At the beginning of the year, the special committee of the European Parliament TAXE started with its work to follow-up on the Luxleaks revelations. The Greens had pushed for a real inquiry committee with more investigative powers, but our initiative for an inquiry committee failed through the resistance of Socialists and Christian Democrats. Nevertheless, we obtained a special committee on LuxLeaks which has received the same mandate we had written for the inquiry committee.
Therefore, the special committee is a big chance to reveal who bears the blame of tax dumping favoured by governments and multinational corporations and to push for changes towards a common and fair European tax policy. In this context it is not only important to investigate the role of tax heavens such as Luxembourg, Ireland, Austria or the Netherlands. We also want to know the reason why the governments, tax and law enforcement authorities of Germany, France, Italy etc. so far have done little against these practises. The investigation in the European Parliament can help to push for effective laws in Europe.
We are still missing the documents that are crucial for clarifying who is responsible for tax dumping favoured by governments and multinational corporations. As we are still waiting for important documents, in particular of the Council Code of Conduct Group on business taxation, we are pushing for an extension of the mandate of the special committee. If this request will not be supported by the other groups, we will come back to our request to have an inquiry committee that has the right to enforce the access to documents.
The draft report was already a good basis. On Wednesday, 23, September 2015, the deadline for amendments ended. In the following we have compiled the most important changes that we have made and that reflect our approach to a fair tax system in Europe.
1. Name and shame who is responsible
- As Greens, we think those who have no act in the past or have not collaborated to our investigations should be held accountable for it. We have therefore tabled a series of amendments to:
- criticize the European institutions and the Member States for not providing adequate information to fulfil our mandate. Three members states (Bulgaria, Denmark and Slovenia) haven’t even bothered to reply to our questions. The Council of Member States did not provide any useful materials while the European Commission is still denying access to 25 documents and minutes of meetings which could show who acted and most importantly didn’t act to fight tax avoidance. (amendments 92-96)
- criticize the European Commission for failing its role as Guardian of the European Treaty. The Commission did not pursue investigations against member states who did not comply with their obligation to exchange information about tax rulings they granted (amendment 100)
2. Be transparent and tough on tax rulings
The Luxleaks scandal and our investigations made it clear that rulings are abused by companies to pay little taxes. We can no longer tolerate that some member states offer secret deals to some big companies. We are therefore proposing:
- the publication of all tax rulings by Member States with its main elements so that citizens can verify if some companies get a privileged treatment (amendment 112)
- the periodical review of tax rulings by Member States if they are granted for a very long period to ensure the context and the rules to be applied have not changed (amendment 115)
- to ensure tax rulings in member states have a legal basis and not to use informal tax arrangements that perpetuate privileged treatment (amendment 116)
- to create a European Ruling Committee which could bring coherence and consistency for European rules on tax rulings and could also rule as a second instance (amendment 116)
3. Real tax transparency
The Greens have been calling for years to oblige companies to be more transparent about their tax business. So without surprise, we are asking:
- to obtain public country-by-country reporting as soon as possible, which is the official position of the European Parliament since July 2015. We believe tax information cannot be considered as business or commercial secrets and therefore an excuse to refute public disclosure (amendment 133)
- to request the member states to create public registries of beneficial owners, so that we can know who owns shell companies and trusts, vehicles too often used to evade taxes (amendment 137)
- to make EU governments publish how much revenue they lose by giving corporate tax breaks like it is done in the US (amendment 136)
- for more research on the tax gap in Europe in order to have better estimates of how much tax evasion and avoidance cost to European citizens (amendment 132)
4. European whistleblowers’ funds
We would not have had the Luxleaks scandal without the courageous whistleblowers. But whistleblowing is a dangerous activity, possibly leading you to jail in many European countries. This is why we are asking for:
- the set-up of a pan-European whistleblower common fund, financed by the money recovered thanks to their leaks, to ensure them financial assistance for the impact their revelations have on their lives and careers (amendment 138)
5. Fighting tax secrecy and letter box companies
While we hear banking secrecy is over, there is still a lot to do to ensure proper exchange of tax information and a ban on shell companies. We therefore request:
- the withdrawal of the European Commission’s proposal on single-member companies (SUP), which will actually make it easier to set up letter box companies in Europe through online registration (amendment 110)
