guy Verhofstadt.

“The European Parliament needs to speed up its internal process and come forward with real solutions,” he added, noting he will urge colleagues in the Conference of Presidents meeting today (11 December) to fast-track the inquiry and legislative proposals.

The new European Commission President Jean-Claude Juncker took responsibility for his country’s tax practices last month. He said he would fight tax evasion with a greater automatic exchange of information during his term in Brussels.

After the second wave of Luxleaks this week, Juncker admitted that he has been weakened by the revelations.

>>Read: Juncker admits he is ‘weaker’ after fresh batch of Luxleaks revelations

More than 300 companies, including PepsiCo Inc, AIG Inc and Deutsche Bank AG, secured secret deals from Luxembourg to slash their tax bills, the International Consortium of Investigative Journalists (ICIJ) reported on 5 November, quoting leaked documents.

The companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, the group of investigative journalists said, based on a review of nearly 28,000 pages of confidential documents.

Tax avoidance is legal, but companies which use complex structures to reduce their tax bills are coming under increasing scrutiny, and legislators internationally have promised to crack down on the practices.

Schulz under pressure to move fast

Speaking to representatives of civil society, during the Plenary session of the European Economic and Social Committee (EESC), European Parliament Martin Schulz said on Wednesday (10 November) that Europe needs to address the weak spots of its economy.

“We need money for investment,” he said, stressing that the money is there, but emphasizing that Europe need a proper taxation system in order to make people pay taxes.

“It is inadmissible that €1000 billion goes hiding because of tax evasion,” Schulz commented, referring to the Luxleaks scandal.

“Public debt could be reimbursed in one decade,” he continued. “We need to tighten tax collection.”

“We cannot wait any longer. Every year we continue losing big sums of money,” he said, adding that the European Parliament needs to speed up its work.

On 4 December, the European Parliament’s Conference of Presidents of political groups agreed that the Economic Affairs committee should draft two initiative reports on tax evasion. These reports, which contain non-binding recommendations to the Commission, rarely have much impact.

The Greens have pushed for a full inquiry committee into tax evasion and dumping as a follow-up to the Luxembourg leaks revelations and the wider implications on tax dumping.

But the leaders of the grand coalition have told their member s not to support the Greens’ proposal.

>>Read: Pro-Juncker coalition blocks committee of inquiry on Luxleaks

 “We are not convinced that simply producing more reports is commensurate to the issue at hand,” Philippe Lamberts, Greens/EFA co-president said. 

“Aggressive tax competition by the Netherlands, Luxembourg, Ireland, Austria and others is a breach of the treaty obligation of sincere cooperation between EU member states. ‘Luxembourg leaks’ is a watershed moment for the battle against tax evasion, and the issues raised by these leaks must be subject to a thorough inquiry,” said Sven Giegold, the Greens economic and finance spokesperson.

The need for genuine investment funds might turn out to be the real incentive for legislators to move fast on tax evasion.

“We have a dramatic investment gap,” said Schulz. He noted that in 2013, the EU invested €325 billion less than the yearly average before the crisis.

“Europe is falling behind. The United States and China are outspending us today to outperform us tomorrow,” he added.

Background

The Luxleaks scandal erupted on 5 November 2014, when the International Consortium of Investigative Journalists (ICIJ) uncovered "industrial scale" tax evasion in Luxembourg at the time when Jean-Claude Juncker was prime minister of the Grand Duchy.

The investigation was based on a review of nearly 28,000 pages of confidential documents, which reveal that more than 300 international companies have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes.

Juncker, who is now President of the European Commission, rejects all accusations of masterminding corporate tax evasion as Prime Minister of Luxembourg and announced a new EU initiative to clamp down on tax avoidance.

Juncker says the tax deals were not illegal and that he will not prevent the commissioner responsible for Competition, Margrethe Vestager, from doing her job in investigating the four cases initially opened (two in Luxembourg, one in the Netherlands and one in Ireland).