The investigation of the European Parliament´s TAXE special committee against tax dumping comes to a head. After the committee hearing of the president of the European Commission, Jean-Claude Juncker, new revelations raise new queries and question his credibility even more. Hence he will have to face further enquiries at a second hearing of the TAXE committee. Access to key documents, that are crucial for the elucidation of the LuxLeaks scandal, is still missing. Member States, the EU Council and the EU Commission have denied access to relevant documents for months. This access is finally to be granted under very restrictive conditions. Based on the soon gained findings, the committee must also hear other witnesses to be able to incorporate all information in the final report of the committee.
Parliament must decide now whether it takes the investigation seriously or whether it wants to be the secretariat of the European Commission. We as Greens want a strong parliament that takes its responsibilities towards EU citizens seriously instead of bowing to questionable practices of large companies and member states.
The TAXE committee could request its prolongation next Monday
The coordinators (MEPs in charge) of the TAXE committee of all parliamentary groups will meet on Monday, 5 October in Strasbourg. I will represent the Greens in this meeting. At this occasion, the coordinators can pave the way for a prolongation of the TAXE committee´s mandate. A prolongation of the mandate is essential, since it is still unclear who has been responsible for the tax dumping practices run for decades by big corporations and states.
A prolongation of the mandate is possible for up to one more year. The currently existing draft report can be discussed and adopted quickly as an interim report. The Liberal (ALDE) and the Left (GUE) Parliamentary groups endorse our Green request for prolongation, whereas Conservatives/Christian Democrats (EPP) and Conservatives & Reformists (ECR) reject it and thus protect those in the European Commission and the member states being responsible for promoting aggressive tax dumping. We are waiting for a positioning of the Social Democrats (S&D) on this issue. Their endorsement of the prolongation would allow to build a majority against the Conservatives. Provided the coordinators plead for a prolongation, the request must be adopted by the Conference of Presidents and, as a final step, confirmed by the European Parliament’s plenary.
Mr Juncker has been aware of tax dumping practices since 1997, but answered untruthfully to the parliamentary committee
During the hearing with the TAXE special committee on 17 September, the current President of the European Commission and former Finance and Prime Minister of Luxembourg Jean-Claude Juncker became entangled in contradictions, which he has not been able to dispel convincingly until now. In 1997, during Mr Juncker´s term as Finance and Prime Minister, the later Minister of Economic Affairs Jeannot Krecké wrote a report on tax avoidance in Luxembourg. In the version that was published at that time, one page was missing. This specific page dealt with the Luxembourg’s tax authorities’ treatment of tax rulings. On 17 September, during his hearing in the TAXE committee, Mr Juncker stated that he had only been informed recently about this questionable page. Conversely, Mr Krecké claimed to have handed over this page to Mr Juncker already in 1997. As a reaction to political pressure created by Fabio de Masi, a MEP of the Left (GUE) group, and others, Mr Juncker published the respective page on Wednesday this week.
The missing page proves Mr Juncker was already informed about problems with Luxembourg’s sweetheart tax deals in 1997 when he was Minister. Mr Krecké strongly recommended Mr Juncker to take a closer look on what his tax authority did in practice. The number of tax deals then exploded over the following years. During the hearing of the special committee Mr Juncker was speaking on the sideline of truth. Even worse, Mr Juncker acknowledged no responsibility whatsoever for Luxembourg as tax haven. After the publication of the missing page, Mr Juncker should explain why he ignored Mr Krecké’s warning and witnessed Luxembourg’s transformation into a tax haven.
Here’s the letter of Mr Juncker to Mr de Masi:
https://sven-giegold.de/wp-content/uploads/2015/09/img-930104006-0001.pdf
The official Krecké report of 1997 without the crucial page is here:
https://sven-giegold.de/wp-content/uploads/2015/03/Report-Kreck%C3%A9.pdf
The newly published page by Mr Juncker missing in the Krecké-report is here:
https://sven-giegold.de/wp-content/uploads/2015/09/img-930103251-0001.pdf
Crucial documents are still missing
The newly out page of the Krecké report is only one of about 1.000 pages that the committee is in dire need of to conclude its work and find out who’s responsible for decades long malpractices in tax issues. Documents that the committee is still lacking include those of the so called ‘Code of Conduct Group on Business Taxation’. In this group representatives of Member States discuss the coherence of their taxation practise with the Code of Conduct on Business taxation adopted in 1997. These minutes of meetings are necessary to find out which Member States dumped taxes and who stood by watching. Yet EU Commission as much as the Council and Member States refuse permission to the committee to read those documents under bearable conditions. Tax Commissioner Pierre Moscovici offered to allow a few MEPs only to read the documents under TTIP-style conditions. Yet without taking notes and without support of assistants there is hardly a chance to properly work on legally demanding problems. This is why the committee needs an extension of its mandate to analyse the still missing documents. Only if allowed so, the committee can find out who’s responsible for tax avoidance deals in Europe.
In case this does not happen we would need a proper inquiry committee which could force access to documents. If necessary, we will re-start the collection of signatures among MEPs for this. Personally, I will not give up the option of forcing access to documents via the European Court of Justice. I have already asked for an individual access to those documents as a necessary first step towards this.
