UK tax reform must be condition of EU post-Brexit trade accord, say MEPs

MEPs say that the EU must make reform of the tax system in the UK a “condition” of any post-Brexit trade agreement with Britain.
Photo Credit: Flickr

By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

07 Mar 2019

Members from the Greens/EFA group say the soon-to-be 27-strong bloc should “challenge” the UK’s tax haven activities and that Britain, after it leaves the EU, should match Europe’s standards on what they call “tax transparency.”

Concerns about alleged tax avoidance involving UK-registered companies was the subject of a parliamentary hearing organised by the group.

The conference on Brexit and the future of tax havens heard from a range of experts and addressed the UK’s role in what was called “financial secrecy services.”


Speakers urged the EU to act to prevent the UK from “evolving towards a tax haven on the EU’s doorstep.”

The conference was also told about the tax reforms that have been adopted in recent years at EU level and remaining loopholes in the fight against tax havens.

The event comes amid ongoing concern that some UK crown dependencies and overseas territories provide shelter to the wealth of the world’s financial elite.

The conference was told that the Panama and Paradise Papers investigations confirmed concerns that tax havens, and the rules of financial “secrecy” that underpin them, have enabled the world’s financial elite to conceal their cash from public scrutiny.

“Matching Europe’s standards on tax transparency must be a condition of any future trade deal” Molly Scott Cato MEP

Revelations from the Panama and Paradise papers drew attention to the scale of the untaxed money involved, it was said.

The role of the UK has been signalled out, partly because an estimated half of the 240,000 shell companies used by the Panamanian law firm Mossack Fonseca to allegedly help the wealthy evade tax were incorporated in the British Virgin Islands.

Jersey, Guernsey, the Isle of Man, Bermuda and the Cayman Islands are also on an EU list of uncooperative tax jurisdictions.

Figures from the UK’s HMRC from 2015-16 showed that 6 percent of tax due in Britain, amounting to some £34bn, went uncollected.

Former UK Prime Minister David Cameron put the crackdown on tax avoidance at the top of his agenda for the 2013 G8 summit and promised to pull away the “shroud of secrecy.”

That same year, he and George Osborne, the former UK finance minister, promised a register of beneficial ownership of UK-registered companies, the conference was told.

At the same time, the European Union has produced tougher anti-money-laundering directives, the latest of which is due to come into force later this year.

“Brexit must become an exit from British tax dumping ... It is clear that any future agreement between Britain and the EU must put an end to tax havens in the UK’s overseas territories” Sven Giegold MEP

One of those attending the conference in Parliament was UK Greens MEP Molly Scott Cato, who told this website, ‘With some of the key Brexit players having interests offshore there is a real risk to the European Union if they are left in control of British finance policy after Brexit.”

“The Greens in Europe will insist that the global tax avoidance industry centred in the City cannot be allowed into the EU through the backdrop.”

The deputy, who represents the South West England and Gibraltar, added, “Matching Europe’s standards on tax transparency must be a condition of any future trade deal.”

Another participant, German Greens MEP Sven Giegold said, “The OECD anti-tax avoidance agreement on ‘Base erosion and profit shifting’ (BEPs) is not working. Europe will need to go further itself and insist that partner countries go further. This has to become a major interest of the EU in the future trade relationship with the UK and its offshore territories.”

He added, “Brexit must become an exit from British tax dumping. The rejection of the Brexit agreement by the British House of Commons has made the modalities of the Brexit even more incalculable.”

“However, it is clear that any future agreement between Britain and the EU must put an end to tax havens in the UK’s overseas territories. The practice of zero tax on company profits in essentially all British overseas territories must no longer be exploited for international tax dodging.”

“In a future outside the EU, the UK must continue to have an effective state aid framework since this instrument can also be used to fight aggressive tax dodging.”

“Special tax deals for non-UK residents with income abroad (“non-dom”) are unfair tax competition and must be abolished. The EU must challenge the UK’s tax haven activities and make a reform of the tax system a condition of any future trade agreement with the UK,” he added.

Separately, concern about tax havens has also been aired recently by the Brussels-based European Economic and Social Committee (EESC), the body that represents civil society.

In an opinion on the European Commission's 2019 economic policy recommendations for the euro area, the Committee called for tax systems to be “fairer and more efficient.”

The EESC opinion, adopted on 24 January, said, “As regards action against tax fraud and aggressive tax planning, which should also help improve public finances, the EESC agrees with the Commission's call for action.”

“However, the EESC believes that European Union rules must be applied without further delay and that other more effective measures should also be taken, including instruments to end the illicit activities of tax havens.”

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