The European Commission strengthens the fight against tax deviators

The European Commission has decided to strengthen the fight against tax deviators and made a “black list” of the 30 offshore, which will now be under her scrutiny. The world’s largest concentration — more than 15 offshore — marked in the Caribbean. Three are offshore in Asia and Africa, five offshore in the Pacific region. A number of “tax havens” (tax havens) still exists in Europe. Among them, Monaco, Andorra, Liechtenstein and Guernsey, as well as Cyprus and Malta. Creating a “black list” the European Commission wants to increase pressure as the offshore companies and their clients, which include, in particular, the world’s largest company. A list of specific punitive measures in Brussels is not yet announced, but they certainly will be.

The problem has been brewing for a long time: the tax Dodgers, both individuals and multinational corporations who derive billions of dollars and euros in offshore, shifting the tax burden on ordinary citizens and law-abiding company. The recent scandal with the “Panamanian securities” is just one example of how acute the problem of financial corruption has acquired in the eyes of politicians and the public. The withdrawal of capital into offshore companies do not only individuals, but also the world’s largest corporations (Apple) and respected countries (Britain, Ireland). The problem is truly global, and the initiative of the European Commission — is only the initial stage of the struggle against this world evil. Among the priority requirements — transparency of financial transactions, exchange of tax information and the least conditional “harmonization” levels of taxation in Europe. Today, the gap in this area is very large: for example, corporate tax is more than 34% in France and only 12.5% in Ireland. Practically, this means unfair competition and poaching of clients at more favourable “tax haven”.

The first initiative of the European Commission on the fight against “tax havens”, which began in April 2016, has been met with fierce resistance from a number of countries, primarily the UK, Ireland and Luxembourg. They blocked the document, while the participants of the discussion mired in a fight — who can and who cannot be in the “black list”. Slovakia made a compromise proposal is to ascertain whether the country’s low taxation real place of business of the company or just “home port”.

Now the European Commission once again decided to “harmonize” (possible to bring) the taxation of companies in Europe, since a similar attempt in 2016 has not produced any results. According to the new draft, all income and losses of companies within the EU must be made to the Central tax register. Under the “harmonization” in the mandatory fall and transnational corporations. Although full harmonization of taxation within the EU will not occur, will be eliminated the most glaring discrepancies. So, according to the European Commission, Apple paid in 2014 a tax of 0.005% on its European profits. For comparison, the Austrian firm would be paid a corporate tax of 25% plus 27% in the case of payment of dividends to shareholders.

It is this “disparity” in taxation and compels the European Commission to develop at least basic mechanisms of tax harmonisation. Thus, as stated by the European Commissioner for economy and Finance Pierre Moscovici, complete egalitarianism and minimum rates of taxation will not be considering the specifics of individual countries of the EU.

In General, Europeans welcomed the attempt to end a tax Scam of transnational corporations. Even more they resent the policies of individual countries, such as Ireland, which thanks to the ingenious tax schemes get an unfair advantage over other EU members. That is artificially low corporate tax in Ireland is attracting billions in investments, primarily from the United States, including the already mentioned concern of Apple.

This also applies to Liechtenstein, which was trying to create a “tax haven” in the heart of Europe, but was forced to adjust the legislation under pressure from Brussels.

In the result of fierce tax competition, many European States have already reduced the corporate tax rate (Austria from 34% to 25% profit, in Germany — from 56,8% to 29.7%).

The most stubborn resistance to any attempt to control offshore has UK. To preserve the integrity of offshore companies and other trade preferences, the EU threatens London dumping — reduce the national corporate tax from 27% to 11%. The UK position is clear — it protects their “tax haven” of Jersey and Guernsey and the virgin Islands. London reacts aggressively and threatens to turn the UK into one big offshore, if Brussels does not take into account its special position and will not provide free access to the European market after Breccia. In addition, London is refusing to provide the European Commission with tax information on U.S. firms operating in the UK. This is contrary to EU regulations, but meets the requirements of the President of the United States Donald trump and is a prerequisite for the signing of the us-British agreement on free trade.

In the European Union are already thinking how to technically overcome the veto of the UK and other countries who refuse to provide information on its “tax haven”. A number of European politicians believe that the “black list” can approve 24 EU countries, while four countries (Britain, Ireland, Liechtenstein and Luxembourg) remain behind this European initiative. In any case, offshore companies in Europe announced the fight. This is one of the reasons for Britain’s withdrawal from the European Union.

While the Commission notes that the actual tax evasion occurs in all European countries, not just in Ireland. So, multinational corporations Ikea, Starbucks, and especially Internet giants Google, Amazon, Facebook and Apple are finding loopholes to avoid fair taxation in Europe, although they earn billions of euros here.

In the future the Commission also intends to involve the observance of basic financial and tax regulations of the country outside of the European Union. In this regard, developed a global “black list” of offshore zones and countries-violators of tax regulations. This list can get, in particular, USA, San Marino, Andorra and Monaco.

At the same time the European Commission is developing a legal justification of the term “offshore”. Zero or minimal taxation is only one of the criteria, “tax haven” is quite a complex mechanism that can provide a variety of financial and legal privileges tax evaders. Experts compare the fight with offshore companies with a very intricate puzzle. But at the first stage will be effective and the simplest methods. So, the European Commission decided that starting from 2020 the major companies operating in several countries, should pay taxes where they receive the basic income. This applies, in particular, those firms that use Ireland or offshore as its “port of registry”.