Friday, February 05, 2010

European Commission: you cannot be serious!

Last November Pascal Canfin and Eva Joly, both Green Party members of the European Parliament, laid down a set of questions to the European Commission on the EU's position on tax havens. Commissioner Kovács has issued a reply - see below.

We at Tax Justice Network are used to bureaucratic weasel words, but these replies take the biscuit.

Message to Commissioner Kovács: this is the moment to (i) strengthen the Savings Tax Directive, and (ii) promote the principle of automatic information exchange as the appropriate standard for international information exchange, and (iii) extend this standard on multilateral basis to non-EU countries, particularly countries in the global South.

Parliamentary questions

25 November 2009
WRITTEN QUESTION by Pascal Canfin (Verts/ALE) and Eva Joly (Verts/ALE) to the Commission

Subject: Fight against tax havens

At the G20 Summit in Pittsburgh the leaders of the major world economies reiterated their commitment to fighting against tax havens.

The mutual signing of tax agreements between tax havens shows the limits of the criteria currently used by the OECD in this area. Does the Commission consider the signing of 12 tax agreements to be a relevant and sufficient criterion for evaluating the degree of cooperation of a jurisdiction?

The G20 called for a ‘peer review’ process within the framework of the ‘OECD global forum on information exchange for tax purposes’. What will be the evaluation criteria supported by the Commission in this process?

In the same spirit and following the example of the blacklist of airlines, does the Commission envisage having its own definition of uncooperative jurisdictions following criteria laid down by itself? Would it support among such criteria the automatic exchange of tax information? More broadly speaking, does the Commission envisage studying the real economic activity in such territories in order to assess the possible misuse of the registered address given by companies in certain jurisdictions?

The American Treasury gives a figure of USD 100 billion of annual losses of tax receipts to the American budget linked to the existence of tax havens. Does the Commission have such a figure for the European Union?

Does the Commission have an evaluation of commercial tax evasion linked to transfer prices and tax havens for the European Union? Is such an evaluation also available for tax evasion by private individuals? If the Commission does not have such estimates, does it foresee conducting studies in order to evaluate losses of tax receipts suffered by the Member States because of the existence of tax havens?

Answer given by Mr Kovács on behalf of the Commission
22 January 2010

The Commission's policy on ‘good governance in the tax area’ is aimed at promoting the principles of transparency, exchange of information and fair tax competition on as wide a geographical basis as possible. Building on relevant international initiatives, the Commission adopted in April 2009 an ambitious strategy to promote these principles, in order to achieve a level playing field and to combat cross-border tax fraud and evasion both within the EU and beyond(1).

In general, the Commission supports the work in this field of the relevant international bodies, and in particular of the Organisation for Economic Cooperation and Development (OECD).

In relation to whether the Commission considers the number of 12 agreements as a relevant criterion for evaluation, the OECD experts have suggested that at this point in time this may be a good indicator of progress. However, this threshold will be reviewed to take account of (i) the jurisdictions with which the agreements have been signed (a tax haven which has 12 agreements with other tax havens would not pass the threshold), (ii) the willingness of a jurisdiction to continue to sign agreements even after it has reached this threshold and (iii) the effectiveness of implementation. The Commission supports this review.

Participants at the Global Forum agreed on the setting up of a Peer Review Group to develop the methodology and terms of reference for a robust, transparent and accelerated process. The first meeting of this Group only took place in October 2009 so it is still too early to evaluate the work it is carrying out.

Given this, the Commission has no current plans to adopt its own definition and criteria to evaluate uncooperative jurisdictions in relation to exchange of information for tax purposes.

The EU and its Member States are about to conclude an agreement on anti fraud measures and tax cooperation with Liechtenstein and the Commission has asked for a mandate to negotiate similar agreements with Andorra, Monaco, San Marino and Switzerland. This demonstrates the willingness to enhance tax cooperation with these jurisdictions in a multilateral way.

Whilst agreeing with the OECD that for the purposes of implementing the commitments made by jurisdictions exchange of information on request should be sufficient (as a matter of fact these decisions reflected what a major step forward exchange on request implies for the jurisdictions concerned), this does not exclude the possibility to go further and agree with these jurisdictions on automatic exchange of tax information if appropriate.

As regards the misuse of registered addresses, the Commission believes this is more a matter for Member States to consider particularly in respect of subsidiaries that companies established in their territories may set up.

The Commission does not have an overall evaluation of the revenue losses affecting the budgets of the different Member States due to tax fraud and tax evasion using non-cooperative tax jurisdictions. Given, however, the growing importance of this subject, the Commission does not rule out conducting a study in the future on this though one has to bear in mind its practical difficulties.

(1) COM(2009)201 final ‘Promoting Good Governance in Tax Matters’.


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