President of the EU Commission Jose Manuel Barros
You really cannot make this stuff up!
So the EU Commission publishes its long awaited tax haven blacklist of uncooperative countries.
benefical ownership, beneficial ownership of information, country-by-country reporting, EU, European Investment Bank, European Parliament, Luxleaks, OECD, OECD Global Forum, Qalaa, recommon, Swissleaks, tax avoidance, tax dodging, tax evasion, tax haven, tranparency
(President of the EIB:Werner Hoyer)
In a new report published on Tuesday this week, transparency NGOs have called on the the Luxembourg-based European Investment Bank (EIB) to set up its own ‘Tax Unit’ to assess how much corporate tax its clients are paying, and produce its own analysis of tax havens rather than rely on the OECD’s ‘black and grey’ list of jurisdictions.
(Preident of the World Bank Group: Jim Yong Kim)
This would be in addition to existing criteria used by the World Bank Group to define tax havens loosely based on the work of the OECD Global Forum on Transparency and Exchange of Information. The practical effect of this criteria is that private investors seeking support financing through the Bank’s International Finance Corporation, would be ineligible if the investment has a connection to a country that is on the OECD ‘black’ or ‘grey’ list; or is a jurisdiction that has been found to be less than compliant under the OECD Phase 2 assessment criteria, which is based on the translation of transparency norms into legal and regulatory practice.
The NGO report titled ‘Towards a Responsible Taxation Policy for the EIB’ and published on April 21st this year, advocates that the the EIB, which is set to be the driving force behind the European Commission’s flagship €315 billion infrastructure investment fund, should define a ‘tax haven’ based on whether or not they have a means of identifying and sharing the beneficial ownership of a company.
The report by Re-Common and Counter Balance argues that this would allow the EIB to ascertain who ultimately owns, controls or benefits from a company or fund that receives its support. They also recommend that the EIB clients should also be required to produce country-by-country-reports.
This development should not come as a surprise because last year I flagged renewed efforts in the European Union to revisit the definition of tax havens along the lines suggested in the NGOs Report. As a result the EIB already has a policy commitment to preventing tax avoidance, money laundering and other damaging activities, including a general prohibition on investments linked to non-compliant jurisdictions (NCJ) or tax havens.Indeed this demand for all companies seeking EIB funds to publish country-by-country-reports (CBCR) also featured in a European Parliament report adopted in March 2014. At present, EU rules require CBCR only from banks and firms in the extractive and logging sectors.
According toAntonio Tricarico, the report’s author, ‘Recent revelations such as Luxleaks and Swissleaks prove that Europe is losing out billions of euros because of tax dodging, and in developing countries the situation is even worse.
Fueling this move by the NGOs is a report by the Illicit Finance Journalism Project last October which found that the EIB had lent money to a number of companies operating in tax havens. One example cited was Qalaa, an African investment fund with $9.5 billion on its books, which has received hundreds of millions of euros from the EIB, and is domiciled in the British Virgin Islands.
It is important to note that the EIB, Qalaa and the jurisdictions in which or through which this investment fund raised money have acted within the legal rules. More here.
Predictably, given the constituency of the EIB, in response to the report the Bank noted that most of the reforms proposed by the report would require legal changes to be agreed by MEPs and ministers.
(Here’s What You Missed Last Week and a Look Ahead.)
Your Summary of the biggest tax, trade and investment headlines affecting International Business and Financial Services
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EU’s New Plan for Safer Banks.
Obama Renews Corporate Tax Reforms
Fear Be Dammed: Why It is Time to Invest in Emerging Markets.
State Bank of India Turning to Facebook and Twitter for New Customers.
Nigeria Seals Off 23 Companies for Non-Remmittance of Employee Taxes
A View from Budapest: Tax Dodgers Always Ahead of the Game
Why Where You Trade is Everybody’s Business
HMRC Claims £100M Victory in Tax Evasion Case.
FATCA Fuels IRS Amnesty, But Advocate Calls it Harsh
Slovenia Initials FATCA Agreement with US
UN Says Top Tax Haven in 2013 Received More Investment Than Brazil and India.
How Panama Can Become the ‘Singapore’ of the Americas.
What Hosting the G-20 Means for Australia.
Australia Announces Offshore Banking Reforms.
The Irish Times Examines the Rise of Jersey as an Offshore Giant.
Africa Told to Seize the Opportunities from Global tax Reform.
