On Sunday 3 October 2021, journalists began publishing a series of documentation collectively named the “Pandora Papers”.
This entailed almost 12 million files including details on more than 330 politicians from 90 countries who have/are utilising vehicles such as offshore shell companies to lessen tax liabilities and remove funds from the spotlight of society. This was the biggest investigative journalist campaign to date.
Reaction of the European Parliament to the Pandora Papers
On Wednesday 6 October, the European Parliament debated the outcome of the Pandora Papers and what the papers presented in terms of the loopholes in the EU tax system aiding tax evasion and avoidance.
The debate included the following key remarks:
Implementation and enforcement gap: The Pandora Papers have shown that member states must fully implement and enforce EU instruments into their national systems. A gap currently exists. If this does not happen wholly across the EU, introducing further legislative instruments will not have the desired effect for they may not be implemented or fully enforced by member state and/or EU institutions.
The “blacklist”: Attention must be paid to the so called “blacklist”, more formally known as the EU list of non-co-operative tax jurisdictions, which reduced in size at almost the same time that the Pandora Papers were published. MEPs made a call for ‘beefing up’ this list as a united Union, using the example of the British Virgin Islands (a jurisdiction named several times in the papers) which is currently not on this list.
Pervasive transparency: The frequent trend of using shell companies to silo tax-free wealth through different jurisdictions was evident in the Pandora Papers to add smoke to the true identity of the owner of those funds. MEPs called for heightened transparency across the board.
Reform to the 1997 Code of Conduct for business taxation: MEPs and the Commission representative, Paolo Gentiloni, agreed that current discussions for reforms to this Code are well-placed. On a high-level reform, the Code must reflect modern tax practice and have its mandate widened to be fully effective.
As highlighted in the European Parliament debate, clear and transparent rules applying equally to all is the fundamental aim here. On a similar theme, we see such view echoed in the Commission President Ursula Von der Leyen’s recent State of the Union speech, “…social fairness is not just a question of time. It is also a question of fair taxation”.
The European Parliament will vote on Thursday 21 October on a resolution to present their collective indignation of the details uncovered by the Pandora Papers which can be felt from the above highlights of the debate on 6 October.
It is understood that further debates will be held on the topic of strengthening instruments in order to put an end to harmful tax practices. It is likely that EU institutions will keep their foot on the accelerator in order to put an end to the current situation where some funds that could and should be contributing to EU public finances and thus the COVID-19 recovery are currently not playing that role.