New measures are urgently needed to counter tax evasion, which costs Europe billions of euros each year, argues Jeppe Kofod.
Jeppe Kofod is an MEP and the head of the Danish delegation in the European Parliament’s Socialists & Democrats Group.
Each year tax fraud, tax evasion and tax avoidance cost every single European citizen €2,000. That is money that could have been spent on health care, public transportation and schools. However, the money ends up benefitting a selected few. It ends up benefitting those who can afford to pay creative tax advisors to find all possible tax loopholes to avoid paying taxes.
That is why we need to not only discuss taxation, but also transparency. To put an end to the countless examples of tax avoidance, we need to discuss the idea of “taxparency”.
The notion of taxparency is one of the ideas that I will be working on as a contribution to the work of the new special committee in the European Parliament. My group, the S&D Group, suggested the establishment of this committee to investigate the increasingly high number of cases of tax avoidance in Europe. Along with the legislative initiative report, the European Parliament will now put pressure on the member states and the Commission to propose legislation that can put an end to the many different types of tax avoidance.
Which initiatives will be recommended by the special committee and by the initiative report have yet to be determined. However, I have already come up with a number of ideas of what could be done.
First of all, we need to increase transparency by, for example, creating a public registry of beneficial ownership. This will ensure that details of the true owner of each company are publicly available. It will thereby make money laundering, corruption and tax evasion more difficult. Also, it will make it easier and faster for national, as well as international authorities to investigate allegations of fraud.
A second idea is to create best practice guidelines for tax advisors. Tax advisors have a responsibility not to offer solutions that contribute to tax evasion. They should therefore be aware of unusual requests, and they should report suspicious financial demands. If they do not have adequate information about the facts, then they should include a statement on where they have concerns. The important part is to make it perfectly clear what the responsibilities of tax advisors are, but also to establish that there can be consequences to not adhering to the guidelines.
My third idea is related to the second one. It is the idea of revoking the banking license for all of those tax advisors who assist in various type of tax fraud. This will increase their incentive to comply with the regulations in place. And it will rapidly diminish the number of creative tax advisors for hire by the big multinational corporations.
My ideas are neither set in stone nor limited to those just mentioned. I am very much open to other ideas that we can use to close the existing tax loop-holes. The objective is to ensure that there are no more scandals like Luxleaks.
The ongoing investigative work by the Commission is very important. And I very much look forward to the Commission’s presentation of its findings. But we need to do even more. That is why I find the European Parliament’s contribution in the form of a special committee and an initiative report very important. And that is why I also urge all member states to take legislative action at a national level.
Taxparency is the way to go. And to prevent future Luxleaks, we need to act sooner rather than later.