Good use of financial scandals. What if the twists that uncovered the truth of the world of finance turned out to be positive for Europe? They have opened everyone's eyes to so much abuse that those responsible for it can longer oppose the disciplines concerning them. In fact, these disciplines are not a sudden invention - they have been in the process of development for a long time. However, they were surrounded by reservation and misgivings, and were sometimes truly ostracised - and the timetable for applying them was very slow. What has changed is the urgency of the reforms, with the support of public opinion which before was largely ignorant of the secrets of this world. The light shed on the inadmissible truth, far from being a discouragement, actually provokes a response.
This prediction has already partly come true. The German minister for finance, Wolfgang Schäuble, expressed the same idea when he said that the publication of 130,000 names of individuals or companies holding accounts in tax havens increases pressure for the fight against tax fraud and confirms the need for enhanced cooperation on this between the member states (see EUROPE 10821). For its part, the European Commission has strongly insisted on the urgency of the European Council's adopting the package of measures aiming to better coordinate member states' action against tax fraud and tax havens. At the same time pressure is growing for the creation of a system in Europe that is similar to the American FATCA - which obliges the financial institutions of other countries to communicate the foreign accounts of American citizens to the tax administration in Washington.
The announcement by five leading member states (Germany, France, Italy, Spain and also the United Kingdom) of their intention to create a common platform of automatic exchange of information between them along the lines of FATCA (see yesterday's edition of EUROPE) is a telling initiative.
New behaviour. Furthermore, and most importantly, the events have already been translated into a change in traditional behaviour. Luxembourg has changed its attitude radically. Let me recall the statement by Luc Frieden, Luxembourg's finance minister, which was reported in EUROPE 10822: “The international trend is moving towards the automatic exchange of banking information. We are no longer strictly opposed to this. We want strengthened cooperation with foreign tax authorities”. This involves an exchange of information in which Luxembourg did not previously participate. Austria, too, has radically relaxed its misgivings. Without these developments the situation would be absurd - European countries, including Switzerland, would be required to provide the Americans with information that, in the EU, would remain secret!
It is true that the British attitude is ambiguous because defending the interests of the City of London is difficult to reconcile with the economic interests of the whole of the United Kingdom, and especially given the developments of the other countries in the EU. Yet the United Kingdom's participation in the approach of the five member states mentioned above is encouraging.
Scale of tax evasion. The general objective would be to broaden financial transparency at the international level - between the countries of the OECD and beyond. Yet the situation in the EU is the priority, in my opinion. The crucial point was summed up in this column's title on Tuesday: “Applying the banking discipline that has been developed by the EU could eliminate a large part of member states' budgetary deficits”.
Was I exaggerating with this title? I don't think so. The European Commission has estimated tax evasion in the EU at a ballpark figure of €1 trillion per year. More detailed analyses (by Tax Research UK) show evasion of €180 billion in Italy, €158 billion in Germany, €120 billion in France, €74 billion in the United Kingdom, and €72 billion in Spain. Tax evasion is punished, up to a certain level, by administrative sanctions (such as fines) but it becomes a crime if it goes over certain limits or involves the falsification of documents or bankruptcy.
National spending can be reduced. In the context described, the case of Portugal is instructive. Its constitutional court invalidated some measures that were decided by the government. The government then decided to replace these measures by cutting spending rather than by further taxation. This confirms the existence of margins for manoeuvre on the side of spending, especially within the political world. The war on wastage is a tough exercise but it's effective. The countries that left free rein to the speculative banks no longer know how to manage - be it Cyprus or Greece. Yet the above developments in most of the member states are encouraging and show that change is under way. (FR/transl.fl)