Tax subcommittee chair: Donohoe is not ideal candidate to lead Eurogroup

MEP Paul Tang during the constitutive meeting of the new subcommittee on tax matters, on 23 September.

Paul Tang has been elected chair of the new permanent tax subcommittee the European Parliament has created. In an interview with EURACTIV, the Socialist MEP recalls that the Parliament has been the most outspoken institution against EU tax havens, including his own country the Netherlands.

One of his key goals is to “crack down on tax avoidance” and he therefore wants to strengthen ties with national parliaments and get them involved in the fight against fiscal dumping in the EU.

Given how difficult is to progress on tax matters, what realistic targets or specific objectives do you have for this subcommittee?

Firstly, my experience in taxation is that uncovering facts and figures is very helpful for the debate. Cases like the ‘Luxleaks’ and the Panama Papers showed that by raising public awareness, you can increase political pressure. That can be a very powerful tool. That’s the general aim of the committee. It’s a shared goal across all political parties. In addition, taxation will be high on the agenda in the aftermath of this crisis because we will get the question of “who will pay the bill”. We will see in two years from now new opportunities that we thought they were very difficult. It’s not just the European Parliament who wants to see fundamental changes, national governments also need new revenues.

Dutch MEP Paul Tang to chair new tax subcommittee

Dutch Labour MEP Paul Tang is expected to be elected the chair of the new European Parliament’s subcommittee on taxation on Friday (10 July), after the political groups reached an agreement on his choice, Parliament sources have told

What are those changes you expect?

First of all, a crackdown on tax avoidance. If you want to raise revenue, you should start with those who don’t pay their fair share of taxes or don’t pay taxes at all. The European Parliament is the only institution that is very outspoken about the EU tax havens including, of course, the Netherlands.

What actions could you take in your committee to fight against fiscal dumping in the EU?

Last week, I had a meeting with someone who uncovered all the minutes of the “Code of Conduct group”, the Council’s group to discuss tax cases. These are the same minutes shown to members of the European Parliament, partly stricken through so we couldn’t read them. We can only read it in private, which is hopeless in a political debate. We can help to bring out these minutes and to show what’s going on in the the ‘Code of Conduct’ group. This is an example of bringing the backdoors discussion to the public. That will be very helpful. In addition, I would love that the “Code of Conduct” representatives physically come to us to explain what they do. They look at aggressive tax schemes, but they were not always able to avoid them. 

Why is the European Parliament taking a leading role on tax matters?

My experience from the past five years is that the European Parliament is usually better informed than the national parliaments. And that helps. For that reason, we have a leading role to play in the debate. Not because we have the formal competences, which is not the case, but because we have the resources to follow these issues. That’s why I am personally very much looking forward to cooperate with national parliaments. By having these debates with the national parliaments, we could be like a hub for the European discussion. But it shouldn’t be limited to Brussels. It should end up in the capitals, to disseminate the information, by working together with the national parliaments.

By involving the national parliaments, do you think you could trigger some changes in countries like Ireland, Luxembourg or your own?

I’ve been in all these three countries during the last mandate. I know for sure that The Netherlands is changing. It’s not enough, but the awareness of the problems domestically has grown over the years. That’s the start. I know that Luxembourg is changing too. I remember [Luxembourgish finance minister] Pierre Gramegna, saying that ‘we will never block a proposal from the Commission’ on tax matters. Ireland is in a different position. When I was there and I asked people in the streets whether Apple should pay the €13 billion, they welcomed it. But members of their Parliament were not so happy about it. This discrepancy will come up, and Ireland will change as well, sooner or later.

What about the big economies?

It is crucial that Berlin and Paris are on the same page, with Italy and Spain on board. That is still lacking. I don’t think that Germany and France are really aligned yet, and they should be to have a real impact. These countries are the main losers from any profit erosion and tax evasion. For example, on the digital tax, Germany is more exposed to the US sanction threat, given its export economy and its automotive sector, so the hesitation in Berlin on this is much stronger than in Paris.

Three of the four presidents of the Eurogroup have come from EU tax havens. Did it have an impact on fighting against dodgy tax practices.

I think Paschal Donohoe is not an ideal candidate for the Eurogroup presidency. We want to crack down on tax avoidance, and I don’t expect an Irish to lead the front. But again, I’m perfectly optimistic that the change will come, with or without Donohoe.

Donohoe wins Eurogroup presidency

Ireland’s minister of Finance, Pascal Donohoe, will be the next Eurogroup chief, outgoing president Mario Centeno announced.

The Netherlands held a very strong position during the July summit with Italy and Spain, questioning their reform efforts and their budgets. But these countries, among others, are losing tax revenues because of the Dutch tax system and others…

It will backfire. The Netherlands will pay for that because we will get under more scrutiny. Raising revenues, especially from those who don’t pay their fair share, will be on the agenda for the years to come. The Netherlands will have to step up to the plate as well. We can’t just criticize other member states and do nothing yourself. In that sense, the Netherlands will pay, but it’s a good thing.

Following the Apple ruling, the Commission said that it would use article 116 to fight against tax evasion and profit shifting. But proving the distortion of the competition in the internal market may result more complicated than demonstrating illegal aid under state aid rules. What is your opinion? 

Commissioner Gentiloni, in charge of tax matters, is seriously considering using article 116. The political will exists. But you’re absolutely right. The first case that the Commission brings will have to stand up in court. You need the legal proof and I agree, that’s difficult. Still, I think Vestager contributed very much to the debate by launching these cases, and by taking Apple to court. It was worth it, even though she didn’t succeed against Apple. Don’t be afraid to lose in court, I would say.

Commission loses out in Apple-Ireland tax battle, announces tax abuse clampdown

US technology giant Apple did not unlawfully benefit from state aid as part of corporate tax rulings in Ireland, the general court of the EU said on Wednesday (15 July). The decision annuls the European Commission’s bid to claim €13 billion back in unlawful tax advantages.

[Edited by Zoran Radosavljevic]

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