The scandal linked to the Panama Papers has not only moved the European Commission to adopt measures against aggressive tax planning, but the European Parliament too is taking action by setting up a corresponding Committee of Inquiry.

A first step

The publication of more than 11 million documents on 3 April 2016 revealed the incredible extent of tax avoidance. 214,000 offshore companies in 21 countries, which are associated with persons from more than 200 states, were set up solely for the purpose of tax avoidance. Estimates show that aggressive tax planning means that states miss out on between 50 and 70 billion euros. Hence, the European Parliament decided to set up a corresponding Committee of Inquiry, comprising 65 MEPs, which would analyse alleged contraventions and mismanagement when applying Union law in connection with money laundering and tax avoidance and which would make the necessary recommendations to improve the relevant legal framework. The final report of the Committee shall be completed within 12 months.

Debate and vote on Anti Tax Avoidance Package of the Commission

Subsequently the debate also covered the report of the Committee on Economic and Monetary Affairs on the “Council Directive laying down rules against tax avoidance practices that directly affect the functioning of the internal market“. Companies shall pay tax in the country where they generate their profits. The six measures of the Commission shall ensure that legal loopholes cannot be exploited in favour of tax avoidance. Apart from that, the report demands a corresponding black list for so-called tax havens, which in case of non-cooperation will be imposed with sanctions. Further demands included a ban on letterbox companies, a Common Consolidated Corporate Tax Base, the termination of double non-taxation and stricter caps on interest rates. There was disagreement among MEPs whether some proposals of the report went too far or not far enough. However, everybody agreed that the Council of the European Union should take into account the statement of the European Parliament – as one fears that the text will be watered down in many places.

The report was finally accepted by a majority with 486 votes in favour, 88 votes against and 103 abstentions.

Further information

Mandate – Committee of Inquiry Panama Papers

Proposal of the Commission

Draft report