At their last voting session of the first October plenary session, MEPs on Thursday were able to further a cause that had come to prominence a week earlier, dominating international headlines.
The latest and, so far, biggest data leak on tax avoidance, tax evasion and money laundering, dubbed the Pandora Papers, made it abundantly clear that the fight against those practices is still far from won, almost ten years after the first such disclosure in the Offshore Leaks.
The European Parliament plenary vote on Thursday concerned the long overdue reform of the 1997 Code of Conduct on business taxation, the EU’s main tool to combat harmful tax practices.
And, according to Parliament’s rapporteur, Aurore Lalucq (FR, S&D), “For all those engaged in the fight for tax justice, it is good news that the European Parliament has backed our proposal to empower the EU in the fight against tax abuse and tax crimes”.
“The Pandora Papers scandal reminds us of the importance of implementing common and ambitious European rules that end tax dumping between member states, while fighting tax havens elsewhere in the world”
Lalucq said that MEPs, by supporting her report, recognised the “untenability of the current Code of Conduct” and called for urgent reform of the “outdated” Code of Conduct to “tighten the criteria for drawing up the list of tax havens”
“The Pandora Papers scandal reminds us of the importance of implementing common and ambitious European rules that end tax dumping between member states, while fighting tax havens elsewhere in the world” French Socialist MEP Aurore Lalucq
The current Code of Conduct is being overseen by the Code of Conduct Group, composed of “high level representatives of Member States and the European Commission”, as the European Council’s website puts it.
Earlier in the week, the Greens/EFA Group’s vice-chair Ernest Urtasun (ES) identified this arrangement as not fit for purpose, arguing that “The Code of Conduct Group is one of the most secretive groups in EU decision making. It's time to re-define what harmful tax practices are and that's why this report offers Member States a new basis through which tax competition can effectively be tackled”.
The Pandora Papers themselves were the subject of a plenary debate added at the last minute and held on Wednesday afternoon.
What irked many members most in an EU context was the fact that just two days after the publication of the gigantic data leak - which confirmed that what had been revealed for one corporate service provider in the Panama Papers five years ago is general practice with at least fourteen more - the Union’s finance ministers (ECOFIN) had agreed to trim what is known as the blacklist of tax havens.
Markus Ferber, who speaks on economic affairs on behalf of the centre-right EPP Group, had already warned the ECOFIN ministers on the eve of their meeting that to further water down the EU blacklist was, “precisely the wrong signal.”
“If you want to fight tax havens effectively, being on the EU blacklist must come with tough sanctions. The Pandora Papers prove that the current approach of exchanging nicely-worded letters simply doesn’t cut it” German EPP MEP, Markus Ferber
What was needed instead, Ferber insisted, was an EU blacklist with bite. “If you want to fight tax havens effectively, being on the EU blacklist must come with tough sanctions. The Pandora Papers prove that the current approach of exchanging nicely-worded letters simply doesn’t cut it”.
This sentiment was shared widely across the European Parliament’s political Groups with Code of Conduct rapporteur Lalucq commenting that “the nine countries still listed [in the Blacklist] mostly represent minor financial flows”.
During the debate, Renew Europe Group Vice-Chair Luis Garicano argued equally bluntly for change: “We had Luxleaks, Panama Papers, Paradise Papers, now the Pandora Papers, and the reality is that it’s the same people committing the same crimes time and time again”.
Of course, there is indignation all around every time and, as Garicano expanded, “our leaders say it’s disgraceful. But nothing changes. And why? Because those who are supposed to change things are benefiting from the situation”.
But the Spanish liberal MEP still pinned his hopes on what is promised by the European Commission, namely new legislation on money laundering, and a new supervisory body. Europe, he concluded, “needs to use the opportunity of this legislation, and I commit myself to ensure we have a strong, independent and well-funded agency”.
Speaking on behalf of the Commission at the debate was Economy Commissioner Paolo Gentiloni. He started out by recalling the progress achieved over recent years, stating that the legislative framework in place in the EU now boosts “some of the highest tax transparency and anti-money laundering standards in the world.”
“We had Luxleaks, Panama Papers, Paradise Papers, now the Pandora Papers, and the reality is that it’s the same people committing the same crimes time and time again. Our leaders say it’s disgraceful. But nothing changes. And why? Because those who are supposed to change things are benefiting from the situation” Spanish Renew Europe Group MEP Luis Garicano
To give him credit, the Commissioner did not shirk the question which must surely follow a statement like this: “Why, if so much has been done, do we still have the kind of revelations which made the headlines over the last few days?”
First, he referred to the fact that some of the new regulations of recent years still have to be fully implemented by some Member States “in order to bear effective results”.
He continued, “secondly, we have to keep in mind that tax avoiders and evaders develop new practices to circumvent the regulations in place. Business is mobile and moves faster than any legislator around the world. These leaks demonstrate that we cannot be complacent”.
As a new building block of the EU’s fair taxation and anti-money laundering strategy, the Commissioner announced new legislation to tackle misuse of shell companies by the end of this year.