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The European Parliament’s Panama Papers investigative committee is preparing for a “fact-finding” visit with counterparts in the U.S. Congress, as well as officials from the Treasury Department and Internal Revenue Service.
The European Union lawmakers’ four-day U.S. trip, which begins March 21, will include a visit to Delaware for meetings with representatives of the state Legislature and members of the Delaware departments of finance and state, to probe issues such as bank account maintenance and company beneficial ownership rules.
The EU officials aim to “discuss with interlocutors the state of play and future perspectives for transatlantic cooperation in the fight against money laundering, tax evasion, and tax avoidance at the international, OECD and G7/20 level, and other tax and beneficial ownership transparency at the U.S. state level,” according to a committee document seen by Bloomberg BNA.
The transatlantic visit comes as concerns grow in the EU that the U.S. is fast becoming a tax haven for wealthy foreign individuals and companies.
The U.S. government’s failure so far to adopt the Organization for Economic Cooperation and Development‘s common reporting standard “is a real problem,” Sven Giegold, a Green Party member from Germany and member of the Panama Papers panel, told Bloomberg BNA in a March 20 interview.
“Basically, the U.S. is not a cooperative jurisdiction when it comes to tax matters,” he said. There is a real enforcement problem when it comes to bank accounts. In fact it now should be considered a tax haven.”
The visit coincides with efforts by the bloc to finalize a tax haven blacklist by the end of 2017, through work being done by the EU’s Code of Conduct Group for Business Taxation. The U.S. is one of 92 countries that have been flagged for screening in the coming months.
“If the EU tax haven blacklist process is to have any credibility, the U.S. must be on the list, if it does not commit to the OECD common reporting standard,” Giegold said.
The European Commission has been outspoken in insisting the U.S. Foreign Account Tax Compliance Act isn’t equivalent to the OECD’s CRS because it doesn’t require reciprocal exchange of bank and asset data.
At the same time, the European Parliament and the EU Council of Ministers are negotiating the final terms of amendments to the EU Anti-Money Laundering Directive. Beneficial ownership rules are a key issue. Eventually, the EU will also draw up a separate money laundering blacklist.
Another important tax enforcement issue that will be raised by some EU lawmakers concerns the Trump administration’s plans for a border adjustment tax that could be imposed on imported goods.
“We certainly hope to get a much better idea about what the Trump administration and the U.S. Congress have in mind about this,” Giegold said. “From what we have heard, the border tax is similar to a value-added tax. But the revenue from it will be used to finance a much lower corporate tax level. This has huge concerns for a variety of reasons for us in Europe.”
The U.S. visit also comes amid concerns about the U.S. government’s commitment to the OECD’s Action Plan on Base Erosion and Profit Shifting, designed to tackle corporate tax evasion and tax avoidance.
At a February meeting of EU finance ministers, when the block adopted new rules to prevent double non-taxation via hybrid mismatch rules involving foreign countries, Luxembourg Finance Minister Pierre Gramegna said that it “is a growing concern among companies throughout Europe that by adopting OECD BEPS reforms, the EU is putting itself at a competitive disadvantage.”
“We do not see the same commitment in the United States or in Asia,” he added.
According to some EU lawmakers and the European Commission, a Group of 20 communique signed March 18 by finance ministers in Baden-Baden, Germany, was important because it emphasized a commitment to the OECD BEPS reforms.
“While the U.S. objection to including a commitment to free trade in the communique was a concern, there was some good news, as the U.S. did not object to G-20 support for the BEPS reforms,” Giegold said. “That was very important. It would indicate that the U.S. is not moving away from BEPS. But it is an issue that will certainly be raised during the visit to Washington in the coming days.”
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