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29/09/2016

Tax rulings committee flexes muscles over Luxleaks hearings

Euro & Finance

Tax rulings committee flexes muscles over Luxleaks hearings

Amazon is among the companies that refused to attend the TAXE committee hearings.

[Robert Scoble/Flickr]

EXCLUSIVE / The European Parliament’s Special Committee on Tax Rulings plans to revoke the accreditation of certain lobbyists in retaliation for the behaviour of uncooperative multinationals. EurActiv France reports.

Due to its inability to enforce cooperation with its tax competition inquiries, the European Parliament’s Special Committee on Tax Rulings (TAXE) is looking for other ways to compel testimonies from reticent multinationals.

Launched in February in the wake of the LuxLeaks scandal to investigate sweetheart tax deals struck between Luxembourg and various multinationals, the TAXE committee has struggled to stamp its authority on the companies under investigation.

Declined invitations

By 5 June, the TAXE committee had only received one positive response to the 15 invitations it had sent out, requesting hearings with the companies accused of the most aggressive tax planning. This was from oil giant Total.

>> Read: Luxembourg tax deals weigh on Juncker

After insisting that absence from the hearings was unacceptable, three other companies confirmed their attendance. Airbus will be interviewed on 2 July, while BNP Paribas and Scottish & Southern Energy (SSE) had their hearing together with Total on 23 June.

Worst offenders

“This meeting was very interesting, because it demonstrated that the absentees were in the wrong,” said French MEP Alain Lamassoure, the committee president. The testimonies of BNP Paribas and Total “helped us to understand the reasons why a company would change its tax residence”, he added.

Many of the explanations given were linked to historic advantages of certain countries, like extractive rights in Bermuda, or tax stability in the Netherlands.

While the last hearings are scheduled for 2 July, Ikea, Coca-Cola and Walt Disney have all so far failed to reply to the committee’s invitation. Philip Morris and Facebook simply “declined” the parliamentary summons, and Barclays and Google refused to attend the hearings in person, but offered only written responses.

>> Read: Brussels mulls clampdown on tax avoidance after Luxleaks

Five companies (McDonalds, Amazon, Fiat, HSBC and the brewer InBev) declined the invitation because of ongoing investigations into their tax practices.

“This is a false excuse. It hasn’t stopped them talking about this in the media,” said Catherine Olier, Oxfam’s tax policy advisor in Brussels. “I hope these companies will reconsider the issue,” she added.

“Today, the worst offenders have chosen not to turn up. We will remember this,” Alain Lamassoure warned. The TAXE committee may lack teeth, but it does have ideas for how to make life uncomfortable for companies that refuse to cooperate.

>> Read: Luxleaks committee to be extended until October

“Soon we will begin examining the Digital Agenda in several European Parliament committees, and I will not hesitate to let the committee presidents know which companies have failed to co-operate with our inquiry. They may find their lobbyists side-lined,” the French MEP said.

This warning will surely not go unnoticed by Google, Facebook or Amazon, for whom the EU’s Digital Agenda is of the utmost concern.

Pressure… on the pressure groups

Excluding lobbyists from the European Parliament is another means by which the committee can exert pressure. “Our rapporteurs had the idea of revoking the accreditation of lobbyists from those companies that declined our invitations,” Alain Lamassoure said.

While signing the EU’s transparency register, which lists the different pressure groups working in the European institutions, is still a voluntary measure, the European Parliament recently strengthened its impact by limiting the access of unregistered lobbyists to Parliament buildings.

>> Read: EU lobbyist register to become mandatory by 2017

MEPs could also take inspiration from the actions of some national parliaments. The UK Public Accounts Committee, for example, managed to question Google over its tax practices, by order of the queen.

A quirk of the British constitution makes a royal summons legally binding. Ignoring the summons could, at least in theory, have resulted in Google’s CEO being thrown in the Tower of London. Alain Lamassoure even suggested that future European Parliament hearings could be carried out together with the UK House of Commons, in order to force CEOs to attend.

Background

On 12 February 2015, the European Parliament decided to launch a special committee for an initial period of six months, to investigate the sophisticated tax rulings of EU member states that became the centre of a media storm earlier this year.

With 45 members and the same number of substitutes, the TAXE Committee's role is primarily to investigate the compatibility of tax rulings with the rules on state aid and tax law. The special committee will then draft a report, including recommendations on how to improve transparency and cooperation between member states to the benefit of the internal market, European companies and citizens.

Timeline

  • 2 July: hearings of Jean-Claude Juncker and Airbus
  • 14 July: Ecofin meeting in Luxembourg, hearing of participating ministers with the TAXE special committee
  • Late October 2015: end of the TAXE special committee
  • November 2015: vote on the report of the TAXE special committee