European parliament: two useful resolutions

Yesterday the European Parliament adopted two resolutions, which we believe will have many positive effects. Sven Giegold, a member of the European Parliament and one of the co-founders of TJN, just sent us an email, which begins:

"Today is a good day for honest taxpayers and a bad day for the tax planning industry. The European Parliament calls for the ending of banking secrecy and a comprehensive package against aggressive tax dodging. This could balance unfair austerity programmes in a time of tight budgets and high debt levels in the member states. Ten years after I co-founded the Tax Justice Network, this resolution is also of personal joy to me."

We have pasted the full text of his message at the end of this blog.

The first resolution calls for concrete ways to combat tax fraud and tax evasion. The draft text can be found here. Among other things, the resolution notes:

• Considers that strengthening the regulation of, and transparency as regards, company registries and registers of trust is a prerequisite for dealing with tax avoidance;
• Welcomes the proposals made by the Commission on country-by-country reporting within the Accounting and Transparency Directives; recalls that country-by-country reporting requirements for cross-border companies are essential for detecting corporate tax avoidance;

We warmly welcome these resolutions, and also the call for automatic information exchange to become the general standard:

"Highlights the need to generalise automatic information exchange and to extend the scope of the Savings Taxation Directive in order to effectively end banking secrecy".

Second, a demand for a compulsory Common Consolidated Corporate Tax Base (CCCTB.) Giegold said:

"A common corporate tax base would ensure greater transparency of corporate tax in the EU and reduce the scope for tax evasion, as well as reducing the administrative burden for tax compliant cross border firms. The CCCTB has to be binding, and the EP has underlined this point today, calling for a mandatory CCCTB for all large enterprises. A non-mandatory scheme would create a 28th tax regime in the EU and thus rather increase tax competition than limit it. The ambition to increase revenue cannot be achieved like this.

Unfortunately conservatives (EPP) and liberals (ALDE) were not willing to call for minimum tax rates. They rather continue worshipping tax competition between the Member States' corporate taxation regimes."

See more on the arguments against tax competition here. News reports suggest that the European Commission and European Council have promised to present concrete proposals in June 2012.

Also see Europolitics:

European Commission President José Manuel Barroso commented after a meeting with Swiss Confederation President Eveline Widmer-Schlumpf, on 20 March in Brussels: “For the European Union, it is essential to take a step forward [with Berne], particularly on savings taxation”.

The article ends with the sentence "Back to square one." That's perhaps overpessimistic, but there is no doubt that Britain, in league with Switzerland and German Finance Minister Wolfgang Schäuble, has sabotaged transparency in Europe. And not for the first time. This is substantially about the City of London and its allies, fighting on the side of financial secrecy. Read all about that here. You can read the rest of the article here.

A more optimistic note is provided by EU Taxation Commissioner Algirdas Semeta, in an interview again with Europolitics:

As regards the taxation of savings. . . we have asked Council for a mandate to negotiate a stronger EU-Swiss savings agreement. As soon as we get this mandate – which I am optimistic will be before the end of the Danish Presidency – we will rapidly startnegotiations.
. . .
On my side, I took the opportunity to confirm with the president that Switzerland would be ready to engage as soon as the Commission is authorised to negotiate an improved and extended savings agreement.

Semeta discussed the poisonous bilateral "Rubik" deals signed by the UK and Germany (and now Austria) with Switzerland, saying (indirectly) that it has yet to provide a seal of approval for them, and that they are still being considered. We take heart from this, too:

"The Commission aims to negotiate a stronger and better EU-Swiss savings agreement as soon as it is given the green light by member states. . . . Once we can commence the negotiations, we will engage with ambition and openness. But we will also have our red lines. The EU is not prepared to back-track on good governance, nor will we accept bank secrecy that can support tax evasion. I remain convinced that automatic exchange of information is the best means of ensuring effective taxation of savings income, and we will push for at least equivalent measures from our international partners."

Important statements. There is also important discussion in that article about discussions with Switzerland over the EU Code of Conduct, criticising "exaggerated delay tactics on the part of the Swiss."

It is a fairly strong set of statements, highlighting in diplomatic language how Switzerland is effectively thumbing its nose at European countries, in deference to the wishes of financial interests, tax avoiders and evaders, and financial secrecy.

Make no mistake: this is economic warfare being conducted by Switzerland. And Switzerland is very much the aggressor. European countries need to pull out some heavy weaponry, and to find ways to counter the efforts of Switzerland's allies inside the European Union - principally Luxembourg, Austria and the United Kingdom. The whole article is worth reading.

Thanks to Koos de Bruijn and Jean Meckaert.

Sven Giegold's email

Dear colleagues,

Today is a good day for honest taxpayers and a bad day for the tax planning industry. The European Parliament calls for the ending of banking secrecy and a comprehensive package against aggressive tax dodging. This could balance unfair austerity programmes in a time of tight budgets and high debt levels in the member states. Ten years after I co-founded the Tax Justice Network, this resolution is also of personal joy to me.

The MEPs demand for the extension of automatic exchange of information in tax matters and of the scope of the savings tax directive. Banking secrecy should come to an end. Attempts by the German and other governments to establish final withholding taxes in conjunction with tax amnesty are rejected by the chamber.

In the area of company taxation the European Parliament calls for an end of tax competition which is to the detriment of public households and for the implementation of a common consolidated corporate tax base (CCCTB). A common corporate tax base would ensure greater transparency of corporate tax in the EU and reduce the scope for tax evasion, as well as reducing the administrative burden for tax compliant cross border firms. The CCCTB has to be binding, and the EP has underlined this point today, calling for a mandatory CCCTB for all large enterprises. A non-mandatory scheme would create a 28th tax regime in the EU and thus rather increase tax competition than limit it. The ambition to increase revenue cannot be achieved like this. Unfortunately conservatives (EPP) and liberals (ALDE) were not willing to call for minimum tax rates. They rather continue worshipping tax competition between the Member States' corporate taxation regimes.

The European Commission is asked to come forward with additional measures in order to close loopholes in company taxation. The revision of the parent subsidiary directive and the interests and royalties directive is imperative to stop the application of harmful structures such as hybrid entities and financial instruments, vastly applied in double-non-taxation schemes.

Although the resolution is not legally binding for the bodies addressed by it (i.e. Council and Commission), it can nonetheless build up political pressure as experienced with the successful calls of the European Parliament for a European financial transaction tax.

In order to protect national regimes containing different privileges and loopholes member states are blocking progress in tax cooperation using the unanimity requirement in tax matters foreseen in the EU treaties. The primary countries leading this discipline are the Netherlands, Austria, Luxembourg and Ireland. Countries suffering from this selfish behaviour should not wait any longer.

Member States now have to deliver on their commitments from the fiscal package to make progress in tax coordination. In case the EU 27 cannot advance in this field the tool of enhanced cooperation needs to be applied. In such an enhanced cooperation willing Member States could harmonise their tax systems without being blocked by unanimity and together increase the pressure on tax havens and tax dumping practices.

The full text of the resolution can be found here.