- to make sure that people creating accounts are identified from the very beginning to ensure efficient automatic information exchange of tax information and to ensure that misreporting of tax information by financial institutions like banks is a criminal offence (amendment 113)
- to get public stastistics about the amount of automatic information exchange between states to check whether information is really exchanged and by whom and to ensure special treatment is granted to developing countries so that they can also receive this information and fight tax evasion (amendment 113)
6. Commission to propose a Common Consolidated Corporate Tax Base (CCCTB)
This file has been on the table for many years now and the European Parliament already expressed its support. While member states are walking at slow pace, we are calling for:
- the Commission to produce a new CCCTB proposal as soon as possible and to refrain from working on interim solutions, which could divert the attention away (amendment 117)
- the Member States to adopt a proposal as soon as possible along the lines of the European Parliament’s position, with a formula apportionment which does not unduly advantage certain member states (amendment 119)
- exploring an alternative framework for a new European-wide tax accounting standard (amendment 120)
7. Strengthening and democratizing of the Code of Conduct on Business Taxation
Our TAXE investigations have clearly demonstrated that the Code of Conduct and the reliance on soft law is not working to provide the tax reforms we need. We therefore want to see:
- an urgent reform of the Code of Conduct mandate and criteria to assess harmful tax measures but conditioned to greater accountability and transparency mechanisms as well (amendment 126)
- a right of initiative for the European Parliament to put on the agenda of the Code of Conduct group any measure it deems harmful so that member states can assess it (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 thanks to preferential tax treatment granted to a company. However, the system has limits and we are calling for:
- Ensuring that every Euro that was due to be paid in case of illegal state aid is effectivelly repaid (amendment 128)
- extending the state aid investigations to all companies involved in the Luxleaks scandals (amendment 130)
- changing the state aid rules so that the money collected in case of illegal state aid can go to the EU budget and that sanctions can be applied against countries and companies breaching European competition law (amendment 131)
9. Tax reforms for a European harmonised corporate tax system
Tax reforms at the European level are subject to the unanimity rule in the Council which makes it very easy for one or two countries to block any progress. Nevertheless, we are in need for urgent reforms such as:
- the revision of the interest & royalties directive to allow for the broadening of withholding taxes and to ensure no incentive for companies to relocate intellectual property to subsidiaries in low-tax countries (amendment 108)
- the revision of the European legislation on controled foreign companies, currently limited by the ECJ interpretation in the Cadbury Schweppes ruling, in order to have an harmonised framework for CFC rules in Europe (amendment 122)
- a legislative proposal to ensure minimum effective taxation in the EU so that we are sure profits are taxed at least once in the European Union (amendment 142)
- anti-abuse clauses into all member states’ tax treaties to tackle treaty-shopping and for member states to denounce their tax treaties when signed with countries that do not respect the EU criteria for minimum standard of good governance (amendment 142)
- creating a European tax treaty model to avoid the multiplication of bilateral tax treaties signed by each member state (amendment 146)
- strengthening checks on economic substance so that member states ensure companies in their territories have a genuine economic activity (amendment 154)
10. Stronger rules to avoid conflicts of interest
Another outcome of the Luxleaks scandal is the role played by accountancy firms and other intermediaries to facilitate tax avoidance. As Greens, we believe stricter rules should apply and we are calling for:
- a legislative proposal to separate audit and consulting activities of accounting firms and other financial or tax services providers (amendment 149)
- the elimination of payment of accounting firms on success which incentivises the creation of risky schemes (amendment 149)
- imposing strict liability measures and sanctions on accounting firms in case of misreporting of country-by-country reporting information in the future (amendment 150)
- revising the EC expert group composition so that these groups are only composed of representatives fully independent of private economic interests and for the Commission to adopt clear rules on conflict of interests to apply to these groups (amendment 151)
- accounting firms to seriously strengthen their internal code of conduct in order not to support / promote tax avoidance schemes (amendment 152)
The Greens have tabled 160 amendments to improve the good draft report and other proposals include for the European Union to go beyond the OECD-led BEPS reform as well as supporting measures to help developing countries in their fight against tax avoidance. Supporting a greater role for the UN in future international tax discussions and the creation of a global tax body (amendment 148) is one of them.
All Green amendments can be found here: PE564 938_23-09-2015_14 58 34- Greens amendments FINAL (3) and here: Amendment by Sven Giegold on behalf of the Greens[1]
You download the draft of the TAXE report in English and German here.