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19th Jan 2019

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EU commissioner: Offshore Leaks transformed tax politics

  • Semeta: 'Offshore Leaks could be identified as the most significant trigger' (Photo: ec.europa.eu)

The EU commissioner in charge of cracking down on tax cheats has urged investigative journalists to keep digging for dirt.

When EUobserver spoke to Algirdas Semeta in March 2012, the Lithuanian economist's ideas on EU tax law faced a wall of apathy from banking centres such as Austria, Luxembourg and the UK.

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But just a year or so later, EU countries have given him the go-ahead for a cascade of new measures designed to claw back €1 trillion a year in lost tax revenue.

Semeta told EUobserver in an interview this week the change in EU politics is due to a "perfect storm" of events.

He mentioned the intensification of the economic crisis, the US push to end bank secrecy under its "Fatca" bill and the French scandal of Jerome Cahuzac - an ex-minister who stashed his fortune in secret accounts - as important factors.

But he said the main "trigger" was "Offshore Leaks."

"Citizens, people in member states have started paying much more attention to how their countries can collect taxes which are due under national law … If you ask me, I personally think Offshore Leaks could be identified as the most significant trigger behind these developments," he noted.

"It has created visibility of the issue and it has triggered political recognition of the amplitude of the problem. We're not talking about €100 billion or €200 billion here, but about €1 trillion," he added.

Offshore Leaks was born last year when Australian reporter Gerard Ryle obtained a hard drive containing 260 gigabytes of information on secret accounts around the world.

The cache is 160 times bigger than the US diplomatic cables published by WikiLeaks in 2010.

Over the past year, the Washington-based International Consortium of Investigative Journalists (ICIJ) has co-ordinated work on the data by more than 100 reporters from top media such as the Washington Post, the BBC, The Guardian, Le Monde and El Confidencial.

It has generated dozens of scoops.

One article prompted the resignation of Herbert Stepic - the CEO of Austria's Raiffeisen Bank International - after revelations he owned secret firms in the Caribbean.

Another one showed how Commonwealth Trust Limited - a company registered in the British Virgin Islands (BVI), a UK protectorate - set up shell firms to launder Russian mafia money.

ICIJ member Duncan Campbell said at a seminar in Brussels in May the stories out so far are just "the tip of the iceberg."

The ICIJ is now turning its attention to people resident in Belgium and Luxembourg - the homes of the EU institutions and their officials.

For Semeta, Offshore Leaks is different to WikiLeaks because it attacks criminal activity instead of diplomatic confidentiality.

He told EUobserver that tax transparency is more important than data privacy.

"What these investigative journalists are doing is exposing people who are breaking the law in their own countries," he said.

Looking back to a meeting of EU finance ministers on 14 May and the EU summit on 22 May, he said EU countries have crossed the rubicon on bank secrecy.

They instructed Semeta to launch talks with European tax havens Andorra, Liechtenstein, Monaco, San Marino and Switzerland on "automatic exchange" of bank data.

They pledged to close loopholes in the Union's "savings tax directive" by the end of this year.

They gave the green light to launch a new EU law against VAT fraud in June.

They instructed the commission to press ahead with on new rules against corporate tax avoidance - the perfectly legal, but controversial, practice of big companies such as Apple, Google or Starbucks, which wiggle out of paying tax in countries where they generate much of their income.

They also urged Semeta to work with the OECD, a Paris-based economic club, and with finance ministers from the G20 group of leading world economies to export the EU's measures beyond its borders.

The commissioner noted that Austria and Luxembourg have bound themselves to fall in line despite previous reluctance.

"There is a political agreement at the highest level that the amended savings tax directive has to be adopted by the end of the year," he said.

"There is common political will to adopt the directive as it stands," he added.

He noted the UK still has homework on overseas protectorates, however.

Britain shares bank information with its semi-independent territories in the Caribbean and beyond. But Semeta said it must make sure the amended EU tax directive will also apply to places like the BVI.

"The objective is to close loopholes in exchange of information also with these islands," he noted.

"We need to create a situation so that automatic exchange of information can take place between any EU member state and the UK protectorates," he added.

Criminal tax evasion aside, Semeta questioned the ethics of corporate tax avoidance.

Google is known for its motto: "Don't be evil."

But Semeta said: "I always link this issue [tax avoidance] with corporate social responsibility - a company cannot be treated as being socially responsible if it creates all these structures to avoid paying taxes."

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Ireland has come under fire for its low-tax regime amid US revelations that Apple and other large corporations are using EU-based subsidiaries to avoid paying taxes.

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