Ordinary taxpayers have paid dearly for the irresponsible gambles of greedy bankers, while for the richest few, paying tax can be carefully avoided.
Too many big corporations and rich individuals are getting away with exploiting legal loopholes, shopping around for the most favourable jurisdictions and hiding money offshore in tax havens.
Europe needs #TaxJustice.
Tax Justice, the Panama Papers Blog
Want to find out more on what we in the S&D Group are doing in the European Parliament to unveil these shady tax dealings?
Make sure to also check out our blog ‘Investigating the Panama Papers’ where our MEPs shared their experiences and impressions from their work for #Taxjustice in Europe.
Our tax system in Europe is broken
These shady practices are creating vast inequalities in our societies and draining the public purse of the vital contributions we need to relaunch Europe's economy and finance the services European citizens deserve. Across Europe, governments have raised tax levels for ordinary citizens and cut spending on hospitals, education and public services.
Tax deals for big companies are just no longer morally acceptable.
WHY DO WE NEED A CHANGE NOW?
On 5 November 2014, a group of international journalists uncovered the #LuxLeaks scandal: more than 300 secret 'sweetheart' deals – known as 'tax rulings' – were agreed between multinationals and the Luxembourg government between 2002 and 2010 in order to slash their global tax bills.
Since then, more revelations have shown other European governments and banks have been complicit in helping big business hide its assets and avoid paying the taxes they should. Journalists working on the #SwissLeaks files in February 2015 found bankers were helping wealthy clients evade taxes on an industrial scale and the Commission judged that tax deals for Fiat and Starbucks were beyond shady and were actually illegal state aid. Then, on 30 August 2016, the European Commission announced that they considered Ireland’s tax deal with Apple as illegal state aid. Apple was ordered to reimburse €13 billion in unpaid tax. The tax rulings had allowed Apple to pay a meagre 0.005% tax on all its European profits in 2014.
In April 2016, the #PanamaPapers unearthed evidence of money laundering, tax dodging, bogus offshore companies and illegal use of tax havens on a vast scale. The 11.5 million leaked documents revealed information on over 200,000 offshore companies, implicating amongst others 140 public officials, including 12 current and former world leaders!
In November 2017, the network of journalists behind the previous tax leaks broke the news with the #ParadisePapers, revealing even more offshore interests and activities of more than 120 politicians and world leaders and exposing
the tax engineering of more than 100 multinational corporations, including Apple, Nike and Botox-maker Allergan.
- But it's clear these revelations are just the tip of a very large iceberg. These scandals have revealed the destructive tax competition between member states and the criminal lengths the rich and powerful – and the secretive industry that helps them – will go to hide their wealth and avoid paying a fair share to society.
- Tax fraud, evasion and avoidance cost European citizens €1 trillion each year. That's €2,000 per citizen!
- This tax gap between the revenues due and what is actually paid is more than what all EU states put together spend on healthcare.
- With that public money, we could invest 4 times more in education.
- Each year, $250 billion is hidden in tax havens.
- Tax fraud, evasion and avoidance mean higher taxes for citizens and less public investment in education, infrastructure and health.
- Some countries allow direct negotiation of tax deals between companies and the tax authorities so they pay almost nothing, while the average tax rate for citizens in the EU is around 45% (Institut économique Molinari).
- Italy is the biggest tax loser with an annual €180 billion loss. Estonia loses more than 28% of its government spending due to tax evasion each year.
- A global financial transaction tax of 0.05%, with an additional fiscal stimulus of 1%, could help create 2 to 3 million jobs in Europe alone.
- It is estimated that developing countries lose 3 times more to tax havens than they receive in foreign aid each year.
- 30% of all African financial wealth is believed to be held offshore, an estimated $14 billion in lost tax revenues every year – enough to save the lives of up to 4 million children a year and get every African child into school.
Our demands and achievements
Our demands and achievements
We believe the EU must work together to clamp down on tax fraud, close legal loopholes and tax havens, and improve transparency and cross-border co-operation to end the banking secrecy that lets the fraudsters and dodgy dealers get away with it.
The S&Ds have been working hard to get European solutions to the problems that drain the finances of our societies. We've set out our demands and one by one we’re turning the red lights to green and achieving our goals!
● A package ensuring a minimum effective taxation of corporate profits in the EU including anti-abuse measures. As Socialists and Democrats, we propose a minimum effective tax rate of 18%.
● A reform to get rid of the unanimity requirement in the European Council on tax issues, to ensure that no single member states can veto tax reforms in order to benefit themselves.
● A fairer taxation of big tech companies and measures to ensure that the way taxes are collected is on par with the increasing digitalisation of the economy.
