EU taxation of multinationals—bypassing the unanimity blockage – by Tommaso Faccio and Francesco Saraceno

The French car-service company Heetch recently displayed an advertising campaign on the streets of Paris (see photo), which proudly affirmed its presence in many French cities but not in Luxembourg—a clear allusion to the tax headquarters of some of its competitors. The fact that ‘paying taxes in France’ has become a commercial argument shows that the issue of corporate avoidance is rising up the public agenda in many countries.

Yet the G20 process on taxing digital firms and introducing a global minimum tax to limit tax competition, led by the Organisation for Economic Co-operation and Development, failed to reach consensus in 2020, mostly because of determination by the United States to protect its digital giants. The European Commission has made clear that, were the G20 to fail to deliver a global solution by mid-2021, it will act. But the EU is stuck between a rock—the US position will likely not change with the new administration—and a hard place: its own tax havens.

Read more at: EU taxation of multinationals—bypassing the unanimity blockage – Tommaso Faccio and Francesco Saraceno

Tax Havens: EU blacklist of tax havens is a sham says EPSU

After months of screening some 90 jurisdictions and countries  in light of EC criteria of lack of transparency and harmful tax measures such as 0 or near 0 corporate tax rates, EU Finance Ministers have  agreed  a tiny  list of 17 countries: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates are the countries listed, officials said.

The second list includes countries like EU candidates Turkey, Serbia and Montenegro, as well as Switzerland, Bosnia and Herzegovina, Macedonia, Morocco, Thailand, Vietnam and Hong Kong.

It also includes entities that are considered as being among the main tax havens but which have promised to change their legislation: Bermuda, the Cayman Islands as well as UK-associated Jersey, Guernsey and the Isle of Man.

Eight countries and territories recently hit by hurricanes - Antigua and Barbuda, Anguilla, Bahamas, British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos, US Virgin Islands - were given a grace period until February to come up with commitments.

The list excludes the most active harmful tax countries or jurisdictions including Benelux, Ireland, Malta, Cyprus, Switzerland, British channel islands,  US Delaware, Singapore or  Hong-Kong. Even Bermuda, that hosts the Paradise’s offshore services firm Appleby, did not make it to the list.

Jan Willem Goudriaan, General Secretary of EPSU, said “This tax havens list is a big sham. EU Finance Ministers have failed to agree a  coherent and transparent blacklist with deterring sanctions to make it effective. Coupled with the cuts in corporate taxes in many EU countries, today’s decision means that tax competition in and outside Europe will continue to run the show at the expense of workers’ wages and quality public services. 

It also means that trade unions, NGOs, investigative journalists and whistleblowers will need to  continue to do the transparency job that governments are not willing to do.”

Nick Crook, head of international for the UK's largest public services trade union UNISON said: “It’s disappointing that this list fails to name some of the world’s biggest tax haven offenders. The international community needs to do much more to tackle tax avoidance, and offshore tax scams that are happening on a grand scale. The richest individuals in our society should be making the biggest contribution to our public services –  not hiding money abroad, and shirking their obligations”

On the international scene, as tax rules for the digital economy are being discussed, this list is a sign that the  EU is losing its credibility on fair tax.

EPSU is the European Federation of Public Service Unions. It is the largest federation of the ETUC and comprises 8 million public service workers from over 260 trade unions; EPSU organises workers in the energy, water and waste sectors, health and social services and local, regional and central government, in all European countries including the EU’s Eastern Neighborhood. EPSU is the recognized regional organization of Public Services International (PSI). For more information please go to: http://www.epsu.org

EU-Digest

European Parliament Blocks EC Money Laundering Blacklist because they consider it incomplete- by Joe Kirwin

EU Money Laundering Controls

The European Commission will be forced to draw up a new blacklist of countries that facilitate money laundering after the European Parliament overwhelmingly rejected the latest effort that failed to consider countries that enable tax evasion.

EU lawmakers voted 392-80, with 207 abstentions, to reject the list that includes 11 countries, including Afghanistan, Bosnia and Herzegovina, Iraq, North Korea, Yemen and Syria, among others.

These are countries that the Paris-based Financial Action Task Force has signaled as destinations for laundering money or sources of terrorism financing.

Any country that ends up on the money laundering blacklist will face stricter controls when doing business in the EU, to ensure financial stability and general safety.

“We can not accept that the commission relies merely on an international body—the so-called Financial Action Task Force (FATF)—in drawing up a list of jurisdictions with strategic anti-money laundering and counter-terrorism financing,’' said Ana Gomes, a Portuguese parliamentarian from the Socialist and Democrat group, in a May 17 statement.

“How can we explain to our citizens that Panama for instance, which led the Panama Papers scandal, is not even on the list?” she asked.

Parliamentary opposition to the current blacklist also concerns the criteria used by the European Commission. EU lawmakers insist that the list should also include countries that facilitate tax evasion, which the Commission believes is beyond its mandate.

A key difference between the two EU institutions concerns the threshold for identifying beneficial owners of companies. EU member states insist it should be 25 percent or more, whereas the European Parliament wants 10 percent or more. Negotiations will continue in June.

The dispute over the AMLD blacklist is different from a tax haven blacklist that EU member states are due to finalize by the end of 2017.

