Tuesday

9th Aug 2022

Brussels shames EU countries on tax fraud

  • Cyprus' shadow economy is worth 26 percent of its GDP (Photo: bundesbank.de)

A fresh report on tax fraud by the European Commission makes several EU countries look like villains in the €1-trillion-a-year racket.

Taxation commissioner Algirdas Semeta put forward the findings in Brussels on Wednesday (27 June) together with ideas on how to clamp down on the practice in future.

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He noted that Austria is vetoing EU-level talks with Andorra, Monaco, San Marino and Switzerland on a new agreement to reveal the true owners of front companies and to make the tax havens hand over more data on EU citizens' deposits.

Cyprus, the incoming EU presidency, appeared on his list of countries which have been instructed by Brussels to implement existing laws properly.

The island, an offshore banking centre, also emerged as hosting one of the EU's most pervasive "shadow economies," worth 26 percent of Cypriot GDP (Bulgaria was the worst on over 30%).

Greece, the EU's biggest bailoutee so far, was said to host a black market worth 24 percent of its GDP.

The country's new shipping minister resigned on Tuesday when it came out he owns an offshore firm in violation of Greek law on public officials.

Semeta also named Luxembourg - the home country of Jean-Claude Juncker, a key architect of EU financial reforms in his role as President of the Eurogroup - as vetoing the third party tax agreement along with Austria.

The commissioner said he hoped EU leaders at the summit on Thursday would put "strong peer pressure" on the Austrian and Luxembourgish leaders to back down.

His report noted that tax fraud costs the EU €1 trillion a year - more than the five bail-outs so far put together.

It added that the related "shadow economy" in the EU is worth €2 trillion a year.

In another window on the murky world, it said 35 percent of EU countries "non-bank deposits" are held in opaque offshore firms.

It noted that the Cayman Islands and Swizterland currently host 20 percent of such deposits worldwide, worth $1.4 trillion.

It also said the Cayman Islands, a British overseas territory, is among the world's fastest growing non-bank deposit centres. Numbers of deposits in Switzerland have flattened out, while numbers in Jersey, another quasi-British location, are falling.

Semeta's ideas for future actions include: introducing a pan-EU tax-identification number for every cross-border taxpayer; minimum criminal penalties for tax cheats; a new "quick-reaction mechanism" on VAT fraud; and more anti-tax-fraud powers for the EU's joint police body, Europol.

He also plans to publish new "action plans" on how to deal with tax havens and companies which do "aggressive" tax planning.

"Why should teachers, nurses and shopkeepers carry a heavier tax burden just because large companies can employ clever tax planners to avoid paying their share?," he said in his speech.

Details of the new initiatives are due by the end of the year.

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