Luxleaks committee to be extended until October

Alain Lamassoure is the president of the European Parliament's TAXE Committee. [epp group/Flickr]

The special committee leading the European Parliament’s inquiry into tax rulings has upped the pressure on businesses and European governments. The inquiry will be extended until October. EURACTIV France reports

Belgium, the Netherlands, Ireland, Luxembourg and Switzerland have one thing in common. These five countries have all received an investigative visit from the European Parliament’s tax rulings committee since the beginning of May. Representatives from the Channel Islands, Bermuda and Gibraltar have also reported to MEPs in Brussels.

Alain Lamassoure, the French MEP and president of the Special Committee on Tax Rulings (TAXE), said “we are still waiting for the United Kingdom, where the elections altered the agenda”. The TAXE Committee was established in February to carry out a six-month evaluation of tax competition between European countries. But the scale of the issue has led the committee to request that its mandate be extended until October.

“We do not want to leave any questions unanswered,” Alain Lamassoure said. The committee president added that he had examined “the small European tax havens”, including Baltic countries like Latvia, where the creation of “kit companies” has become something of a national sport. French prosecutors are investigating a French company called France Offshore, which offered package tax evasion deals in Riga, with the approval of the Latvian embassy in Paris.

The committee’s mandate is limited to countries within and close to the EU. The European Parliament will deliver its findings on Singapore, for example, through the OECD.

Raising the pressure

“What is certain is that this works. The example of Amazon, which has recently committed to changing its tax practices, shows that we have cranked the pressure up a notch,” Alain Lamassoure said.

“What will help us is that two of the leading countries in terms of tax evasion will take over the rotating presidency of the EU,” the TAXE Committee president told EURACTIV. Luxembourg and the Netherlands will occupy the presidency of the Council of the EU for the next two semesters.

It became evident in a hearing on 1 June in the European Parliament that this opinion is not universally held.

“The man who led Luxembourg during the signing of these friendly little arrangements today has the most important job in the EU. The fact that Luxembourg will take on the rotating presidency is a problem: will the poacher really become the game-keeper?” asked Tove Maria Ryding, a senior policy analyst at Eurodad.

Publishing the details of tax rulings?

Some MEPs have highlighted the need to increase the transparency of the Commission’s projects. The EU Executive plans to make EU countries exchange information over tax rulings, with no obligation to make them public.

>> Read: Parliament shuns committee of inquiry into Luxleaks

Die Linke MEP Fabio De Masi expressed his concern that details of tax rulings could be exchanged under the table. “We met the Luxembourgish tax authorities, who told us that they had informed Germany and France of their largest tax rulings. But this had no effect! The only solution is to make them public,” he said.

The Tax Justice Network’s Richard Murphy also argued against secrecy in tax dealings. He believes that information exchanged between countries is still too opaque. The British tax expert told the TAXE Committee that “data that has obviously been produced from computers is supplied in printed format, or alternatively turned into PDFs that cannot be scanned so that re-keying of all information is required before the data has any useful purpose. The effect is to completely destroy that data’s value in use.”

“Absence should be taken as a guilty plea!”

The Tax Rulings Committee, which has the status of a special committee, rather than a more powerful committee of inquiry, is acutely aware of its own limitations.

“A committee of inquiry would have had the power to summon people. We can see today that certain countries or people invited have declined their invitations,” Richard Murphy said. Among the companies that refused their invitation to the hearing on 1 June were Amazon, Google, Fiat, HSBC and McDonalds. Some cited ongoing legal proceedings as the reason for their absence, claiming they could not discuss subjects that were already under inquiry.

“I may not be able to summon people, but absence should be taken as a guilty plea! All our requests to governments to carry out fact-finding missions and speak to their tax ministers and other functionaries were accepted,” the committee president said.

The MEP invited the directors of Amazon to the European Parliament, with the understanding that a refusal on their part would equate to an admission of guilt. “Our legal tools are weak, but our political tools are strong,” Alain Lamassoure said. To date, only nine of the 28 member states have responded to a questionnaire about their tax practices, but the special committee will use its extended mandate to meet with EU finance ministers during the next Ecofin council on 14 July, in Luxembourg.

Protecting whistle-blowers

Antoine Deltour, the Luxleaks whistle-blower and former employee of KPMG, was also present at the European Parliament hearing on 1 June, where he enjoyed the broad support of MEPs. The Parliament has already examined the idea of a directive to protect informers, and the TAXE Committee is also looking at ways that protection could be improved. “We are shocked that you find yourselves trapped. It would be good to have access to an exchange platform, so as to avoid prosecution but to get the information out all the same,” Socialist MEP Pervenche Berès said.

>> Read: Court finds culprit for Luxleaks scandal: The journalist who broke the story

The whistle-blower was also congratulated by Alain Lamassoure. “You have initiated a new type of citizenship by provoking a debate,” the MEP said.

Antoine Deltour, the Luxleaks whistle-blower, said "The problem is that the consent to taxation has changed sides; it should not be normal for Amazon to appear like a do-gooder because it decides to pay its taxes."

German MEP Michael Theurer said "It is a scandal that the big multinationals do not think they need to appear before our special committee, we must insist."

On 12 February 2015, the European Parliament decided to launch a special committee for an initial six month period, 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.

  • 17 June: presentation of European Commission's tax package
  • 23 June: hearing with new witnesses
  • 14 July: Ecofin meeting in Luxembourg, hearing of participating ministers with he TAXE special committee
  • Late October 2015: end of the TAXE special committee
  • November 2015: vote on the report of the TAXE special committee

Subscribe to our newsletters