The EU Parliament blasts the Council about the tax dealings of the wealthy

European Parliament. Joint meeting of the Committee on Economic and Monetary Affairs (ECON) and the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE). Exchange of views between the TAXE Committee President Alain Lamassoure (on the left) with Commission President Jean- Claude Juncker and Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici (on the right). (European Parliament Audiovisual Services. Event Date: 17/09/2015. Copyright: © European Union 2015).

European Parliament. Joint meeting of the Committee on Economic and Monetary Affairs (ECON) and the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE). Exchange of views between the TAXE Committee President Alain Lamassoure (on the left) with Commission President Jean- Claude Juncker and Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici (on the right). (European Parliament Audiovisual Services. Event Date: 17/09/2015. Copyright: © European Union 2015).

The European Parliament once more honored its role as the authentic exponent of the will of the European citizens. Last Tuesday it dismissed as a “missed opportunity” the EU Council’s decision to water down the mandatory exchange of the ‘tax rulings’ between member states. A ‘tax ruling’ is a special taxation arrangement accorded to a company or an individual by the tax authorities of a country. It’s accorded mainly to foreign taxpayers providing an actual tax haven bargain and an assurance about how certain aspects of taxation will be applied in each specific case.

The ‘tax rulings’ made headlines in November 2014 when the world learned that the authorities of Luxembourg had accorded special tax ‘treatment’ to hundreds of wealthy individuals and multinationals in order to park their money in the Grand Duchy. It also became known that more EU and other European countries offer similar ‘services’ facilitating wealthy individuals and companies to evade taxation.

It all started in Luxembourg

After the Luxembourg scandal broke out, Jean- Claude Juncker, the then newly elected President of the EU Commission felt obliged to do something in order to appease the anger of the public opinion. He himself must have been behind these Luxembourgish tax agreements. He had served a Prime Minister and Minister of Finance of the Grand Duchy for many years.

All that said, the Commission, under his instructions, prepared a proposal to make it mandatory for EU member states to exchange information on their tax rulings. However, this proposal was met with disappointment by the European Parliament for its ineffectiveness. Even worse, the powerful ECOFIN council, regrouping the 28 EU ministers of Finance, further watered it down obliging Markus Ferber (EPP, DE), the Parliament’s rapporteur, to voice his dismay at the “directive’s limited scope and late entry into force”. His report was approved by the Parliament’s Economic and Monetary Affairs Committee last Tuesday by 49 votes in favor, 0 against and 6 abstentions. Tax experts say that the more transparent and communicated those tax dealings are, the less will be used for tax evasion. Let’s see that in detail.

The member states are reluctant

When the draft text of the new directive on the ‘tax rulings’, as it was formulated by the 28 member states at the ECOFIN council became known, the European Sting commented that, “The EU (is about) to fight cross-border tax evasion with a toothless directive”. On 8 October the Sting’s first story concluded that the “text of this new EU directive aimed at improving transparency in assurances given to companies about how their taxes are calculated cannot cover the many possibilities the modern aggressive or active ‘tax planning’ offers”.

What the Parliament wants

In any case, the European Parliament has proposed very concrete amendments to the text that the ECOFIN council ministers agreed. The MEPs want the following changes:

*the directive should apply to all tax rulings, not just the cross border ones “given that purely national transactions can also have cross-border effects. The Council made the directive’s scope cross-border only”.

* The Parliament insists that the European Commission should be able to use the information exchanged between member states on the tax rulings for purposes other than just overseeing that the member states conform to the directive.

* The Parliament wants the automatic exchange of information to start as soon as possible, whereas the Commission proposes that it should start on 1 January 2016 and the Council agreed on 1 January 2017.

*The Commission says that the mandatory exchange mechanism should apply to tax rulings issued in the ten years before it enters into force, whereas MEPs say it should apply to all rulings that are still valid on the day the directive enters into force. From its side, the Council insists that the directive should apply only to rulings, amendments or renewals of rulings after 31 December 2016.

* The MEPs insist that the information should be communicated “promptly after the ruling is issued” rather than “within one month following the end of the quarter during which the ruling was issued” as the Commission proposes. The Council deal says that the information should be provided “within three months following the end of the half of the calendar year during which the ruling was issued”. This means that if a ruling is issued in January, the mandatory exchange of information can take place until 30 September.

Different visions

Obviously, there are key differences in the three texts. Initially, there was the one drafted by the Commission. Then the ECOFIN council agreed upon a drastically modified one, while the Parliament wants to change them both. It goes without saying that the parliamentarians are the strictest of them all concerning the effectiveness of the directive against tax evasion. What is at stake here relates to the ability of the member states to accord special tax treatments to wealthy individuals and probably help some companies to evade taxation.

