Yesterday’s European Council – the regular meeting of EU heads of state - was dominated by discussion of measures to combat tax evasion. Though there was emphasis on the importance of the EU’s upcoming Anti-Money Laundering Directive – a key opportunity to finally uncover the secret owners of companies - there was an awful lot of delay on automatic information exchange, and a glaring avoidance of anything constructive on tax havens.
The promising political rhetoric of last week’s EU finance ministers’ meeting was continued, indicating that public campaigns, supported by Eurodad and members, to raise tax dodging to the top of the political agenda are having effect. The EU leaders said that “it is important to take effective steps to fight tax evasion and tax fraud” and recognised that “increased efforts are required in this field, combining measures at the national, European and global levels”.
Eurodad is part of a strong coalition pushing for using the upcoming revision of the EU’s Anti-Money Laundering Directive to put the real – or ‘beneficial’ – owners of companies, trusts and foundations on public record. Though finance ministers had failed to mention this key opportunity, the heads of state made an indirect link, showing campaigning is paying off and this issue is rising to the top of the agenda. The Council conclusions state that “…the identification of beneficial ownership, including as regards companies, trusts and foundations, is essential. The revision of the third anti-money laundering directive should be adopted by the end of the year.” It is positive to see the heads of state recognise that not just companies, but also trusts and foundations, are being used as tools for money laundering. However, it remains to be seen whether governments will ultimately agree to make the information on beneficial ownership public or follow the weak and ineffective current proposal from the European Commission, which simply asks that companies, trusts and foundations identify their own beneficial owners but only present this information upon request.
As with May’s EU finance ministers’ meeting, the political rhetoric on automatic information exchange is good, with a promise that “…the EU will play a key role in promoting the automatic exchange of information as the new international standard.”
However, the touchstone issue was whether real progress could be made to unblock the delayed adoption of the revised EU’s Savings Tax Directive. Such a decision would allow far greater exchange of information, but has been held up for years, largely due to the opposition of Austria and Luxembourg. After the “offshore leaks” recently caused a number of tax haven scandals to unfold, hope grew that the Council would swiftly adopt the revised directive. Yesterday, however, the Council instead “called for its adoption before the end of the year”.
There are also steps promised in terms of the scope of information that would be subject to automatic exchange, with “amendments to the Directive on administrative cooperation” promised later this year, “in order for the automatic exchange of information to cover a full range of income.”
The Council’s silence on how to tackle tax havens was deafening. The European Commission’s December ‘action plan’ had proposed developing a blacklist of ‘non-cooperative jurisdictions’, but discussion on this was postponed by the finance ministers earlier in the month, and ignored entirely by the heads of state. Prior to the summit, Eurodad member Oxfam had issued a challenge to the UK, sponsor of many of the world’s most notorious tax havens, such as the Cayman Islands, to tackle this issue. Oxfam put it this way: “Britain’s credibility is on the line; talking tough on tax, whilst continuing to usher a third of the world’s wealth into UK tax havens, risks making a mockery of David Cameron’s leadership at the G8 summit in June.”
Thanks to advocacy by Eurodad and allies, the European Parliament has pushed strongly on the issue of country-by-country reporting, already forcing EU Banks to abide by this measure from 2014. This issue also made it in to the Council’s conclusions, which raises hope that heads of state are starting to realise the importance of getting full disclosure on companies’ profits, sales, staffing levels, assets and tax payments in individual countries.
Though the Council’s conclusions only mention country by country reporting in the context of "amending the Directives on disclosure of non-financial and diversity information", there are indications that more pressure could achieve a real breakthrough on this issue and ensure that all corporations are subject to the same regulations as banks. Speaking today, Michel Barnier, European Commissioner for the Internal Market and Services noted that "the largest banks will also have to disclose their profits, taxes and subsidies in each Member State and non-EU country where they operate." Crucially, he added that "in line with yesterday's conclusion of the European Council we will expand these reporting obligations to large companies and groups"
The Council conclusions also open up new areas where progress could be made. For example “work will be carried forward as regards the Commission’s recommendations on aggressive tax planning and profit shifting” and a” strengthening of the Code of Conduct on business taxation” promised, albeit “on the basis of its existing mandate.”
The key question with all these promised initiatives and deadlines remains: will this translate into concrete decisions on new regulation, and will this regulation ultimately be implemented?