The TAXE3 committee has been set up to investigate financial crimes, tax evasion and tax avoidance in the wake of Luxleaks, the Panama Papers and the Paradise papers. It is the fourth such committee and demonstrates the European Parliament’s determination to act against financial malfeasance by the rich and powerful.
Last week we hosted our first hearing on the topic of combatting money laundering in the EU banking system. This came in the wake of various recent banking scandals across Europe and the failure of national authorities in several member states to adequately enforce laws against money laundering. Recent scandals include the ABVL bank in Latvia which was wound up by EU authorities after allegations from the US Treasury that it had helped facilitate the funding of North Korea’s missile program; allegations of money laundering linked to the Russian elite and intelligence services by the Dansk bank in Estonia; the Pilates Bank of Malta which has been accused of laundering money for the ruling family of Azerbaijan; and The Banco de Madrid in Spain which filed for bankruptcy after its Andorran parent was accused of money laundering by US authorities.
The TAXE3 hearing was clear on the need for anti-money laundering guidelines in Europe, especially on how to assess banks’ business models which will help better enforce anti-money laundering rules on a day-to-day basis. It is known that some business models are more prone to the facilitation of money laundering than others. There was also broad agreement on the need for a centralised system at EU level for anti-money laundering supervision, but this needs to be backed up with the right legal framework and additional resources.
The Green Party within the European Parliament have focused attention on ‘Golden visas’ – which effectively offer residency in return for investment – together with other citizenship/residency programmes. The work of our previous PANA committee and of NGOs like OCCRP have revealed that there are an increasing number of ‘cash for citizenship’ schemes on offer from EU member states. These opaque structures may enable illegal activity by tax evaders and money launderers within the internal market. There are thus questions about whether due diligence is being applied to these programmes and there is a need for stronger EU legislation. There is also the issue of national schemes providing special tax privileges for new and foreign residents compared to other residents as this can lead to potentially harmful tax competition between member states (such as the UK non-domicile regime).
Certain Green TAXE3 members also have a spotlight on the tax-haven blacklist which is due to be updated by the end of 2018. Certain commitments made by jurisdictions placed on the “grey list” will have to be assessed by the Code of Conduct group and Council. The European Parliament has regularly called for greater accountability of this listing process to ensure it is not subject to political influence but based on objective criteria. This will also be the opportunity to debate other ongoing issues discussed in the Code of Conduct Group. For example, what progress member states have made in ending tax practices which allow for tax avoidance and/or tax evasion and are harmful to the proper functioning of the single market. There will be further discussions on preventing money reaching these non-cooperative jurisdictions via the European Investment Bank.
The frist duty of the committee is to follow up the recommendations from the previous parliamentary committees in tax avoidance as well as supporting the Commission in implementing the 2015 Action Plan for Fair and Effective Taxation. This set out a series of initiatives to tackle tax evasion and avoidance, thereby ensuring secure sustainable revenues for Member States.
Molly Scott Cato is Green MEP for the South West of England and Gibraltar. She is a member of the TAXE3 committee.