Brussels, 04/04/2016 (Agence Europe) - In the wake of the “Panama Papers” about the opaque mechanisms behind tax havens, the biggest data leak in history, left-wing political groups at the European Parliament called on Monday 4 April for vigorous measures to increase the transparency of the relations in place between European businesses with so-called non-cooperative jurisdictions.
“This latest financial scandal shows that we need to get tough on fraudsters and all those who help them to hide their money in tax havens”, said the leader of the S&D group, Italy's Gianni Pittella, who said that the actions revealed of senior political figures discredit the political system in the eyes of the citizens. He called for the total transparency of accounting information on the part of European businesses, irrespective of their size, otherwise Europe itself would be contributing to the transfer of profits to jurisdictions with more advantageous taxation systems.
On Tuesday 12 April, the European Commission is to present a legislative proposal revising the accountancy directives, with a view to obliging European businesses with a turnover of €750 million and above to publish certain information (e.g. number of employees, net turnover, profit/losses before tax, corporate tax to be paid and actually paid) in a format broken down by country (country-by-country reporting) for their activities in the EU and on an aggregated basis for their activities outside the EU (see EUROPE 11517). There is already the requirement of public country-by-country reporting in place for banks.
Speaking on behalf of of the Greens/EFA Group, Belgium's Philippe Lamberts argued that the Panama Papers scandal also justifies a revision of the European rules on the fight against money laundering, in order to “impose stiff sanctions on non-cooperative banks, require transparency by publishing registers of the names of the ultimate owners of companies, trusts and foundations and ban the use of shell companies to evade tax”. He also called for the “levying of withholding tax on funds transferred to foreign jurisdictions which are non-cooperative in taxation matters”. Speaking along similar lines, Fabio De Masi (GUE/NGL, Germany) said that all member states which have signed bilateral treaties on dual taxation - such as the Netherlands with Panama and Germany with the British Virgin Islands - should levy withholding tax on financial transactions involving these jurisdictions.
Finally, according to its spokesperson, as it “does not need lessons” on tackling tax fraud and tax evasion, the Commission stressed that all of its action in this area is based on the “principle that revenue should be taxed in the country in which it is generated”, a principle which it promotes at international level.
As regards the Panama Papers revelations, which were simultaneously unveiled in 107 newspapers in 76 countries, the European institution has informed the Panamanian authorities of its serious concerns, after these authorities refused to apply the global OECD transparency standard, contrary to an earlier commitment made by Panama to carry out the automatic exchange of financial information from 2018 onwards. Eight member states (Bulgaria, Croatia, Greece, Latvia, Lithuania, Portugal, Poland and Slovenia) listed Panama as a non-cooperative jurisdiction. In the framework of the work on the anti-tax avoidance legislative package, presented by the Commission in January (see EUROPE 11473), the member states are to adopt conclusions on a pan-European list system by June. The anti-tax avoidance package also contains anti-abuse measures to identify and tackle the transfer of funds to shell companies with no actual economic activity.
Sources close to European Commission President Jean-Claude Juncker report that the general view is that “although transparency is one of the tools to be used, the one and only structural solution for the medium and longer terms continues to be the convergence of taxation concepts, which means adopting the 'anti-tax avoidance' package as soon as possible in order then to be able to prepare the ground for a common corporate tax base in Europe”. “Consolidating profits through a single tax declaration will then stem from this convergence process”, these sources added. According to another source, member states which are dragging their feet, such as Malta, have come in for much criticism.
Appearing on Monday before the European Parliament's TAXE II committee, set up in the wake of the LuxLeaks scandal, Commissioner for CompetitionMargrethe Vestager was invited by Alain Lamassoure (EPP, France) to react on a possible impact of the Panama Papers scandal on the procedures set in place by the Commission regarding illegal state aid. “It is too soon to take position. There are individuals, businesses which are organised at offshore level, which does not involve state aid (…). There may be activities which are unfair, but nonetheless legal”, the commissioner said.
Cañete's circles involved. The Panama Papers flagged up links, both direct and through their entourage, of senior political figures, some of which are still in office, such as the Icelandic prime minister and the Ukrainian president, Petro Poroshenko, with offshore companies. The name of Commissioner for Energy and the Climate Miguel Arias Cañete is among those quoted, as his wife and his sons are beneficiaries of a company domiciled in Panama. “According to the information provided by Commissioner Cañete, his declaration appears to be in compliance with the code of conduct of commissioners as it includes all professional activities and financial interests of the commissioner's wife that would pose potential conflict of interest”, said Commission spokesperson Margaritis Schinas, who added that the company in question had been “inactive for several years, long before the commissioner took office in November 2014”. The Greens/EFA group has pledged to invite Cañete to appear before the TAXE II committee.
Announcing their intentions to request a copy of the Panama Papers file, the French authorities said that in 2015, of 7,800 dossiers processed, 515 already had a link to a shell company on Panamanian soil, leading to €760 million' worth of overdue tax for a total amount of assets of €2.4 billion. (Original version in French by Mathieu Bion and Maëlle Didion)