Sunday

16th Dec 2018

EU to become world's worst place for tax cheats

  • Semeta: 'Luxembourg and Austria have to stick to the instructions of the heads of state' (Photo: Alan Cleaver)

The European Commission has said the EU is building "the most comprehensive information exchange system in the world" to combat tax dodging.

Algirdas Semeta - the Lithuanian commissioner behind a series of new tax laws - made the claim in Brussels on Wednesday (12 June).

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

He told press his regime goes further than recent US legislation, the Fatca law, which says foreign banks can lose their US licence if they do not share information on US account holders.

"The EU system will become even broader than the US system," he noted.

Semeta spoke after tabling a new bill, an amended version of the EU's existing Administrative Co-operation Directive (ACD).

The old ACD forces EU countries to share information on non-residents' employment income, director's fees, life insurance products, pensions and real estate assets.

But it contains a loophole, saying data can be withheld if it is not easily "available."

The updated ACD says the availability clause should be reviewed in 2017.

It also calls for information sharing on "dividends, capital gains, other financial income and [on] account balances" from 2015 whether the data is easily available or not.

Semeta is at the same time herding EU countries to adopt his amended Savings Tax Directive.

Under the old savings law, EU countries tell each other how much interest non-residents earn on bank deposits.

But they do not share data on interest arising from investment funds, pensions, innovative financial instruments, trusts or foundations.

Meanwhile, two EU banking centres - Austria and Luxembourg - are exempt.

Semeta said the updated savings law closes the loopholes and will be adopted by the end of the year in line with a promise by EU leaders in May.

"Luxembourg and Austria have to stick to the instructions of the heads of state," he noted.

He added there is "new momentum" in EU capitals to adopt a third proposal, the Common Consolidated Corporate Tax Base (CCCTB), as well.

Corporate tax avoidance - creating structures which are legal, but which are designed to avoid paying levies in high-tax countries - costs EU treasuries €150 billion a year.

Semeta said "if we implement the CCCTB at EU level, then the problem of transfer pricing, where companies shift profits from one country to another, would simply disappear from the Union."

Independent experts welcome the updated savings tax bill.

Mark Morris, a tax specialist at the Baker & McKenzie law firm, said it is unique because it "pierces" the secrecy of "untaxed entities and legal arrangements."

Entities such as trusts and foundations hide the real owner of the money to avoid tax.

But Semeta's law says if the owner cannot be identified, then the tax disclosure burden falls on whoever is entitled to income from the entity, whoever contributed money to set it up, or whoever manages it on the owner's behalf.

It also obliges entities to declare money held in exotic jurisdictions, such as the British Virgin Islands (BVI).

"No previous tax law in the world since the time of the Crusaders [Medieval times] has been able to pierce these structures because the beneficial owner is always hidden," Morris noted.

John Christensen - the British chief of the Tax Justice Network (TJN), an NGO - called the amended savings law "a major step forward in the battle against tax evasion."

He noted the EU information exchange model is "multilateral" in nature, but America's Fatca is "unilateral" and has less scope for adoption by the G8 or G20 clubs of leading nations.

"We would like to see the EU approach become the basis for a global standard," he said.

Baker & McKenzie's Morris and another TJN analyst, Markus Meinzer, voiced reservations on the new ACD, however.

Morris said it will be "toothless" if it does not contain the same provisions on trusts and foundations as the savings tax bill.

Meinzer said it leaves several questions unanswered: "Who would be responsible for collecting all the information? How do you treat dividends paid by a trust, for instance? How do you treat capital gains paid by a trust to a company based in a place like the BVI?"

He added: "If these kinds of issues aren't addressed, then this proposal is doomed to be easily circumvented."

Ireland on the defensive in Apple tax row

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.

Opinion

Tax wars: EU playing catch-up with US

The EU has promised to create the world's leading tax transparency regime. But it is playing catch-up with Fatca, the equivalent US legislation.

Greece to seize tax dodgers' assets

Greek tax authorities will seize the assets of businesses and individuals who do not settle their tax debts, the government has said.

News in Brief

  1. EU leaders endorse creation of eurozone budget
  2. Selmayr has no comment on MEPs' call to resign
  3. May had 'robust' discussion with Juncker
  4. UK to continue talks on EU 'assurances'
  5. EU invests €20m in AI software for self-driving cars
  6. Belgian PM 'not optimistic', urges 'no deal' Brexit preparedness
  7. Romanian president expects no Brexit summit in January
  8. Swedish MPs reject Lofven to lead new government

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. No more Brexit talks, despite May's pleas
  2. EU leaders stuck on asylum reform
  3. Orban and other PMs spread fake news, says Juncker
  4. Fishing quota and no-deal Brexit preparation This WEEK
  5. Kosovo has right to own army, Germany and US say
  6. EU needs election-meddling stress tests
  7. Russian and US obstruction was 'insult' to climate scientists
  8. EU-27 unimpressed by May, offer little on Brexit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs
  2. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  3. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  4. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  5. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  6. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  7. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  8. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  9. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  10. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  11. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  12. Mission of China to the EUChina: Work Together for a Better Globalisation

Join EUobserver

Support quality EU news

Join us