Brussels, 07/04/2016 (Agence Europe) - The Commissioner for Taxation, Pierre Moscovici, wants a discussion at the informal meeting of the finance ministers of 22 and 23 April on the Panama Papers scandal, which has revealed the scale of the phenomenon of hiding tax assets via offshore finance. The subject will therefore be included on the agenda, as the Dutch finance minister, Jeroen Dijsselbloem, confirmed on Twitter. Although the discussions will be fairly general, the initiatives already on the table of the member states could help to stem the problem.
The first of these initiatives, the one on which Moscovici is laying the most emphasis, is the forthcoming pan-European list of non-cooperative jurisdictions in taxation matters. He wants this list within six months, based on joint criteria and accompanied by possible sanctions. His first attempt to draft a list of these countries, in June of last year, provoked criticism, for instance from the OECD. In February, the British press reported that the UK had lobbied the Commission to keep Bermuda off the list. A Commission source explained at the time that London had made even more noise about the inclusion of Jersey and Guernsey on the list (EUROPE 11482).
Presenting his VAT action plan on Thursday 7 April, Moscovici said that he would not support a list stemming from political horse-trading between member states wanting to protect certain jurisdictions. When the first attempt at the list was made in June of last year, a number of third countries “took the precaution of accelerating the setting in place of global standards, which makes it useful”, the Commission explained, adding that “bizarrely, a number of member states tended to take the view that their own list should be updated downwards”. “We do have to act, we do specifically need to get out of this logic of horse-trading, I will not tolerate a sub-list, we would be making fools of ourselves”, he said.
The day before, at a briefing with a small group of journalists, he stressed the importance, in the context of the Panama Papers, of the anti-abuse clause of the proposed anti-tax avoidance directive, currently under discussion between the member states. This could “already put an end to shell companies, empty shells would not pass the 'anti-abuse' test”, a source close to the Commissioner explained. The latest proposed compromise of the Dutch Presidency of the Council incidentally adds the possibility of sanctions to the 'anti-abuse' provision of this proposed directive.
Over at the Commission, emphasis is also being laid on the importance of the switchover clause (clause on switching over from exoneration to tax credit). This clause could, “to a certain extent, respond to the issue of the Panama Papers”, a source explained. The clause provides that member states would not be able to exonerate certain foreign income (distribution of profits, proceeds from selling shares) from third countries with, in return, the granting of tax credit, if the legal corporate taxation rate in the third country is less than 40% of the legal rate of the member state. The compromise text of 18 March limited the scope of this clause, providing for it to apply only if an anti-double taxation agreement is not already in place (EUROPE 11514). A few tweaks have been made to the text of 6 April. This clause will not apply “where a convention for the avoidance of double taxation is in place between the member state of the taxpayer and the third country where the entity is resident or the permanent establishment is situated”, the latest version of the text now reads. A Commission source acknowledged that this provision is one of the most controversial in the proposed directive, as it is not part of the OECD action plan to fight tax optimisation ('BEPS'). Over at the Council, it is suspected that the clause will end up being left out altogether, although the Dutch Presidency is planning to do its utmost to keep it in. Whatever happens, if it is removed from the text, it will be before the Ecofin Council of May, to prevent the ministers from taking responsibility for it themselves, the Council source explained.
The NGOs have welcomed the fact that in light of the Panama Papers scandal, the Commission is planning to change its proposal, to be unveiled next week, on country-by-country reporting, as we indicated in EUROPE 11514. In response to our article, Oxfam's Aurore Chardonnet said that “if the Commission should remodel its proposal to include third countries in country-by-country reporting, this would be a very good thing. By allowing the public to know where a multinational company makes its profits and pays its taxes, the Juncker Commission would be taking a decisive step towards tax transparency”. “The Commission should now follow its line by amending its proposal and making sure that it adds true country-by-country reporting, rather than just smoke and mirrors to save face after Panama Papers”, Elena Gaita of Transparency International told us. The German GUE/NGL MEP, Fabio De Masi, told us that he found it remarkable that the “Commission always drags its feet until there is a big public outcry (…). Keeping the most notorious tax havens out of a regime labelled with 'transparency' is utter nonsense”.
However, a number of observers argue that the two issues are unrelated, as it is unlikely that the offshore companies involved would be included in the scope of application of the forthcoming country-by-country reporting, given that only groups with turnovers of €750 million and above will be covered. (Original version in French by Elodie Lamer)