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April 11 — Germany's Finance Ministry released a 10-point “Next Steps” plan on tax haven activities that calls for a global register of beneficial company owners, a monitoring system for the OECD's automatic exchange of information, and measures to standardize international “black lists” of practices that should be outlawed.
“One hundred countries are not enough,” the ministry said in a statement describing the plan released April 11. “We must ensure that all possible world states and territories implement the new standard for the automatic exchange of information in tax matters given that the honest states must increase pressure” so that “it is no longer worthwhile to provide a home for black money.”
Germany's proposal is a response to documents leaked from the Panamanian law firm Mossack Fonseca & Co. to the International Consortium of Investigative Journalists. They describe a web of offshore shell companies that, critics said, allowed politicians and public officials including Russian President Vladimir Putin to hide billions and shield them from taxes .
It comes the day before the European Commission will meet to discuss company disclosures and two days before an international network of tax administrators plans to meet at the Organization for Economic Cooperation and Development to discuss tax issues arising from the Panama scandal .
Germany's plan further proposes exerting more pressure on states, such as Panama, that haven't yet agreed to automatic data exchanges per OECD recommendations, although it didn't say what that pressure would be.
BMF said the OECD global forum should be given global oversight of all automatic data exchanges and be granted sanction power over states that aren't in line with the OECD rules. Previously, the German government suggested sanctions take the form of fines ranging from 5,000 euros ($5,700) to 50,000 euros, but critics said those fines aren't high enough to be a viable deterrent.
The German finance ministry said it will lobby for all transparency registers around the world to be linked and searchable by any tax officials in any of the participating OECD countries.
BMF hinted that it would pursue penalties against banks and tax practitioners more aggressively than it currently does, and that it would push for changes in German law that would make it harder for those subject to tax investigations to wait out statutes of limitation in order to avoid prosecution. Tax groups such as the Tax Justice Network are lobbying the German government for a 15-year statute of limitation on tax matters.
Germany said it also will apply laws designed to thwart money laundering through the banking sector to all commercial transactions, some 80 percent of which are carried out in cash.
To that end, the finance ministry said it will move responsibility for money laundering investigations from the criminal police authorities to the federal customs office. It also said it intends to engage the German states in a discussion about whether money laundering investigations—currently conducted by the states—could be better coordinated at the federal level.
Despite the plan, critics noted that Germany still opposes making public the transparency register foreseen in the EU's fourth money laundering directive. They also accused Germany of pushing for a definition of “beneficial ownership” that, they say, wouldn't prevent obfuscation of beneficial economic ownership of certain financial vehicles.
“The German government—along with Malta and Cyprus—has tried to block making the transparency register public,” Markus Meinzer of the Tax Policy Network told Bloomberg BNA April 11 in an e-mailed statement. “They are trying to block progress made here by Great Britain, France, Italy, and Spain.”
Meinzer also accused Germany of favoring a definition of “natural persons holding the leadership position of a company” in the EU directive that, he said, would essentially allow “the same (fake) company director to be listed as the nominal head of potentially thousands of letter-box companies”—a situation not unlike the ownership structures revealed in the Panama Papers leaks.
“The new EU directive”—which Germany is scheduled to transpose into national law this year—“would seek to make this the standard definition of beneficial owner,” Meinzer said.
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Germany's plan, in German, is at http://src.bna.com/d2p.
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