updated 4:19 PM CEST, Oct 25, 2021

EU lawmakers call for updating regs to address more 'innovative tax schemes'

The European Union should update its tax avoidance legislation and revamp its systems for assessing harmful tax regimes if it is to ensure that member states are not deprived of substantial revenue, European Parliament lawmakers agreed on Thursday, in a non-binding resolution that was seen to be a response to the release earlier this week of the so-called Pandora Papers.

In the plenary resolution, prepared by France's Aurore Lalucq, of the center-left Place Publique party, the lawmakers agreed that while tax competition among the bloc's countries was not in itself problematic, common principles were needed to govern the way that they used their tax regimes and policies to attract business and profits.

Currently the policing of such matters is falling short, the MPs agree, because policy and legislation has not kept up with the more innovative tax schemes that have been devised over the last 20 years, according to a summary of the resolution posted on the European Parliament's website.

The resolution was adopted with 506 votes in favour to 81 against, with 99 abstentions.

In a prepared statement, Lalucq said that the publication of the Pandora Papers earlier in the week, by the International Consortium of Investigative Journalists, had "remind[ed] us of the importance of implementing common and ambitious European rules to end tax dumping between member states, while fighting tax havens elsewhere.

"This report recognises the obsolescence of the current Code of Conduct [on Business Taxation].

"Parliament calls for their updating, in order to strengthen the criteria for compiling the list of tax havens and demands the Code’s recommendations be legally binding in order to effectively combat harmful tax practices and aggressive tax competition.”

A European Parliament press office statement noted that "conservative estimates" by the OECD on Base Erosion and Profit Shifting (BEPS) indicated that such BEPS efforts currently account for around 4% to 10% of global corporate income tax revenues, or €84bn to €202bn annually. 

To view the full 16-page resolution, entitled Reforming the EU policy on harmful tax practices (including the reform of the Code of Conduct Group)click here.

In a related development, an EU decision to remove Anguilla, Dominica and the Seychelles from a tax haven blacklist on Tuesday was questioned and even ridiculed by MEPs and transparency campaigners, according to various media reports, which cited the coincidence of the timing of the jurisdictions' removals with the Pandora Papers revelations. 

The EU tax haven list was created in 2017 to call attention to the need for certain jurisdictions to improve their enforcement of tax avoidance and tax evasion regulations, and currently consists of nine names: American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the U.S. Virgin Islands, and Vanuatu.

“The EU is shutting its eyes to real tax havens, while considering blacklisting poor countries who do not sign up to the imminent global tax agreement,” Oxfam’s EU tax expert, Chiara Putaturo, was quoted in the Guardian as saying.

“Today’s decision to delist Anguilla, the only remaining jurisdiction with a 0% tax rate, and the Seychelles, which are at the heart of the latest tax scandal, renders the EU’s blacklist a joke.

“While the Pandora Papers investigation blew the lid on how the super-rich continue to use tax havens to avoid paying their taxes, ordinary people are asked to foot the Covid-19 recovery bill.”

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