● A European blacklist of tax havens, with sanctions for companies and individuals dealing with them
● Protection for whistleblowers
● A gender tax gap estimate, including an assessment of the cost of all tax incentives in all member states of the EU.
● Fighting dodgy tax schemes (so-called harmful tax practices) by defining, reviewing and proposing rules to ensure they are repealed throughout Europe
● Penalties for tax advisors and financial institutions who aid companies and individuals in cheating on their tax payments.
● A public register of ‘beneficial ownership’ to force companies to reveal which part of their organisation really makes the profits and to determine, which taxes are due
● More transparency from EU governments on tax deals negotiated between national tax administrations and multinational companies (deals which were at the heart of the LuxLeaks scandal) –Sanctions for those who break the rules
● Automatic exchanges of country-by-country reports between the tax administrations of Europe – the European Parliament has voted to set up this kind of exchange, so that governments can track where taxes should be due
● New rules from EU governments to force multinational companies to publicly declare where profits and taxes are paid on a country-by-country basis
● A ban on ‘letterbox’ companies – To combat practices by multinationals who register in low-tax countries, avoiding due tax payments where they really operate
● An EU tax authority to co-ordinate between national tax authorities, in order to crack down on cross-border tax crimes
● A fully fledged Common Consolidated Tax Base for Corporate Taxation (CCCTB) – a single set of rules for cross-border companies to calculate their taxable profits in the EU
● Tough EU legislation to stop big companies using tax breaks on patents to dodge taxes
● Reform of the Code of Conduct group – we need more than a voluntary code to regulate tax competition and stamp out abuses.
Join us to keep up the pressure and achieve these goals for #TaxJustice. Together we'll make sure everybody pays their fair share.
Special Committee on Tax Rulings - TAXE 1 & TAXE 2
In the wake of the #LuxLeaks revelations, the European Parliament set up a Special Committee on Tax Rulings - TAXE 1 in February 2015 to investigate allegations that some EU countries are offering special minimal tax regimes to attract large corporations. The mandate of the Special Committee on Tax Rulings (TAXE 1) ended on 30 November 2015.
After the Special Committee TAXE I reported its findings, the European Parliament voted in December 2015 to continue and widen its work and set up the Special Committee on Tax Rulings - TAXE 2 to ensure that the long list of recommendations were put into action. The TAXE 2 Special Committee's report was adopted in Plenary on 6 July 2016 and the mandate of the Special Committee on Tax Rulings (TAXE 2) ended on 2 August 2016.
After 18 months of investigations, hearings and fact-finding missions of the Inquiry committee on the Panama Papers, the European Parliament has adopted, on 13 December 2017 during the plenary session in Strasbourg, over 200 strong concrete recommendations to fight international tax avoidance, tax fraud and money laundering. They include many progressive proposals, such as to abandon the unanimity rule decisions in tax matters and the introduction of sanctions for those dealing with tax havens, thanks to the work of the S&D rapporteur Jeppe Kofod. The European Parliament's vote in plenary on the findings and recommendations puts an end to the mandate of the inquiry committee on the Panama Papers.
Inquiry committee on the Panama Papers
The Socialists and Democrats are committed to keeping up the work of the European Parliament on tax issues. During the Strasbourg plenary session on 13th December of 2017, the European Parliament adopted over 200 strong, concrete recommendations to fight international tax avoidance, tax fraud and money laundering. In this context, the S&D called for a special committee on the Paradise Papers, the Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3 Committee), which was established on the 1st of March 2018.
The establishment of the TAX3 Committee followed the continued revelations about tax fraud over the last 5 years, such as Luxleaks, the Panama Papers, the Football leaks and the Paradise Papers. The European Parliament will vote on, a final report, including new findings and recommendations, on the 27th of February in the TAX3 Committee and at the end of March 2019 in a Strasbourg plenary session.
The long-term goal is to establish a permanent structure, which would allow for continued investigations into tax fraud and to keep up the pressure on member states to act on issues related to tax evasion. To be continued...
SPECIAL COMMITTEE ON FINANCIAL CRIMES, TAX EVASION AND TAX AVOIDANCE (TAX3)
On the initiative of the Socialists and Democrats, the European Parliament has decided to set up a special committee on financial crimes, tax evasion and tax avoidance. The green light was given on March 14, 2018 in Strasbourg.
The new special committee will have 45 members and will be in place for 12 months.
It will continue the work carried out by the previous special tax committees (1 and 2) and the Panama Papers Inquiry and expand the investigation into new murky areas, such as financial crimes, including the impact of VAT fraud. The committee will contribute to the ongoing debate on taxation of the digital economy and assess national schemes providing tax privileges, the so-called golden visas.
The Socialists and Democrats are convinced that it is paramount to keep the pressure on EU governments so that we can build a fairer tax system in Europe.