At a hearing of the European Parliament’s committee investigating the Panama Papers scandal on Tuesday 9 May, MEPs were looking forward to speaking with representatives of Madeira, Gibraltar, Jersey and Guernsey.
It was the representative of Madeira, which several MEPs accuse of being a tax haven, who was the first to face the hazards of the hearing. The island’s secretary of state for finance said it was certainly a heavenly haven but not a tax haven.
Madeira is an outermost region that is therefore granted special status. Outermost regions are remote islands that are dependent on a small number of economic products, and the EU considers that they face economic challenges that justify their exceptional beneficial regime. In Madeira, companies are entitled to lower taxation as long as they create jobs. The island offers a very advantageous tax rate of 5%.
Its representative justified this by explaining that some fiscal benefits were repealed in 2011, causing 4,500 companies registered there to move elsewhere. Quizzed by the co-rapporteur for the investigative committee, Jeppe Kofod (S&D, Denmark), he explained that most of the companies in question had moved to Luxembourg, the Netherlands and Austria. The financial institutions that left Madeira opted to move to Hong Kong, Miami and Luxembourg.
Belgian MEP Louis Michel (ALDE) said he doubted the island was still eligible for the special status (which has been extended to 2027). The Company Taxation Code of Conduct Group at the Council is currently discussing guidelines for special economic zones, which are due to be endorsed at the meeting of finance ministers in June.
The island’s representative said he was open to an impact assessment of what are known as ‘duty-free zones’ such as Madeira, but since Madeira is poor, he suggested the EU start with other zones if it really wants to tackle tax havens. He said that corporate accounts are public in Madeira, as is the register of commerce.
Transparency was also stressed by the representatives of Jersey, Guernsey and Gibraltar.
Gibraltar, under the fourth anti-money-laundering directive, will have a register of beneficiaries of intermediary companies by 26 June. If agreement is reached on a public register at global level, then he said Gibraltar would follow suit. He pointed out that Gibraltar was not mentioned much in the Panama Papers scandal.
The same cannot be said for Jersey. The island’s representative pointed out that there is no evidence that the companies mentioned in the Panama Papers have committed any wrong-doing. He basically said that Jersey has an exceptional reputation for managing private wealth so it was not surprising that banks had asked Mossack Fonseca to set up companies there.
Some MEPs took interest in the question of dual nationality or fiscal residence (which exists in both Malta and Cyprus).
Automatic exchange of information about bank accounts only covers non-residents. In Gibraltar, taxpayers with dual fiscal residence are not covered by automatic exchange of information. The territory’s representative said there were 320 such people in Gibraltar. Parliament sources say this is another potential loophole. (Original version in French Élodie Lamer)