Debate: Reforming the EU policy framework to stop tax avoidance in the EU after the OpenLux revelations
Date: WEDNESDAY, 10 MARCH 2021
Speaker: Paolo Gentiloni
Language: EN

Thanks to OpenLux, we know more than before on issues concerning the implementation of anti-money laundering rules and transparency of beneficial ownership information, on the use of aggressive tax planning strategies, and on the existence of companies with no or very little economic substance, the so-called shell companies. OpenLux points to problems which, by nature, have no borders. We need EU solutions. The aim to increase transparency of information is a key driver for the Commission agenda. After the Fifth Anti-Money Laundering Directive, which by the way enabled the OpenLux investigation, a step forward in transparency will be achieved soon with the interconnection of a system of national registers, which will allow national competent authorities to have direct access to information held by the national registers of the other Member States. Other very important steps have been achieved, thanks to the two anti-tax avoidance directives and the DAC 6 on the mandatory disclosure of potentially aggressive cross-border tax arrangements. As a result, the EU today has a legislative framework in place that makes it the frontrunner on standards of transparency and anti-avoidance rules, compared to other global players.  However, we cannot be complacent. While national governments are struggling to face revenue needs, a decisive step up to ensure more effective EU-wide compliance with the principle of progressive tax is needed. It would support redistribution and reduction of inequalities among our economies. Moreover, we also need improvements to the EU list of non-cooperative jurisdictions, as we discussed here last month with a resolution of the Parliament. First, we have to make sure that all the rules we have adopted at the EU level are effectively enforced by all Member States. Second, we need to constantly work to further strengthen our legal tools to curb illicit behaviours. The OpenLux investigation revealed that a large number of companies have failed to meet their reporting obligations. This is a matter of monitoring and, of course, it is not acceptable, neither in the case of Luxembourg nor or any other EU Member States. We have EU rules and all EU Member States have to follow them.  In addition, in an ever-evolving world, tax practices continuously evolve as well. This is why clamping down on tax avoidance and tax fraud remains high on our political agenda. In July last year, the Commission tabled an action plan for fair and simple taxation, which now has to be put in practice, and we will not stop there. The Commission services are working intensively on additional proposals, including on the fight against tax avoidance and on the public disclosure of certain information about income tax by large undertakings. We intend to provide more detail on some of those initiatives in the forthcoming communication on business taxation.  Let me briefly speak about some of them. First, shell companies – entities with no or very little economic substance – can pose a real threat within the internal market in terms of tax base erosion and profit shifting, and they also play a role in transactions linked to money laundering and tax evasion. My services are currently reflecting on an additional amendment to the Anti-Tax Avoidance Directive as soon as possible, in order to tackle the challenges linked to the use of shell companies in relation to tax avoidance. As regards the fight against aggressive tax planning, it is worth mentioning two parallel initiatives: the reform of the mandate of the code of conduct of the Business Taxation Group and the Recovery and Resilience Facility.  The reform of the code of conduct mandate aims at broadening the scope to assess and ensure the proper monitoring and assessment of all relevant tax measures in Member States. The Recovery and Resilience Facility context, the Member States concerned by a recommendation on aggressive tax planning are currently submitting to the Commission their national plans. Due consideration will be given to tax reforms aimed at decisive steps against aggressive tax planning strategies o foster corporate transparency. I am pleased to see the recent unblocking in the Council on the proposal for a directive on country—by—country reporting, and I congratulate the Portuguese Presidency for this step forward. Parliament and the Council will hopefully soon start the trilogues and finalise the negotiations.  Honourable Members, action only within the EU would not be sufficient, as shown in the OpenLux investigation, their potential harmfulness seems to have been exacerbated when complemented with reduced transparency in third countries, especially those with no income tax or with significant deficiencies in their anti-money laundering or tax transparency frameworks.  This is why tackling the international dimension of the beneficial ownership—related deficiencies is one of the priorities for the future of the EU list. We need to integrate, effectively, beneficial ownership within the EU listing process. Last but not least, a few words on minimum effective taxation to put a floor to tax competition. I only see two possible scenarios. If an agreement is reached at the OECD on Pillar 2 within the timeline that we have, this will be transposed into EU law. If no agreement is reached at the OECD, the Commission is committed to taking EU action to ensure a minimum level of effective taxation, taking into account the landing point of the current global discussions.