Currently, EU member states are “screening” 92 countries as candidates for the tax haven blacklist. The U.S. is among the 92 countries.

Read more: European Parliament Blocks EC Money Laundering Blacklist | Bloomberg BNA

Tax Havens: Ireland and four UK territories named on 'world's worst tax havens' list

The Republic of Ireland along with four UK-linked territories – Bermuda, the Cayman Islands, Jersey and the British Virgin Islands – appear in a new list of the world’s 15 worst corporate tax havens revealed by Oxfam.

They earned their place on the list of shame because they've adopted an aggressive set of policies to enable companies to minimise their tax bills.

And Oxfam chief executive Jim Clarken has warned there is "a risk" that Northern Ireland too could be used as a tax haven when it introduces its lower rate of corporation tax in 2018, leaving those who can least afford it to pick up the tab.

Oxfam analysed key practices such as offering unfair and unproductive tax incentives and zero corporate tax rates, as well as failure to cooperate with international processes to combat tax avoidance including measures to increase financial transparency.

The ‘Tax Battles’ report highlights how tax havens help to facilitate tax dodging that robs countries around the world of vital revenue that could be used to fight poverty.

In May more than 300 top economists, including Cambridge University professor Ha-Joon Chang, warned there is no economic justification for tax havens and urged world leaders to take on the powerful vested interests that benefit from the status quo.

The new report follows Oxfam-commissioned research in Northern Ireland, conducted by Millward Brown Ulster, which revealed that 89 per cent of people here are concerned that when big firms don’t pay their fair share of tax, ordinary people pay the price.

The survey showed that 87 per cent of people in Northern Ireland want Theresa May to prioritise ending tax avoidance.

Clarken said: “Ireland is part of a toxic global tax system servicing the very wealthiest while ordinary people pay the price and lose out on essential public services.

"And with Northern Ireland set to take control of corporation tax in 2018, there is overwhelming public support to ensure any new proposed tax regime here is fair, open and transparent – and that it does not impact negatively on vulnerable people.

“Any reform of the corporate tax system must contain safeguards preventing companies from taking advantage to avoid tax owed elsewhere. Otherwise there is a risk that Northern Ireland could be used as a tax haven, leaving those who can least afford it to pick up the tab."

He added: “Tax dodging isn’t an abstract accounting game – the lost revenue has devastating consequences for the world’s poorest people who miss out on life-saving medicines and the chance to go to school.

“Around the world Ireland is known as a country of good fun, bad weather and awful tax policies that facilitate worsening inequality by allowing some of the world’s richest companies to avoid paying their fair share to society. This is no badge of honour.

“Having the UK Overseas Territories and Crown Dependencies operate as tax havens undermines these islands’ efforts to be outward-facing, responsible members of the international community. It’s time to end this embarrassing contradiction in our own backyard.”

Bermuda tops the list of 15 countries followed by the Cayman Islands and the Netherlands. Switzerland and Singapore are in fourth and fifth place followed by Ireland.

Luxembourg is in seventh place, Curaçao is eighth and Hong Kong ninth. The countries ranked from 10th to 15th are Cyprus, the Bahamas, Jersey, Barbados, Mauritius and the British Virgin Islands.

Ireland’s score was based on its lack of effective rules to prevent corporate tax dodging and because it facilitates large-scale corporate tax avoidance through profit-shifting, aggressive tax planning structures and so-called sweetheart deals like the tax arrangements enjoyed by Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate.

Read more: Ireland and four UK territories named on 'world's worst tax havens' list - The Irish News

Tax Havens: Europe Will Force Big Companies to Disclose How They Use Tax Havens

The European Commission will propose rules on Tuesday to force major companies to publish details of where they make profits and where they pay tax, as it moves to clamp down on tax avoidance following the Panama Papers revelations.

Companies will have to disclose activities in tax havens, an amendment which has been added to earlier proposals, but campaigners say the measure may be toothless as European Union (EU) states have no common view of what constitutes a tax haven.

The commission wants to apply the measure to all firms with global annual turnover above 750 million euros ($856 million), meaning US companies such as Google and Facebook — which have faced criticism for their complicated tax avoidance mechanisms — will be subject to them.

The original plan had been for big companies to show only how much they paid in each EU state, with the rest of the world treated as a single item. Now, EU officials say, the draft will propose that they also list how much of their money outside the EU flows through each state classed by EU governments as a tax haven.

The problem, transparency campaigners say, is that there is no agreement among EU member states on the definition of a tax haven.

Read more: Europe Will Force Big Companies to Disclose How They Use Tax Havens | VICE News

Taxation Policies: Curbing Tax Avoidance, Tax Evasion And Tax Havens

The aggressive tax avoidance by multinational corporations (MNCs) where they are now paying virtually no tax was highlighted recently by the takeover of “Irish” company Allergan by Pfizer in a blatant tax-avoidance move.

Such tax avoidance by these companies is facilitated by sovereign nations in their “tax wars” between each other, vying for foreign investment.

They are ceding billions in taxes to multinational corporations while beggaring their own exchequers.

Governments have woken up to these tax losses; progress is being made, but much more needs to be done.

Figures released from the OECD confirm that corporate tax revenues have been falling across OECD countries.

Read More: Curbing Tax Avoidance, Tax Evasion And Tax Havens