Understandably those ‘rulings’ realized in one EU member state may damage the tax collection ability also of another country. The question is why so far the 28 governments tolerated such an abominable arrangement? And the equally obvious answer is that every country wants to safeguard its right to use tax allowances in order to attract money and investments. Unfortunately, those dealings have very rarely led to investments in the real economy and the creation of jobs. In most cases they have just facilitated the ‘parking services’ for capital a country chooses to offer.

Now the Parliament and the Council have to begin consultations in order to achieve a compromise on the final text. The directive is expected to be adopted at a forthcoming Council meeting but the European Parliament has to officially give its opinion first.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

Who will win the AI race? If countries work together, then the answer could be all of us

Europe on the Move: Commission completes its agenda for safe, clean and connected mobility

90% of fish stocks are used up – fisheries subsidies must stop

Everyone has ‘a moral imperative’ to uphold the rights of persons with disabilities, says UN chief

EU leads the torn away South Sudan to a new bloody civil war

‘Habitual residence’ rules deprive EU workers from social benefits

EU Parliament and Council: Close to agreement on the bank resolution mechanism

Brexit negotiations: back to square one, tougher words, no good faith

EU unfolds strategy on the Egypt question

“If the job market doesn’t exist, then even the most brilliant Youth Guarantee cannot ensure a job to these young people”, European Youth Forum Secretary General Giuseppe Porcaro on another Sting Exclusive

The importance of pre-departure training for a better understanding of global health issues

Beware the fragility of the global economy

New skills agenda for Europe needs real investment

More solidarity and interaction between generations needed to challenge age stereotypes and ingrained ageism

“We have to do a better job of creating alternatives to violent extremism”, US Secretary of State John Kerry from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

Mood changes in Europe in favour of growth and jobs

8000 young people in the EP in Strasbourg: “a breath of fresh air for EU democracy”

EU Commission draws the wrong conclusions

The UK to split if May’s hard or no-deal Brexit is pursued

Alarming level of reprisals against activists, human rights defenders, and victims – new UN report

Can Kiev make face to mounting economic problems and social unrest?

A Sting Exclusive: “Climate change and youth inaction: oblivion or nonchalance?”, AIESEC wonders from Brussels

Act now to end violence, Zeid urges Nicaraguan authorities

Why EU’s working and unemployed millions remain uncertain or even desperate about their future

The financial sector cripples Eurozone growth prospects

Why are the financial markets shivering again?

Switzerland to introduce strict restrictions on executive pay

Bankruptcy or referendum: which one is going to be first?

Nuclear non-proliferation treaty an ‘essential pillar’ of international peace, says UN chief

These coastal countries are sinking the fastest

“Is Europe innovative? Oh, Yes we are very innovative!”, Director General of the European Commission Mr Robert-Jan Smits on another Sting Exclusive

Migration Crisis: how to open the borders and make way for the uprooted

On the detention of children in the United States of America

Is Eurozone heading for disinflation?

Copyright: European Union , 2017; Source: EC - Audiovisual Service; Photo: Frank Molter

EU hits deadlock on the future of glyphosate a month before deadline

Eurozone: Sovereign debt decreases for the first time since 2007

COP21 Breaking News_03 December: Argentina Accepts KP Amendment

A reflection of health inequity in recent epidemics

Intel @ European Business Summit 2014: Better decisions now, the new business dashboard 

MEPs to vote on overhaul of road transport rules in July

Crimea, a wicked game of political chess and a ‘big’ coincidence

So, what is your favourite Sustainable Development Goal?

Q&A on the 19th China-EU Summit to be held on 01-02 June 2017 in Brussels

Hollande decisively rebuffs Merkel’s and Rehn’s austerity policies

EU and Japan agree on free-trade deal and fill the post-TPP void

Why medicine is relevant to the battle against climate change

Climate change update: will the UN member states regain momentum despite the little progress at COP23?

Global health challenges require global medical students

WEF Davos 2016 LIVE: “If we do not do properly the Paris agreement, then all 16 remaining goals will be undermined”, UN Secretary General Ban Ki-moon cautions from Davos

Youth employment crisis easing but far from over

“A divided Europe is not in China’s interests”, Ambassador Zhang of the Chinese Mission to EU welcomes Brussels

The Changing Scope of International Economic Relations – Chinese Leadership in the 21st Century

ZTE @ MWC14: ZTE excels in all areas at this year’s Mobile World Congress

The gender gap of medicine in 2018

The IMF overstates the risks for Eurozone and downgrades the threats for the US economy

Conflicting statistics and bad banks haunt the Eurozone

Utmost hypocrisy emitted by EU’s energy regulation

How secure is blockchain?

Juncker Investment Plan for Europe welcomed by European Youth Forum

Eurasian Union begins: the giant modelled on the EU is Moscow’s biggest challenge

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s