Panama Papers highlight problem that is immoral, unethical and unacceptable, say MEPs

EU plans to introduce "blacklist" of tax havens could prove an invaluable in the fight against tax evasion and avoidance.

By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

26 Apr 2016

Speaking at a conference on the issue in the European Parliament on Tuesday, Stephen Quest, director general of the taxation and customs directorate at the European Commission, said the executive hoped to introduce the proposal within months.

He said, "It is hoped this will prove to be a very effective stick to use against non-cooperative tax jurisdictions and we are working on having this in place within the next six months."

Quest, who only took up his new post in January, said that "fair taxation" was "at the heart" of the Juncker Commission which was "working hard" to honour its commitment to improve tax systems in Europe.


He said, "This, as we have seen recently, is a fast moving agenda but we are trying to lead by example and are working hard to get our own house in order. This is not finished and the Commission will be coming forward with new proposals."

Quest praised the work of NGOs who, he said, were "driving" the fight for "tax justice". He said there was also a "strong focus" on helping developing countries in the global fight against tax evasion.

Several tax experts and activists from Africa and Latin America were in Brussels to meet relevant officials at the European Commission and MEPs and to attend the event, entitled "Why EU tax policy matters for developing countries."

Their visit follows a tour of Europe during which they have been visiting national policymakers, giving talks and taking part in events to highlight the effects of Europe's tax policies on developing and middle-income countries.

The debate comes on the day the trial starts of one of the two journalists who exposed the so-called 'LuxLeaks' affair.

Opening the parliamentary event, Socialist MEP Peter Simon said the meeting was particularly relevant at this time of tax scandals such as the recent Panama Papers revelations and ongoing legislation in the EU.

The German deputy, the Socialist group's co-coordinator on the TAXE2 special committee set up to look into the LuxLeaks scandal as well as the fall-out from the Panama Papers, told the hearing that tax evasion had a "particularly damaging" impact on the economies of developing countries which lost a big chunk of tax revenues to tax dodgers.

Describing such practices as "simply unacceptable", Simon said the Panama Papers had shown that tax evasion and avoidance was "far more widespread" than was thought. The revelations, he said, had given "renewed impetus" to ongoing efforts to address the issue.

"It is paramount though that we develop a legal framework to deal with this," he argued.

Further comment came from Danish deputy Jeppe Kofod, the Socialist co-rapporteur of the TAXE2 report, who said MEPs had an "important role" to play in combating "aggressive tax avoidance" as well as pressing the Commission and EU member states to come forward with legislation.

"Levels of tax evasion are unacceptable but we need a coherent policy at EU level to combat this."

Kofod believes this should include new rules and better transparency together with a blacklist of those countries that act as tax havens. Such countries, he said, should face the prospect of "severe" penalties and sanctions.

Multinationals such as Google should, he insisted, "be made to pay tax on the profits they earn in Europe."

"Most importantly, we need better transparency because, as the Panama Papers have shown, the rich and famous will always try to find new ways to avoid paying tax. This criminality must stop."

His remarks were echoed by party colleague Hugues Bayet, a French MEP and Socialist rapporteur on the anti-tax avoidance directive, who told the meeting that the Panama leaks showed that "it is time to act against aggressive tax evasion."

Bayet said, "Like most people I do not particularly like having to pay tax but taxation is necessary to pay for a good health and education system, uphold our security and tackle poverty."

He said the report he is drafting will demand that companies pay tax in those countries "where they make their profits" and also call for harmonised tax rates for multinationals.

"Harmonisation will not be easy because there are many who oppose it, partly out of a misplaced fear that multinationals will leave for other countries where taxes are less. But harmonisation works in the United States so why not in Europe?"

The hearing also heard from several people in African countries which, it was said, have a particular problem in generating tax revenues to help fund basic public services.

Geoffrey Chongo, has spent more than 10 years as a tax inspector in Zambia and is now a tax justice advocate, said that tax evasion was the main reason for this.

Chongo said that in Zambia the tax collection ratio per head of population was just 17 per cent and that the country loses some $3bn each year, or around 10 per cent of its GDP, through tax avoidance.

This was despite the fact that the country was rich in national resources and boasted an average GDP growth of six per cent.

He said, "Tax avoidance in Zambia is a big problem, not least in the mining sector which is mostly run by multinationals.

"Over 60 per cent of the population are in poverty but the country simply cannot collect sufficient tax revenue to address its needs. We need the whole international community to help address this issue."

Further contribution came from Marcelo Oliveira, who has been a tax auditor at the Brazilian revenue service for 15 years. He said that tax dodging undermined efforts by the West to support developing countries such as those in Africa and Latin America.

The Panama Papers had, he noted, exposed shortcoming in existing tax systems and their consequences.

Elly Schlein, an Italian MEP and rapporteur on the tax avoidance and tax evasion dossiers, agreed with other speakers, saying that developing countries currently lose a significant amount of their GDP in tax due to evasion.

"This means they struggle to find even the most basic of public services such as education. The Panama Papers highlight a problem that is immoral, unethical and unacceptable and that is why we need to scale up our actions to address tax evasion."

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