The EU checks the multinationals for tax fraud but Britain may sail out of the EU via Panama

Lord Hill, the EU's British financial services commissioner presenting the new tax transparency rules for multinationals. Date: 12/04/2016. Location: Strasbourg – EP. © European Union , 2016 / Photo: Jean-François Badias.

Lord Hill, the EU’s British financial services commissioner presenting the new tax transparency rules for multinationals. Date: 12/04/2016. Location: Strasbourg – EP. © European Union , 2016 / Photo: Jean-François Badias.

The Panama Papers did not offer to the world community much more news than most people already knew. For example, the ‘revelation’ that a close friend to the Russian President Vladimir Putin was enormously rich without having labored for his wealth, is no news at all.

Every Russian or informed citizen in the entire world was sure that Putin has nurtured a business oligarchy of his own in the long years of his almost absolute rule. Today, the Russian economic oligarchy boldly usurps large parts of the country’s GDP, spinning it around the world as it pleases. The same is true for a number of Arab and African political leaders. So the Panama Papers didn’t make us wiser, it reminded us though what our leaders really care about.

What about Britain?

Indirectly, the Panama Papers also reminded us that Britain itself is a tax haven and not just its many overseas territories and crown dependencies. Those latter cases are notorious as a refuge for tax fraudsters and criminals from time immemorial.

It’s a fact that the UK government permits to non-domiciled super-rich of any kind to live and do business, without paying income or capital gains tax on overseas earnings. PM David Cameron’s late father was legally able to create an offshore company, parking his wealth there and actually transferring the product of such gains to his son.

Cameron himself may have published his own seemingly faultless tax returns of the last six years, but what about his wealthy stockbroker late father’s tax records and the £200,000 gift from his mother? Were his parent’s tax affairs equally spotless? In any case, this is a matter of the British tax authorities and more so of the country’s political system to clarify.

Angered Brits?

The problem is that Britain may sail this June out of the EU via Panama. In referendums, voters cast their ballots thinking about a lot more than the question asked. They tend to express their disappointment or anger with the general social, economic and political situation. Greece in July 2015 and Holland last week proved that.

Coming back to Cameron’s apology about his wealth, his move triggered a wave of criticism from leading conservative politicians and other quarters. Senior Tories told Cameron that he bent to ‘populism’ by publishing his tax returns. Obviously, Britain’s ruling classes do not think they are accountable to lay people, about the way they have acquired their wealth. The Financial Times leading business columnist went as far as to defend the ‘right’ of retired politicians to gain from their involvement in politics.

The conclusion that the average man in the street can come upon is then, that Britain itself is not only a tax haven, but its ruling classes consider it as their prerogative. Many political analysts say that a number of eurosceptic conservatives and some business leaders want their country out of the EU, in order to be able to dent even the basic workers’ rights that Brussels has imposed on all EU countries.

Brussels felt the heat

As it turns out, the publications of those 11.5 million pages of internal documents from the Panamanian law firm Mossack – Fonseca, which specializes in offshore business, had one more important but indirect effect. It pressed the European Commission to hastily make the big multinational firms come clean on their tax obligations. For the first time in history Brussels’ intention is now to make sure that business profits are taxed in the country where they are generated. For years there was much talk about that, but nothing concrete came forward.

Finally, last Tuesday afternoon, Lord Hill, the EU‘s British financial services commissioner, said that there is strong support in the College of Commissioners, for a proposal about compelling all large multi-nationals operating in Europe to publish information on the tax they pay, country-by-country. He added that “While our proposal is not of course focused principally on the response to the Panama Papers, there is an important connection between our continuing work on tax transparency and tax havens that we are building into the proposal.”

EU’s tax havens

Lord Hill forgot to say though that, in reality, there are tax havens even within the European Union. The fact is that a number of EU member states like Ireland, Cyprus, Bulgaria and Luxembourg (0% tax on dividends and capital gains in the Grand Duchy) and some more impose very low income tax on company profits.

Differences are quite impressive between the 12.5% tax on profits in Ireland and Cyprus and 10% in Bulgaria compared to around 35% to 40% in Germany, France, Austria and elsewhere in mainland Europe. There is a strong incentive then for multinationals to choose in which country to be taxed. The same is true for the giant American multinationals which go as far as to spend billions in order to acquire companies based in Ireland and transfer their headquarters in Dublin.

The obligations of multinationals

In short, the latest Commission proposal contains the following main lines:
*It would affect the larger multinationals – those with annual global revenues above €750 million
*Those companies will publish information in seven key areas:
-The nature of their activities;
-How many staff they have;
-Their net turnover;
-Their profit before tax;
-The amount of tax due based on yearly profits;
-The amount of tax they actually paid in that same year; and
-Their accumulated earnings.
The proposal will impinge on about 6.500 businesses and 90% of multinational revenues in the EU.