Hungary Rejects OECD Advise to Tax Wealth.
(Australia PM and Chair of G20 Tony Abbott)
Fair and low is how taxes should be administered according to Australian Prime Minister Tony Abbott speaking at this year’s World Economic Forum in Davos.
Abbott’s comments on international tax reform are instructive not only because Australia has been at the vanguard of the international tax debate as Chair of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes – now chaired by India; but also because Australia now holds leadership of the G20.
The Aussie PM has re-affirmed that under his stewardship the G20 will continue to continue to “tackle businesses artificially generating profits to chase tax opportunities rather than market ones.”
Echoing the dogma of ‘fair’ taxation now in vogue in the Europe, the United States, India and a growing number of industrialised countries, Abbott is resolute in his mind that “an agreement on the principles needed for taxation to be fair in a globalized economy,” would be “a big step forward.”
Committed to the OECD Base Erosion and Profits Work Plan,Australia ‘s tenure as G20 Chair will seek acceptance of the principle that “in order for the global free-market economy to grow in a digitalised age, corporate profits must be paid where the revenue is generated and not elsewhere.”
The implications for international business and finance centres – onshore and offshore – are plain. They have become the target of countries eager to cash in on the taxes that continue to escape their reach because of rules, of their own crafting, deliberately designed to increase the global competitiveness of their own corporate behemoths.
In November the G20 Summit will be held in Brisbane. While most of the world is excluded from its dialogue this body has become the makers and ‘enforcers’ of international tax law especially supported by the technical expertise of the OECD.
(U.S President Barack Obama)
Passionate as Australia and its leadership may be about ensuring that companies pay taxes where they earn it, more powerful members of the G20 whose businesses depend on the non-taxation of profits through various legal means to stay competitive remain apathetic about the pursuit of such a global norm.
Few expect this to change in the ten months leading up to the Brisbane Summit.
For more on Australia’s 2014 G20 Agenda click here.
For more on the US Position on BEPS click here.
For more on Australia’s approach to tax evasion click here.
(EU Tax Commissioner Algirdas Semeta)
Just as the EU starts talks with Switzerland to revise their EU-Swiss Savings Tax Directive, based on planned changes to the EU’s own Savings Tax Directive, EU Tax Commissioner Algirdas Semeta has chided Austria and Luxembourg for playing ‘cat and mouse’ with the EU on the issue of automatic exchange of information (AEI), by refusing to lift their banking secrecy until the EU achieves a level playing field with Switzerland.
Commissioner Šemeta confirmed that the proposed start date for AEI is 2015; and that the overwhelming majority of EU countries agree that the EU must spearhead the campaign for AEI. In fact, as Šemeta pointed out, a “lack of consensus undermines the EU’s credibility as it could not seek to apply pressure at the international level for the adoption of AEI if it is unable to reach agreement internally.”
The problem is that Austria and Luxembourg,are competitors with Switzerland for investors desirous of maintaining ‘secrecy’ in their financial and other dealings; and do not wish to agree to anything that would give the Swiss an advantage in the market.
They are therefore refusing to abandon their secrecy regime until the EU gets Switzerland to do the same first.
While confirming the EU’s resolve to guarantee a level playing field with non-EU members in Europe by negotiating strong agreements, Šemeta understands that this cannot constititue a pre-requisite for reaching an accord within the EU.
Clearly Šemeta is concered not to have the issue of AEI turn into a stale-mate with countries embroiled in a waiting game of ‘who blinks first’.
Still Šemeta is optimistic because he believes that the EU has new leverage with Switzerland that would compel them to negotiate with the EU to apply planned changes to its Savings Tax Directive.
In particular, he notes that Switzerland is “under great pressure to sign up to AEI, primarily as a result of the changed political environment, and the fact that automatic information exchange is due to become the global standard shortly.”
Moreover, the OECD is currently finalizing its proposed AEI concept, which it hopes will be adopted by G20 Finance Ministers in February, and, according to Emeta, if G20 Finance Ministers fail to unite behind the OECD’s proposal, the EU could as a last resort revert to the European Commission’s 2012 recommendation, advocating that countries unwilling to comply with international standards be placed on a so-called “black list” of countries deemed uncooperative in tax matters.
Such a measure could give rise to severe sanctions, including the termination of double taxation agreements.
Despite his optimism Commissioner Šemeta knows he has precious little time.
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