Despite Panama Papers, EU Pitching Another Tax Evasion 'Smokescreen'

The European Commission's attempt to crack down on corporate tax evasion "is a smokescreen that will not stop multinationals dodging their taxes," the UK-based social justice organization War on Want declared Tuesday.

The proposal put forth by the Commission on Tuesday would require large companies--those whose annual revenue exceeds EUR750 million ($856 million)--to publicly disclose tax and financial data. The plan was reportedly "toughened up" in the wake of last week's Panama Papers revelations.

"The proposal is a recipe for more austerity, cuts to public services and tax competition, and leaves no seat at the table for southern countries, for whom genuine country-by-country reporting could help to collect taxes to fund essential public services."
--Owen Espley, War on Want

But Koen Roovers, lead EU advocate for the Financial Transparency Coalition, a network of civil groups and governments working to reform financial systems, denounced it as "a half-hearted hybrid that would keep most of the world in the dark."

According to Reuters:

The Commission had initially planned to impose so-called country-by-country reporting only for companies' activities in each of the 28 EU states.

But under pressure after the recent Panama Papers leaks, it made a last-minute change to its proposal, requiring corporations to disclose tax data also in jurisdictions deemed as tax havens--although EU states have never agreed on a common list of tax havens.

That is just one of the criticisms leveled by campaigners across the continent and beyond, who say the proposal's limited scope represents yet another missed opportunity to effectively end tax havens.

For one thing, "the Commission's proposal only requires reports for EU member states and countries on what is likely to be an arbitrary list of tax havens," said Oxfam's EU tax policy advisor, Aurore Chardonnet, on Tuesday.

"The Commission criteria to list tax havens are already absolutely vague," she explained, "and we also expect EU member states to delay or oppose the process of compiling an official EU list."

ActionAid's EU tax advocacy officer, Kasia Szeniawska, echoed that charge, saying the "yet-to-be-agreed list of tax havens...is likely to be selective and highly politicized."

Indeed, it is unclear if one of the world's worst tax havens, the United States, will make the list.

In turn, Szeniawska said, "citizens, journalists and campaign groups won't get the information they need to scrutinize multinationals' global tax affairs, and there's no assurance that the world's poorest countries will get the information either."

Meanwhile, noted Owen Espley, tax campaigner at War on Want, between 85-90 percent of the world's corporations will not have to report under the proposal. Indeed, said Szeniawska, the deal "lets off the hook the vast majority of multinational companies by setting a very high threshold for companies covered by the requirement."

Political economist Richard Murphy, who calls himself "the person who created the idea of country-by-country reporting," says what the Commission is suggesting is "nothing like" the system for which he advocates. In fact, Murphy said, this "disaster in the making...is, I suspect, designed to undermine the credibility of country-by-country reporting."

In a blog post, he further enumerated the plan's failings, including:

• We will have no data on developing countries who are meant to benefit from this disclosure;
• The USA has killed all disclosure for anywhere outside the EU;
• The EU has a very poor track recording in preparing tax haven lists If a tax haven is part of a larger state - as Gibraltar is part of the UK for EU purposes - then it appears data will not need to be disclosed for it. This will also apply in the Netherlands;
• Most tax haven data will not be disclosed under these rules;
• We will simply not be able to use this data to extract useful data from the accounts - and we will not even know if the information we will get will usefully reconcile with those accounts.

"The Commission has once more taken the side of tax dodging multinationals against the European public," said War on Want's Espley. "The proposal is a recipe for more austerity, cuts to public services and tax competition, and leaves no seat at the table for southern countries, for whom genuine country-by-country reporting could help to collect taxes to fund essential public services."

To that end, an analysis from ActionAid International earlier this year exposed how corporations take advantage of global tax treaties in developing nations to avoid paying their fair share, thereby fueling poverty around the world.

"Unless companies have to report on their activities in all the countries where they operate, they could continue to dodge tax on a massive scale, using the places still hidden from view," said Toby Quantrill, Christian Aid's principal adviser on economic justice.

"The Panama Papers are a graphic reminder of what happens when the powerful can hide: people and companies do things they would never have done in public," Quantrill said. "The European Commission should learn this lesson and revise its plans immediately, to ensure multinationals reveal what they are up to in all the countries where they operate, not just for some."