Hard truths on tax evasion in Europe
By Jeppe Kofod, Co-Rapporteur for the European Parliament’s Inquiry Committee on Money laundering, tax avoidance and tax evasion, MEP (Socialists & Democrats). The blog is written as part of International #TaxJustice Blog Action Day – a day on which a number of CSOs across Europe working on tax issues want to draw as much attention as possible to tax dodging, harmful tax competition and incentive, tax havens etc.
Apple, the richest company in the world, paid only 0,005 percent in tax on its European profits in 2014. Taken together, all forms of illicit tax practices costs European member states the equivalent of 2.000 euros per citizens, per year!
About Jeppe Kofod
Jeppe Kofod is Head of the Danish Social Democrats in the European Parliament and Co-Rapporteur for the newly formed Inquiry Committee on Money laundering, tax avoidance and tax evasion.
You can follow Jeppe’s work against international tax fraud on:
Aggressive tax planning is a shady business that thrives on secrecy. However, thanks to the whistle-blowers who revealed the LuxLeaks documents and the Panama-Papers we have now been given a rare glimpse into the workings of the international tax evasion industry.
But if we fail to act, if we do not hold the corporations, banks and authorities involved accountable, we risk wasting this enormous opportunity to take action against tax havens and international tax avoidance.
The good news are that since LuxLeaks we have progressed by leaps and bounds in the fight against illicit tax practices. Thanks largely to the outcry and public pressure in the wake of the revelations.
Let me mention three concrete examples:
CbCR will force multinational companies to report which countries they are active in, how many employees they have in every country, how much profit they have produced and the amount of taxes paid in each country.
This will make it easier for authorities to stamp down on shell companies created only to aggressively lower the effective tax rate or to avoid tax all together.
2) We’ve also pressured Switzerland into signing a tax information exchange agreement that will enter into force on the 1st of January 2017 and which will effectively end banking secrecy in Switzerland. This is a huge victory in the fight against tax dodging. Similar agreements with Monaco, Liechtenstein, Andorra and San Marino will also come into effect shortly.
3) Finally, the European Parliament has adopted my own proposals calling for direct and proportional financial liability for banks and tax advisors proved to be involved in illegal tax-schemes.
In repeat cases where banks or advisory firms have knowingly and systematically been involved in illegal schemes, the European Parliament is now calling for their business licenses to be revoked. Effectively barring them from operating in Europe – the world’s largest open market.
That is a consequence to be feared by any cooperation. No matter how large. No matter how rich.
Unfortunately, there is still some ways to go, before this proposal – officially adopted though it is – becomes the law of the land. We need the European Commission to integrate it into a legislative proposal. A matter of some urgency, I might add.
In complete honesty, our current sanctions, consisting mostly of fines, are laughably inefficient.
Let me give you an example.
Last year, Nordea, the largest bank in Scandinavia, was fined by the Swedish authorities for failing to comply with anti-money laundering legislation.
The fine was only issued after Swedish authorities had documented and criticised these failing no less than three times over a period of five years. More than fair warning, indeed. The fine meant that Nordea had to pay the Swedish authorities 50 million Swedish Kroner, app. 5.2 million euros. “The maximum administrative fine” possible under current legislation.
However, in the same year, Nordea reported a company-wide profit of 4.700 million euros. Equivalent to a weekly profit of around 90 million euros.
In short, Nordea could afford to pay the fine two times a day, every single day of the year – and still produce a profit! That ought to be cause for outrage.
That is why we need harsher, EU-wide sanctions against companies, banks and advisors that profit from illegal tax schemes. The current system simply isn’t working.
So whilst we certainly have achieved much, we still have a very long way to go and success is by no means given or automatic. To be blunt, it is crucial to keep up the pressure on the political systems to act, if we are to end illicit tax practices.
Today is International Blog Action Day. If you take away only one point from this blog let it be this: Take action!
Demand action from your elected politicians, write your local newspaper and demand that they follow up on the Panama-Papers stories they wrote only a few months ago, spread the word on social media and support the NGO’s who are keeping both authorities and politicians like myself accountable on this issue.
So please, join in the spirit of Blog Action Day. Add your voice to the outrage and demand action on International Tax Fraud!
This project is funded by the European Union.