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3rd Dec 2022

EU states obstructing tax transparency

  • Most of the jurisdictions mentioned in the latest leak were British overseas territories (Photo: Merlijn Hoek)

EU-level efforts to crack down on tax avoidance appear to have generated few results following the latest leaks by a consortium of international journalists.

A year-long investigation into over 13 million documents from two offshore service providers, published on Sunday (5 November) revealed loopholes that member states like Germany refuse to close in EU bills currently under talks.

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"EU governments such as Germany have been standing against the rising tide of financial transparency," Carl Dolan, who heads Transparency International's EU office, said in a statement.

Dolan says EU capitals have yet to sign up to two European Commission proposals aimed at shedding light on money laundering, tax evasion and avoidance.

The latest cache of documents, also known as the Paradise Papers, was sifted through by hundreds of journalists and exposed links between offshore tax havens and more than 120 politicians and world leaders.

Doing business in offshore jurisdictions, many of which are British oversea territories, is not illegal. But the latest leak revealed how the Bermuda-based global offshore law firm Appleby bends or ignores the rules for clients suspected of corruption.

It follows a separate leak in April last year called Panama Papers that exposed the details of some 200,000 offshore entities, many of them tied to drug crime and criminal gangs.

A few months later, the EU commission tabled reforms of the European anti-money laundering directive (AMLD).

But EU states balked at plans to set up public registries to identify the real owners behind shell firms, trusts and similar legal structures.

NGOs are pressing for public access to so-called beneficial ownership information for both companies and trusts.

Such information reveals who is behind schemes often used to hide cash from national tax coffers.

"The EU has so far failed to respond to the Panama Papers," said Rachel Owens from the NGO, EU Global Witness office in Brussels.

The next round of talks between the EU institutions on the AMLD is set to place next week.

The EU parliament wants companies and trusts to reveal the identities of beneficial owners. The Council, representing member states, argues it would violate people's privacy.

"They [member states] have spent the last year blocking proposed changes that would tackle these problems: by failing to act they are complicit in this corrupt system," said Owens, in a statement.

Similar comments were made by Eurodad, a Brussels-based network of civil societies spanning over a dozen European countries.

It said that so long as loopholes persisted, the global elite and corporate wealth would continue to cheat the public out of taxes.

"Ministers have given many speeches about wanting to fix the system, but they haven't walked the talk," said Eurodad's Tove Maria Ryding.

Tax dodging is said to be costing the world's most impoverished countries some $100 billion every year.

EU states are also in talks to create an EU black list of tax havens. It is not yet clear, given the secrecy of the talks, which countries will be on the final list.

MEPs demand stronger rules against tax evasion

MEPs in the civil liberties and economic committees voted in favour of toughening up EU wide rules on tax evasion, as they gear up for institutional talks in March on the EU's anti-money laundering directive.

Investigation

Illicit Russian billions pose threat to EU democracy

It cost €11 million to help Le Pen campaign in elections, but it cost the Russian mafia less than €100,000 to hire a former UK attorney general to lobby against EU sanctions.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

Malta denies secrecy in 'Paradise Papers' leak

Malta's finance minister Edward Scicluna told reporters that the Maltese-based entities named in the latest tax avoidance leaks are all listed on a public register. "There was no secrecy whatsoever," he said.

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