EU has to solve tax evasion

On Tuesday (26 March), the European Parliament largely backed a detailed report on financial crimes and tax avoidance in the EU. The text set a clear roadmap to tackle those issues. However, the plan is far from likely to be implemented.

The 154-page report gathers the result of four years of work, six studies, dozens of finding trips, public hearings and meetings with companies, governments and institutions.

The report claims that the 28 EU members aren’t putting enough effort into dealing with financial crime or tax evasion. It also claims that “Until the member states change their approach, we won’t be able to move forward.”

Among others, the European Parliament says that Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and The Netherlands show signs of becoming “tax havens”, and that they allow aggressive tax planning to take place.

It has accused Denmark, Ireland, Sweden, and Finland of increasing the risks by opposing digital taxes. Also, Malta and Cyprus allow “golden visas”, which the Parliament opposes. And, it claims European banks have been too lenient when it comes to tackling money laundering.

According to Luděk Niedermayer, EPP rapporteur: “We know exactly what didn’t work in the past and we must change the system accordingly. We want to make sure that for people that want to launder money, Europe is not the right place.”

As explained in the report, Parliament has been working on new legislation, which would include changes to VAT and digital taxes.

Member states are not only blamed for not being part of the solution, but they are also part of the problem.

With the European elections around the corner, the Parliament called on the next Commission to establish a European financial police force, an EU financial intelligence unit and an EU anti-money laundering watchdog, to tackle financial crimes.

“We know exactly what didn’t work in the past and we must change the system accordingly,” said Luděk Niedermayer, EPP rapporteur. “We want to make sure that for people that want to launder money, Europe is not the right place.”

However, if member states are barely able to agree on foreign countries blacklists and their own common tax policy, it seems unlikely they would agree on sharing information and fighting these crimes together.

Europe will be what the member states want to make of it. When it comes to tax policy, they have done little. As in this case, a strong European Parliament would at least be able to put pressure on member states to deliver.

The lack of transparency in the decision-making process in the Council and the unanimity rule for taxation policy makes it almost impossible to move forward and for the citizens to make their own governments accountable. But the two-speed Europe does not work for problems that do not understand borders, as it is the case here.

Commission President Jean-Claude Juncker proposed in his state of the Union speech in September to abolish unanimity in the Council for tax policy. Although the initiative was backed by strong member states such as France or Spain, the usual suspects were against.

Ahead of May elections, in a moment when the very existence of the EU is contested across its member states, EU leaders would do better to move towards delivering on social justice to citizens.

Tax evasion and financial crimes cost billions of euros in European taxpayers’ money, at a time when public finances are under severe restraint.

Those who make grandiloquent speeches in defence of Europe would do better to work towards a fairer Union for its citizens, including through tax policy.