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By Joe Kirwin
European lawmakers agreed Nov. 28 to establish a new panel to scrutinize recent Paradise Paper revelations, while preparing for a future permanent tax investigative committee.
The European Parliament’s Panama Papers investigative committee coordinators agreed on the new panel, to work through the end of the current European Parliament’s term in June 2019, at a hearing about media reports that led to the Paradise Papers leaks Nov. 5. The plan must get the approval of the European Parliament General Assembly when it meets Dec. 11 in Strasbourg, France.
“We have agreed this morning that the work of this committee should continue to examine profit shifting and tax evasion exposed in the Paradise Papers,” panel Chairman Werner Langen said Nov. 28. “Meanwhile, we have also agreed to push for a permanent tax inquiry similar to what exists in the U.S. Congress.”
The Paradise Papers leak of 13.4 million documents revealed multinational companies’ and high-net-worth individuals’ use of complex offshore tax planning. The data trove was published Nov. 5, renewing debate about how to curb profit shifting.
Meanwhile the European Commission and some European Parliament members clashed Nov. 28 over how effective pending corporate tax reform will be at reducing profit shifting and tax avoidance and evasion.
European Taxation Commissioner Pierre Moscovici insisted that the common consolidated corporate tax base (CCCTB) proposal is key to reducing the profit shifting identified in the Panama Papers as well as the newly released Paradise Papers.
“A common corporate tax base as included in the CCCTB will limit the kind of artificial transfers that we have seen in the Panama Papers and again in the Paradise Papers,” Moscovici said during testimony before the European Parliament Panama Papers investigative committee. “It is my hope that EU member states will agree on this legislation by the end of 2018.”
Moscovici also emphasized that the CCCTB won’t include harmonization of corporate tax rates.
However, members of the left-wing European United Left-Nordic Green Left political group—known by the acronym GUE—released a report insisting the CCCTB has a major loophole because it won’t stop companies from shifting profits outside the European Union in order to avoid taxation.
Criticism from the left-wing European Parliament political group is based on a Nov. 28 study carried out jointly with the Tax Justice Network.
“The study highlights that profit-shifting outside of the EU is not addressed by the CCCTB and it emphasizes the need for a worldwide approach so that profit shifting within and out of the EU can be accounted for,” said Miguel Viegas, a Spanish member of the European Parliament said at the Nov. 28 hearing.
The joint TJN and GUE study also insists that the data that the European Commission will use to determine the consolidation in the form of an apportionment formula is flawed.
The data “are shown to gravely understate the degree of profit-shifting by U.S. multinationals in particular,” the report said.
“First and foremost this report shows the alarming limitations of the data that have been used by the commission and other sources in estimating the impact of the CCCTB proposal on member states’ tax revenue,” said Matt Carthy, an Irish GUE parliamentarian. “I fully support the call made by these academics for policymakers to address this by using the more comprehensive data resources created by the introduction of an OECD standard for county-by-country reporting when it is available—and the finding that taking major policy steps without such analysis would be deeply irresponsible.”
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