Sven Giegold
Member of the European Parliament – Greens/EFA Group

Speaker of the German Green Delegation

New subcommittee on tax in the European Parliament: Green priorities for European tax justice

Dear friends,

Dear interested,

The corona crisis is leaving massive holes in the public coffers of European countries. However, the economic recovery and green transformation won’t work with austerity programmes but require courageous investments in the future. In the coming months and years, this will bring the fight against tax evasion, tax avoidance and money laundering back on the political agenda. There has never been a better time to finally end European tax dumping. And that is why the new and permanent tax sub-committee of the European Parliament comes at just the right moment. We Greens have been fighting for this committee for many years and this Wednesday at 9 am the committee will finally start its work and I will be on board as coordinator of our group.

The Greens/EFA Group is providing three full members and three substitute members. This week I was appointed by the Green members of the committee as Green coordinator of the tax Committee. My Danish colleague Kira Peter-Hansen will be Vice-President of the Committee. After various special committees (TAXE in 2015, TAX2 in 2016, TAX3 in 2018) and a committee of inquiry (PANA in 2017), the new tax subcommittee is the first to deal with tax scandals on an ongoing basis. This will make the work of the European Parliament much more efficient, as the constant reorganization of the work and search for new staff for the committee secretariat will come to an end.

Three-digit billions of euros that we would urgently need to deal with the Corona crisis are trickling away into tax swamps. If the public sector is spending unprecedented sums of money today, it must also think of tomorrow’s revenues. We must not let the next generation foot the bill for the recovery and we must put a stop to questionable tax practices and financial crime. Especially the winners of the corona crisis – like some large digital corporations – must finally pay their fair share of taxes.

The recent revelations by the International Network of Investigative Journalists ICIJ together with US investigative media company BuzzFeed about the money laundering involvement of major international banks must be a wake-up call. The so-called FinCENfiles are based on leaked suspicious transaction reports addressed to the US anti-money laundering authority FinCEN. They allow a frightening insight into the criminal activities of major international banks, including HSBC, Deutsche Bank and Commerzbank. Even the public money laundering supervisors do not look good in the revelations: the documents show that they have not been able to put an end to these activities for years. We Greens have requested a plenary debate on the FinCEN files and will put the topic on the agenda in the new Tax Committee for an evaluation and a hearing. It will be of particular interest to find out exactly when which of the banks involved made questionable transactions for the last time. In this regard the new media reports are often unclear.

A few of the priorities for our work from a green perspective:

Minimum tax rates for companies and digital tax

The European Union must become a global leader in the fight for tax justice. Since the United States have at least partially withdrawn from the OECD corporate tax negotiations, Europe must now take action itself. We need European minimum tax rates on corporate profits. Moreover: The German hesitation on the digital tax has already cost more than 10 billion euros in tax revenue in Europe. The questions of corporate taxation and the digital tax will certainly occupy the new subcommittee.

Make pressure for tax transparency of large enterprises

We want to make sure that the tax committee also deals with Europe’s sharpest sword against tax avoidance: tax transparency for large corporates (public country-by-country reporting). While the European Parliament has long since approved the proposal, the Council has been blocking it for years. At present, it is up to the German Council Presidency to finally put the issue on the agenda for a vote. We want to exert pressure here. In addition to country-by-country reporting, the Council is blocking the Common Consolidated Corporate Tax Base (CCCTB) approved by the European Parliament, the fraud-proof reform of VAT and the Financial Transaction Tax. The main blocker has been the grand coalition in Berlin for years.

Brexit: Focus on new tax competition and the British overseas territories

Even the smoldering dispute over Brexit is not unaffected by the tax question. We want to put it on the agenda of the new subcommittee. Along with the EU, Great Britain is also leaving the European Code of Conduct Group, in which issues of corporate taxation are discussed. As far as the rules for tax avoidance are concerned, the British government has repeatedly signaled that it no longer wants to comply with EU standards after Brexit. Even before Brexit, British tax havens undermined European tax law. Europe must use future trade relations with the UK to put an end to tax dumping via British tax havens. In general, bilateral trade agreements must become an instrument against tax avoidance, tax fraud and money laundering.

Exploitation of workers in the internal market and tax losses

Dumping employment, a reality in German slaughterhouses, occurs in many EU member states and also has an impact on tax revenues. Subcontractors from Eastern Europe have exploited the workers in German slaughterhouses below the minimum wage, thus also depriving the tax authorities of revenue. False self-employment is common in the construction, logistics, agriculture, sexual services and care sector. Workers are paid low wages without effective social security. This not only leads to unfair competition with decently paying companies, but it also means that local communities, where the actual work is carried out, miss out on part of the trade tax. So far, this issue has been completely below the radar in the debate on tax justice.

Money laundering and tax avoidance with real estate

Another tax-related topic that is a source of concern for many people are exploding rents and unaffordable residential real estate. Apartments and houses have become extremely attractive as investment objects due to low interest rates, which drives up prices. But also criminal money contributes to the explosion of rents in attractive locations. In addition, national tax law and bilateral tax treaties offer special rules to reduce taxes on income from real estate sales and rental income. In the real estate sector, tax evaders and money launderers are particularly active because the controls are still too soft and the rules are fragmented. We need standardization here.

Crypto-currencies and other assets

Digital currencies have developed their own global payment system, for which there are no tax reporting requirements and which is a gateway for criminal money. Income from Bitcoin & Co. must be effectively taxed just like other income.

Ecological taxes and duties

As part of the European Green Deal, the EU emission trading system has to be tightened up so that carbon dioxide emissions finally have a relevant price. A proposal is also planned to standardize energy taxation in Europe so that, for example, senseless cross-border gasoline traffic motivated by tax differentials ends. All measures must ensure the following: They must be effective and social. Only a relevant CO2 price is effective. It must not distort competition for greenhouse gas-intensive industries, and must therefore be balanced at the external borders. And: The revenues must be paid back to the population in such a way that inequality does not increase further, but that people with low incomes are better off than before.

Tax competition for rich private individuals

More and more EU countries are extending tax competition from companies and capital income to rich individuals. The sale of EU citizenships and residence permits (golden passports and golden visa) is also used for tax dumping or money laundering. The EU Commission and member states must address this issue and stop tabooing it. If necessary, member states must ensure a minimum level of taxation for citizens living abroad.

Conclusion

Tax evasion, tax avoidance and money laundering are a thorn in the flesh of our society and promote inequality and social division. This is why we Greens in the new tax committee want to promote European tax justice. There have been a number of successes here in recent years. The EU Commission has transformed itself from a driver of tax competition in Europe to an ally. The new permanent subcommittee is the beginning of a new stage in the fight for tax justice in the European Union. After years of ad hoc committees, the European Parliament can finally tackle tax evasion and tax avoidance on an ongoing basis.

With green European greetings

Sven Giegold

P.S.: Save-The-Date | Italian-German webinar on “Funding the Corona Recovery by curbing tax dumping and money laundering” with Finance Ministers Scholz (Germany) und Gualtieri (Italy) on Wednesday, 30.9.2020 7-8pm. Register here: https://us02web.zoom.us/webinar/register/WN_Tt9-EIA_Q9-1eC_QetcPCg