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17th Nov 2018

EU countries are not 'tax havens', parliament says

  • Luxembourg (pictured), the Netherlands, Malta and Ireland cannot be considered 'tax havens', the parliament narrowly voted (Photo: Jimmy Reu)

Malta, the Netherlands, Luxembourg and Ireland cannot be considered as tax havens, the European Parliament agreed on Wednesday (13 December).

A Socialist group amendment listing the four EU member states specifically by name was part of 211 recommendations contained in a report by a special inquiry committee into money laundering, tax avoidance and evasion, the PANA committee.

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The proposal obtained 327 votes against, 327 in favour and 24 abstentions, which means it could not be adopted as there was no majority.

According to the text, foreign direct investment in Malta amounts to "1,474 percent of the size of its economy", while Luxembourg and the Netherlands combined have more inward investment than the US.

Even though the parliament refused to name the four countries as tax havens, "we do name the weird foreign direct investments going into these countries", which makes the adopted text "really strong" anyway, said S&D MEP Jeppe Kofod, one of the co-rapporteurs of the report.

The MEPs' vote is the last stage of 18 months' work by the special committee, that was created in the wake of Panama Papers revelations in June 2015 with the aim of eradicating the practices revealed by the leaked documents.

According to a report from the international NGO Oxfam published on 28 November, Ireland, Luxembourg, the Netherlands and Malta should have been labelled as tax havens by the EU.

In Strasbourg, MEPs backed the recommendations from the PANA committee, approving them by 492 votes to 50 with 136 abstentions.

The parliament backed a common international definition of what constitutes a tax haven, an offshore financial centre, secrecy haven, non-cooperative tax jurisdiction and a high-risk country.

Among the other recommendations approved, there is also the establishment of a permanent committee of inquiry on taxation, based on the model of the US Congress.

Since a lot of follow-up work will be needed, "for the rest of the legislative period the idea is to have a special committee to keep up pressure in driving these recommendations forward", said Kofod.

EU finance commissioner Pierre Moscovici said he wished that the special committee could continue its work since it is not finished yet and "it will never be."

"[The] ability to invent new mechanisms" will always be needed, he noted.

MEPs also called for a change in the EU Council's voting on on tax policy, from the current unanimity - required by EU legislation - to a qualified majority.

This could be reached through a decision by the European Commission to make a tax reform proposal under article 116 of the EU treaty, that would lead to a co-decision between the council and the parliament - with a qualified majority in the council.

Member states "block a lot when it comes to fighting money laundering, and we have proof of that" said Kofod.

In addition, a change in the Code of Conduct group - a group of national experts working on tax issues - was adopted, "to radically redefine" its governance structure and transparency.

"We want to see into the secrecy culture" of member states, Kofod explained.

Prime ministers 'real enemy' of tax justice

"The real enemy of tax justice in Europe has been the prime ministers and presidents of EU governments," said Greens-EFA shadow rapporteur Molly Scott Cato, a British MEP.

Among the recommendations approved, MEPs voted also a new rules to regulate intermediaries, such as lawyers and accountants, who aid aggressive tax planning, plus incentives to refrain from engaging in tax evasion and tax avoidance.

MEPs also approved "regularly updated, standardised, interconnected and publicly-accessible" beneficial ownership registers of companies, foundations, trusts and similar legal arrangements.

"We have imposed a change of paradigm from a culture of secrecy to transparency, from watertight compartments to cooperation between administrations" said Moscovici.

"It has never been done in the past", he added.

The report and recommendations of the special inquiry committee will now be passed on to the council and commission for their consideration.

"We got a result we can only dream of thanks to the work in the committee", concluded Kofod.

The black list

On 5 December EU finance ministers agreed to blacklist 17 countries and territories that do not cooperate in the fight against tax evasion and tax avoidance.

On that list there were no European countries.

To classify 92 analysed non-EU jurisdictions, EU ministers used criteria based on transparency, fair taxation, and international efforts to tax profits where those profits have been made.

Ministers prepared also a second "grey list" of 47 countries, that still have to meet their commitments.

Eventual sanctions will be discussed by ministers for not complying countries.

The creation of a list, even if not perfect, "pushed some countries to take a commitment," Moscovici said at the time.

EU blacklists 17 tax havens, avoids sanctions

Finance ministers pointed out 'non-cooperative' entities and set up a second 'grey' list of more than 40 countries that have promised to improve their tax practices.

EU commission wants 'credible' tax haven blacklist

The EU's finance commissioner Pierre Moscovici told reporters that he wants a credible EU blacklist of tax havens following the latest media tax avoidance revelations of the wealthy elite in the Paradise Papers.

EU states loosen grip on tax havens

Finance ministers removed eight entities from the tax havens blacklist, while ruling out more transparency or sanctions - prompting criticism from tax-campaigning NGOs such as Oxfam.

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