On 26th March 2019, the European Parliament adopted the Report of the Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3) with a vast majority. The report includes many important demands against tax avoidance and tax evasion. In doing so, the EU Parliament once again sets high standards for the tax policy in the European Union and its Member States.
The European Parliament saw cross-party agreement on the final report of the Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3). The voting result sent a strong signal in the fight for a fair tax system: 505 MEPs voted in favour of the final report, 63 voted against and 87 abstained. Thereby, the EU Parliament has clearly shown that it has recognised the urgent need for action in the field of taxation.
The strong agreement puts particular pressure on the European Council as many important tax issues have been blocked for a long time due to the resistance of individual states. New figures illustrate the urgency of the problem: each year, Europe misses out on 825 billion euros in tax revenue through tax avoidance and evasion in the EU. This money is lacking in the state budgets for education, health or infrastructure.
Many important demands are included
With its latest report, the EU Parliament has once again shown that it adopts a pioneering role in the fight against tax tricks. Member States are urged in particular to abandon their blockade regarding important measures such as the Common Consolidated Corporate Tax Base, public country-by-country reporting, the digital workplace as well as abandoning the unanimity in tax issues towards a fair tax policy. Apart from that, the report includes a whole list of further demands and points, from abolishing letterbox companies, improved control and possible sanctions against third countries that do not play by the rules, up to stricter rules for financial intermediaries. Tax havens within the EU are also an issue, which is associated with the demand to make fair taxation part of the European Semester.
EU Finance Ministers have to act
In the end, it will above all depend on the willingness of the EU Finance Ministers, as tax issues can only be decided by unanimity in the European Council. The demands of the EU Parliament have to be taken seriously by taking measures against the system of tax tricks. In the plenary session on the TAX3 final report, MEPs of the S&D fraction denounced Ireland, Cyprus, Malta, the Netherlands, Belgium and Luxembourg, because these do not have the political will to close loopholes and to pursue financial crimes. Progressive proposals on fighting tax avoidance and tax evasion are on the table; they only require implementation. It is not enough that decision-makers make public statements against tax tricks, whilst representing repeatedly problematic positions in the negotiations. Austrian Finance Ministers too have frequently played an inglorious role, such as in case of public country-by-country reporting.
Unfortunately no majority for minimum profit tax rate
Even if the overall report has to be welcomed, in respect of a significant point it does not meet the standards of a progressive tax policy. The Conservative majority in the EU Parliament has stopped a minimum rate for profit taxation by companies from being adopted. The average corporation tax rate within the EU has been drastically reduced over the past years. Hence, the Member States have undercut each other so to speak. Workers and consumers are balancing public finance as they are the ones who have to shoulder public finance increasingly alone. This too requires rethinking.