Two weeks ago began a joint action: 80 journalists of international media brought forward overwhelming evidence of Luxemburg’s organized tax avoidance scheme.
Headlines of newspapers like The Guardian, Süddeutsche Zeitung and other concerning the exposure of these practices did not surprise me at first. For many years now the Tax Justice Network, Attac, the Greens and I fight against the fairly known aggressive tax avoidance – not only in Luxemburg. But only when formulating the first responses we realised the importance of the Luxemburg Leaks: The recent attention to the problem of tax dumping might be the dawn of a European policy of tax justice.
To end European tax dumping we just launched a new website. Support our 10 demands to Juncker and the European finance ministers on: http://act-or-go.eu
The French economist and writer Thomas Piketty phrased the problem recently most striking: Europe is a rich continent in which many people are needlessly poor and many states needlessy indebted. Only fair taxation, in particular on the highest fortunes and incomes, would enable investment into the future of our society. The excessive tax competition prevents exactly that. By pitting states against each other can multi-national corporations achieve to pay almost no taxes. Common citizens as well as local businesses have to pay extra.
What will become now of Jean-Claude Juncker, who transformed from the originator of that problem in Luxemburg to the new president of the European Commission? President of the Guardian of the Treaties and fair competition. Also I and 20 other Greens gave him our vote, even though we already knew what he has done in Luxemburg: https://sven-giegold.de/2014/warum-wir-juncker-als-kommissionspraesidenten-unterstuetzen/ (in German).
This happened due to the fact that Europe needs a strong European Commission who is able to take a stand with strong initiatives against the pressure coming from many member states for renationalization and standstill. In addition promised Juncker in exchange for our support transparency regarding lobby contacts and a strong ecological orientation in his investment project. Nevertheless one starts to ponder in the current situation if that has been such a smart move in the end.
When thinking about it calmy it becomes clear: Juncker is actually a stroke of luck in the fight against tax dumping and tax avoidance. He is under pressure to deliver against tax dumping. It is better if he stays and we have the opportunity to put him under pressure for the upcoming five years. It speaks volumes that the opponents of European unification brought forward a motion of no-confidence. In particular the right-wing populist Eurosceptics attempt the personalization of European tax dumping instead of pushing forward European-level policies against tax avoidance. In the parliamentary debate respectively in the reasoning of their motion of no-confidence against Juncker rejected the conservative right-wing ECR parliamentary group (of which the German AfD is also a member) as well as the anti-european EFDD parliamentary group European-level tax policies explicitly as a response to LuxLeaks.
If we can continue to keep the pressure on is Juncker more of an opportunity than a problem for more tax equity. This would also be fairer since Juncker and Luxemburg are only the tip of the iceberg. Special deals between multi-national corporations and tax authorities are more numerous in The Netherlands than in Luxemburg. And of all things the Dutch finance minister and social democrat Dijsselbloem is Juncker’s successor as the head of the Eurogroup. Also did countries like Germany and France, who suffered losses in tax revenue due to the unfair competition, watch to a large extent only from the sidelines without raising protest.
Juncker promised two concrete things now in this appearance: Information about special agreements between multi-national corporations and tax authorities shall be exchanged automatically between states. The outcome of that is limited, though. Second: He wants to work on a common European business tax basis. The biggest concrete progress regarding that common business tax basis comes from the working process of the most important industrialized and newly industrialized countries (G 20). At their most recent summit in Australia did they agree to a plan of action by the OECD for combating Base Erosion and Profit Shifting (“BEPS”). The G 20 want to achieve thereby that corporations pay taxes in places where they are really active and not just where they have their letterbox company.
Juncker’s proposals are a step in the right direction but present no solution to the problems. Aggressive tax avoidance will continue, although a bit hindered. Within the framework of the BEPS action plan were the G 20 states not able to agree on a common ground for the taxation of multi-level corporations. Multi-level corporations are still not taxed as one unit, but are instead split in hundreds of taxable individual entities in different countries, with the demarcations determined now by stricter rules. The outcome is thus a patchwork of complicated regulations with numerous loop-holes. The proposals by the G 20 constitute therefore a job-creation program for tax accountants. Effective instead would be a real common tax base with a minimum rate based on this tax base as well as obligatory country-specific transparency for multinational corporations.
It is of no use to cut just one head of the hydra called tax avoidance. Only a consistent and comprehensive program can rid the world of such aggressive tax dodging practices by multinational corporations. The elements for such a programme exist since a long time. Already on the day of the disclosure of the Luxemburg Leaks the Greens presented such a plan. Juncker can and must act now. His massive conflict of interests can turn into the dawn of real European-level tax policies. It is up to him to prove that he acts in the interest of all Europeans. If he does not take serious action he loses the rest of his credibility. Juncker has to act, or to go.
The European Parliament has to keep up the pressure on Juncker and other obstructionists by establishing a committee of inquiry. The Greens in the European Parliament presented a draft mandate for that. For the establishment of such a committee we need 188 supporting Members of the European Parliament. We as Greens have 50 representatives, the European Left has 52, the Liberals 67, and the Socialists and Democrats 191.
For the committee of inquiry as well as for other next steps applies: It is primarily dependent on the Socialists and Democrats if we can make progress or not. In the new parliament they play a central role for many progressive issues. Yet so far have Martin Schulz, his parliamentary group as well as Sigmar Gabriel and the party comrades in the German Parliament been remarkably quiet although they face such a great opportunity for social progress. The Grand Coalition in Berlin is also stalling Brussels in the fight against aggressive tax avoidance. The coalition agreement of the governing parties in Berlin takes explicitly position against country-by-country transparency of profits of multinational corporations. The same applies to the Anti-Money laundering Directive: The European Parliament demands that in the future it has to be public which owner hides behind which letterbox companies – the Grand Coalition of SPD and CDU in Berlin stalls here, while both are in favour in the European Parliament. Furthermore, there is the issue of minimum tax rates. Certainly there is no need for a one-size-fits-all rate in a common market, but at least a common minimum tax rate. Also about this issue one can hear no sound from Martin Schulze and the European Socialists and Democrats.
Would the Christian Democrats and Social Democrats advocate more strongly for tax equity another key project came into reach. As his first big initiative Juncker promised a 300 billion Euro investment project to boost the European economy and reduce the intolerable high unemployment rate. The whole world wonders now how he wants to fund that. His now revealed plans contain not one cent of fresh public funds. We have a solution for this problem: At the very latest since the LuxLeaks scandal it is apparent how how to achieve: When the EU closes the tax havens it would be possible to fund even bigger investment projects. At the convention of the European Greens in Ostend a couple of days ago we have decided that tax justice will be one of our six priorities for the next 5 years. That offers me the opportunity to aggressively pursue my pet subject.
I would appreciate if you support our 10 demands to Juncker and the European finance ministers at http://act-or-go.eu.