I will continue to inform about the proceedings in the TAXE special committee and call on whistleblowers and experts for their help. Please, hand us over important information which could support the inquiry into tax dumping and neglect of member states. Of course I also accept such information with full protection of the sources or anonymously.
TAXE report in the final stage of negotiations: Our Green demands
We aim for European laws that prevent tax dumping in the future. As a basis, the TAXE special committee seeks to clarify why this didn’t work in the past. While the question for political responsibility still lacks an answer, the two rapporteurs, social-democrat Elisa Ferreira and liberal Michael Theurer, have presented their draft report to the committee:
https://sven-giegold.de/wp-content/uploads/2015/09/TAXE-Draft-report-EN.pdf
On 23 September the deadline for amendments ended. We as Greens tabled 160 amendments in total which can be downloaded here:
https://sven-giegold.de/wp-content/uploads/2015/09/PE564-938_23-09-2015_14-58-34-Greens-amendments-FINAL-3.pdf
https://sven-giegold.de/wp-content/uploads/2015/09/Amendment-by-Sven-Giegold-on-behalf-of-the-Greens1.pdf
In the following we compiled the ten most important changes that we made to the report of the special committee and that reflect our approach to a fair tax system in Europe:
1. Name and shame who is responsible for tax dumping
Those who enforced or enabled tax dumping should be held accountable. We criticize the members states that didn’t reply to our questions (Bulgaria, Denmark and Slovenia), the European Commission that withholds crucial documents and the Council of Member States for providing hardly any useful information (amendments 92-96). We clearly say that the European Commission failed as Guardian of the European Treaty (amendment 100).
2. Be transparent and tough on tax rulings
The LuxLeaks scandal and our investigations showed clearly that rulings are abused by companies to pay little taxes. We therefore propose the publication of all tax rulings by Member States so that citizens can verify if some companies get a privileged treatment (amendment 112). Additionally, we are calling for common European rules on tax rulings of Member States (amendment 116) and for a periodical review of granted tax rulings whether they are still appropriate (amendment 115).
3. Real tax transparency
We as Greens have been calling since years to oblige companies to be more transparent about their tax business. In concrete terms, we are asking for public country-by-country reporting (amendment 133) and public registries of beneficial owners, so that we can know who owns shell companies and trusts, legal constructions too often used to evade taxes (amendment 137). EU governments should publish how much revenue they lose by offering corporate tax breaks (amendment 136).
4. European whistleblowers’ fund
We would not have had the Luxleaks scandal without courageous whistleblowers. But whistleblowing is a dangerous activity, possibly leading to jail in many European countries. This is why we are asking for a pan-European common fund which compensates whistleblowers for financial damages (amendment 138).
5. Fighting tax secrecy and letterbox companies
While banking secrecy is in the retreat all over Europe, exchange of tax information is still insufficient. We therefore request public statistics about the amount of automatic information exchange between states (amendment 113). Additionally, we call on the European Commission to withdraw the proposal of single-member companies (SUP) which will actually make it easier to set up letterbox companies through online registration (amendment 110).
6. Commission to propose a Common Consolidated Corporate Tax Base (CCCTB)
The good idea of a common basis for the calculation of corporate taxes has been discussed for decades. We are calling on the Commission to produce a new CCCTB proposal as soon as possible (amendment 117). Member States must adopt this proposal immediately and should take into account the European Parliament’s position with a formula apportionment that does not unduly advantage certain member states (amendment 119).
7. Strengthening and democratizing the Code of Conduct Group on Business Taxation
Our TAXE investigations have clearly demonstrated that the Code of Conduct Group and the reliance on soft law have failed to provide the reforms of Member States’ tax laws we need. We therefore urgently call for a reform of the Code of Conduct Group including greater accountability and transparency (amendment 126). The European Parliament should have the right to put on the agenda of the Code of Conduct Group any measure it deems harmful (amendment 126).
8. Speeding up EU state aid procedures and secure the money recovered for the common good
State aid rules can be a powerful tool to stop distortion of competition in the EU internal market due to preferential tax treatment of some companies. We are calling for full reimbursement of illegally granted state aid (amendment 128) and for extending the state aid investigations to all companies involved in the LuxLeaks scandals (amendment 130). Additionally, state aid rules should be changed so that the money collected in case of illegal state aid can go to the EU budget and so that penalties can be imposed against countries and companies breaching European competition law (amendment 131).
9. Tax reforms for a harmonised European corporate tax system
As tax reforms at the European level are subject to the unanimity rule in the Council, the harmonization of rules so far has only made little progress. However, we call for implementing urgent reforms: the interest & royalties directive must give the Member States more leeway to levy withholding taxes so that companies lose the incentive to relocate intellectual property and income thereof to subsidiaries in low-tax countries (amendment 108). We need a common European framework for rules on controlled foreign companies (CFC) (amendment 122). The Commission must make a legislative proposal to ensure minimum effective taxation in the EU so that profits are taxed at least once in the European Union (amendment 142).
10. Stronger rules to avoid conflicts of interest
The Luxleaks scandal and our investigations have proven that audit companies, consulting firms and other intermediaries played a crucial role to facilitate tax avoidance. We are therefore calling for a legislative proposal to separate audit and consulting activities of accounting firms and other financial or tax services providers as well as the elimination of payment on success for consulting firms (amendment 149). Members of EC expert groups have to be fully independent from private economic interests (amendment 151).