One year on from the Panama Papers — how far has Europe come?
Today marks exactly one year since an anonymous source leaked 11.5 million client files from the database of Mossack Fonseca, one the world’s biggest offshore law firms. With the help of the International Consortium of Investigative Journalists, over 100 media outlets exposed the individuals and companies with links to secretive tax havens. The revelations made front-page news worldwide, putting the industrial scale of global tax evasion firmly into the spotlight.
In the aftermath of the scandal, almost no country was left untouched. Hundreds of celebrities and politicians, including 12 national leaders, were shown to be implicated in the dodgy offshore dealings. The public outcry prompted a swathe of protests, mass redundancies at Mossack Fonseca, and even the resignation of the Icelandic Prime Minister, Sigmundur Davíð Gunnlaugsson.
Whilst the fact that the global elite were not paying their fair share of tax was not news in itself, the leaked file put into perspective just how much money was being lost as a result of the shady corporate transactions. Whatsmore, the timing of the revelations — coming after a long period of austerity during which millions of honest people were left struggling to get by — could only leave a bitter aftertaste for many across the world.
But today, one year on from the Panama Papers leak, can we really say that Europe has learnt from its mistakes? On this anniversary, let’s look back on the last 12 months — what we have achieved in the fight for tax justice, and what work remains to be done.
Success Story 1: National Responses
On the back of the outrage sparked by the Panama Papers revelations, many national governments responded by getting serious about collecting the unpaid taxes from the companies and individuals exposed by the leak. In the days, weeks and months that followed the leak, governments in more than 70 countries launched over 150 investigations, inquiries, audits and probes into the affairs of thousands of people and corporations linked to Panama Papers. In November 2016 alone, governments in Iceland, the United Kingdom, Canada, France, India and Pakistan announced probes of nearly 1,300 taxpayers for potential tax evasion. As a direct result, by the end of 2016, $110 million was recouped in unpaid taxes or asset seizures. A small amount for the global elite, but a giant leap forward in the fight a fairer, more equal society!
Success Story 2: Setting up a proper Inquiry committee — the PANA Committee
Under pressure from the S&D Group, the European Parliament responded to the scandal by setting up an inquiry committee. The committee’s activity builds on the investigative work of TAXE and TAXE2 committees, but has a more comprehensive scope and extensive power to scrutinise all matters of tax avoidance and evasion in the EU. This marked a huge step forward in planting the issue of tax justice in the middle of the European political agenda. On a practical level, the committee’s activity has also kept the topic in our newspapers, maintaining political pressure to bring about real change.
Progress on the horizon
There has also been some development at the EU legislative level. This is despite the fact that action in tax matters is notoriously slow given the need for the agreement of all EU finance ministers, often leading to a stalemate situation. However, the momentum sparked by the Panama Papers succeeded in pushing this agenda forward and several proposals are currently on the table of European Governments.
Firstly, the European Commission wants to strengthen the Fourth Anti-Money Laundering Directive. On a practical level, this means two things: on the one hand, boosting the competencies of national authorities to track down people who hide their finances and on the other hand, improving the exchange of information between member states about who really owns companies or trusts.
Secondly, the Commission has suggested introducing a Common Consolidated Corporate Tax Base which would make it easier to calculate the taxable profits of cross-border companies in the EU. Not only would it help simplify the procedure and help to close the loopholes, it would reduce harmful tax competition between EU member states.
Finally, the Commission is also considering introducing country-by-country reporting to all multinational companies operating in the EU, obliging them to declare where they make their profits. This level of transparency is already applied to banks, which is how Oxfam was able to reveal in a recent report that Europe’s biggest banks are registering a massive €25 billion of profit in tax havens.
Room for Improvement
Despite the progress made, it is clear that there remains a lot to be done if we are to ensure that the right amount of taxes are paid where profits are generated. On the EU’s to do list in the fight for tax justice, we want to see:
Introducing a European blacklist of tax havens and implementing sanctions against countries who continue to do business with them.
A ban on ‘letterbox’ companies — putting an end to the practice of multinationals registering in low-tax countries to avoid paying their due tax where they really operate.
Guaranteeing protection for EU whistleblowers. In light of the recent prosecution of the journalists behind the Lux Leaks scandal, it is clear we urgently need to legislate for the protection of those who bravely speak out about unethical tax dealings.
Introducing an EU tax authority with the competency to co-ordinate between national tax authorities to crack down on cross-border tax crime.
Continuing our fight for tax justice
Thanks to the Panama Paper revelations, in 2016–17, we have made significant progress in the crackdown on tax evasion and avoidance. However, it is also clear that there still remains a lot to be done. As Socialists & Democrats in the European Parliament, we will continue to lead the way in fighting against the shady dealings of the global elites and to make that everyone pays their fair share back into our society.
If you want to track the status of our demands in our fight for tax justice, make sure to check out our #TaxJustice initiative here and follow as we are turning red lights to green and step by step achieving our vision of a fairer society.
