EU must do more on tax havens, says Von der Leyen, as MEPs pile pressure on blacklisting

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EU Commission President Ursula von der Leyen said that the Pandora Papers revelations are embarrassing for leaders who have pushed austerity. Speaking in Helsinki, she insisted that the European Union must do more to combat tax evasion and aggressive tax planning.

“Tax evasion and aggressive tax planning is completely unacceptable,” von der Leyen said. “We have in the European Union some of the highest tax transparency standards in the world, but as we see it’s not enough, more work is needed.”

The Papers, revealed yet another hidden world of offshore finance and investments, with a number of MEPs turning to social media to call for stronger action against tax havens, with some suggesting that current EU policy against such jurisdictions is inadequate.

MEPs from most political parties represented at European level criticised the expected removal of Anguilla, Dominica and Seychelles from the EU tax haven blacklist, a decision expected to be rubber stamped by EU finance ministers today. Only two serving EU leaders were mentioned in the Pandora Papers, Cypriot president, Nicos Anastasiades, and the Czech prime minister, Andrej Babiš, who served as his country’s finance minister. Neither man is accused of doing anything illegal, though many have questioned their ethics and judgement.

For critics, the Pandora papers highlight problems with the union’s tax blacklist, which was created by EU finance ministers in 2017 to pressure non-EU countries to clamp down on tax avoidance and tax evasion. If the three countries are indeed removed from the list, only nine will remain, American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

MEPs and activists have criticised the exclusion of other low-tax jurisdictions, including the British Virgin Islands, which features in the Pandora Papers, but is not on the EU blacklist. “Some of the world’s most notorious tax havens are not even listed by the EU and tomorrow EU finance ministers are set to let even more off the hook,” said French Socialist MEP Aurore Lalucq, who has drafted a resolution calling for a crackdown on tax havens, which MEPs will vote on this Thursday. “Sadly, the countries that remain blacklisted do not represent the most important financial flows.” “We need to know exactly who is asking for what in the council, especially if some ministers are involved in tax evasion scandal,” she added.

German MEP Markus Ferber, who is the European People’s party spokesman on economic affairs, said the revelations showed the EU blacklist had no teeth. “The Pandora Papers show once more that the fight against tax havens and letter box companies is only making limited progress”, he argued.

“Even after years of scandals, the EU list of tax havens has no teeth. The plan of EU Finance Ministers to further water down the EU blacklist this week is precisely the wrong signal. If you want to fight tax havens effectively, being on the EU blacklist must come with tough sanctions. The Pandora Papers prove that the current approach of exchanging nicely-worded letters simply doesn’t cut it. We need to reset the EU blacklist and make sure that it contains all the usual suspects and come up with sanctions that are an effective deterrent. Otherwise, it will be business as usual for tax havens”, Ferber argued.

MEP Sven Giegold, an outspoken MEP, and financial and economic policy spokesperson of the Greens/EFA group lamented that the PandoraPapers show that billionaires and powerful people use many tax havens that are not on the EU list. Two-thirds of the shell companies in the Pandora files are in the British Virgin Islands, which are missing from the EU tax haven list. “The EU list of tax havens must be fundamentally revised. The European Parliament has long been calling for stricter criteria and an independent, transparent decision-making process. In January, the European Parliament had demanded that the EU list of tax havens include a hard criterion on the transparency of beneficial owners”.

Giegold blamed EU finance ministers for blocking the introduction of this criterion since the beginning of the tax haven list in 2017. The PandoraPapers have shown how important this information about the real owners of a letterbox company is. “Third countries should therefore have to keep publicly accessible registers of the beneficial owners of companies, as is already mandated by law within the EU. The criteria for third countries, also with regard to economic substance and fair taxation, must be strengthened. The EU can only make credible progress here if it also applies these criteria to intra-European tax havens”, he insisted.

A spokesperson for the European Commission told The Guardian that it was drawing up new legislative proposals “that will further enhance tax transparency and reinforce yet again our fight against tax evasion”, including draft legislation to tackle the misuse of shell companies for tax purposes.

The European Parliament will be debating the Pandora Papers on Wednesday.

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