Reporting on outside business

Understandably, “this kind of information is already collated and provided to national tax administrations”. However, now the companies in question will also be obliged to report on the total tax they pay outside the EU.

In relation to this last obligation, Lord Hill added that “we’ve also decided that if they pay taxes outside the EU in countries or jurisdictions that don’t abide by international good governance standards on tax, multinationals would have to publish the same detailed information as for a European country. So if large multinationals active in Europe are paying tax in somewhere like Panama – to take one example – they’d need to make that public”.

Hopefully, if all this information is gathered, proven to be correct and is freely shared by all EU tax administrations and the Brussels authorities, multinationals may be forced to pay taxes where they make their profits. Of course, this will not make our brave new world a just and equitable place, but it’s a step in this direction. Consequently, the Panama Papers leak indirectly offered us all something that may prove of great value, that ‘nothing remains secret under the sun’.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

COVID-19 pandemic: The war inside our heads

Asking for more restriction on intra EU immigration: Unproductive and politically dangerous

Coronavirus: a Disease that spreads as fastly as its fake news

Can the Tokyo Olympics help bring the world together?

European research priorities for 2021-2027 agreed with member states

The Eurogroup protects Germany and blames others

Myanmar military target civilians in deadly helicopter attack, UN rights office issues war crimes warning

The price of centralization of human resources for health

Children of ISIL terrorists likely held in ‘secret detention facilities’, UN human rights office warns

EU: Divided they stand on immigration and Trump hurricanes

COVID-19 and the pursuit of financial inclusion in Pakistan

Coronavirus: Commission launches data sharing platform for researchers

Infringement – Commission takes Italy to Court for its incomplete regime of access to genetic resources

Human rights champions from across the world receive top UN prize

Germany may have a stable and more cooperative government

How income-sharing agreements can improve access to education

Lagarde discusses the European Central Bank’s policy revamp with MEPs

Macro-Financial Assistance: Europe’s way to control Ukraine?

ECB asks for more subsidies to banks

COVID – ACT III, When do I get off the stage?

SRHR and Ending HIV : Can one be achieved without the other ?

Sign language protects ‘linguistic identity and cultural diversity’ of all users, says UN chief

Who really cares about the 26.2 million of EU jobless?

19th EU-China Summit: A historical advance in the Chino-European rapprochement

‘Foreign children’ in overwhelmed Syrian camp need urgent international help, says top UN official

EP survey: EU recovery funds should only go to countries respecting Rule of Law

FROM THE FIELD: West Africa’s wishful gold diggers

Moving from commitment to action on LGBTI equality

Tokyo 2020 Olympics: from cardboard beds to recycled medals, how the Games are going green

Commission’s action plan: financial world mandatory links to environmental targets

Fostering intergenerational solidarity and cooperation through age-friendly environments: the right answer to Europe’s demographic challenge

The Eurogroup+ is born to govern the EU Banking Union

European Youth Forum demands immediate action & binding agreement on climate change

How to create a transparent digital economy and rebuild consumer trust

Coronavirus reinforces the importance of empathy

To all far-right partisans who exploit Charlie Hebdo atrocity: a peaceful reply given by a peaceful student

For how long and at what cost can the ECB continue printing trillions to keep euro area going?

What is the European Super League and how would it work?

State aid: Commission approves German scheme for very high capacity broadband networks in Bavaria

To feed 10 billion people, we must preserve biodiversity. Here’s how

Ramped-up emergency preparedness, part of ‘changing the DNA’ of the UN’s health agency

New Report Offers Global Outlook on Efforts to Beat Plastic Pollution

How African countries can benefit from plan to reform global tax

Destabilizing Lebanon after burning Syria; plotting putsch at home: King and Crown Prince of Saudi Arabia

COVID-19 is an unmissable chance to put people and the planet first

Take care of your borders and then expand them

The Juncker Plan at work: bringing investment back on track in Europe

Africa-Europe Alliance: European Commission committed to a sustainable African agri-food sector

Mindfulness: a freedom we can still have in the pandemic

If you live in a big city you already smoke every day

Employment and Social Developments in Europe: 2018 review confirms positive trends but highlights challenges, in particular linked to automation and digitalisation

Safer products: EP and Council close deal to beef up checks and inspections

Coronavirus global response: EU Humanitarian Air Bridge to Iraq and new funding

Top UN Syria envoy hails ‘impressive’ start to historic talks in Geneva

UN rights chief slams ‘unconscionable’ US border policy of separating migrant children from parents

EU-US resume trade negotiations under the spell of NSA surveillance

The world’s economy is only 9% circular. We must be bolder about saving resources

How many websites are there?

State aid: Commission approves €650 million Polish support to LOT in context of coronavirus outbreak

Nepal faces a crisis as COVID-19 stems the flow of remittances

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