The vice-president of the European Commission, Valdis Dombrovskis, Commissioner for the Euro and Social Dialogue, said he hoped that the new revelations in the of the Paradise Papers would prompt member states to redouble their efforts to combat tax evasion, “as they are losing.”
Speaking at a Eurogroup meeting in Brussels, an exasperated Dombrovskis said that cases such as those exposed in the latest tax haven and tax evasion research, "stress precisely the need for all member states to commit themselves, because ultimately all member states are losing tax revenue."
"With regard to the Paradise Papers, it should be said that they give renewed emphasis to the work the European Commission is doing to combat tax evasion," said the Commissioner, noting that "much has already been done," in the area of legislation on money laundering and the automatic exchange of information between member states' tax administrations, "but more needs to be done" in areas such as digital taxation.
"I hope this will provide a new sense of urgency," added the Vice-President, who rather hoped for a "new impetus" in combating tax evasion at a European level.
The Paradise Papers research was conducted by the International Consortium of Investigative Journalists, which previously disclosed the Panama Papers documents.
In this new work, released on Sunday, ICIJ analyzed 13.4 million files and listed 127 political leaders from around the world, entrepreneurs, artists and footballers with companies in tax havens which is not, in itself, illegal.
Among them are Queen Elizabeth II, Colombian President Juan Manuel Santos, former German Chancellor Gerhard Schröder, Stephen Bronfman, Canadian Prime Minister Justin Trudeau's campaign fundraiser and singers Bono and Madonna, plus more than a dozen funders, advisers and members of the administration of US President Donald Trump.
The implication developed by the media from the ICIJ research is that the holding of offshore accounts and ownership of companies itself is illegal, which is not the case. Income derived from offshore accounts should be declared in the country where the recipient is fiscally resident.
However, many companies have been using off-shore subsidiaries to evade taxation and as a convenient harbour for money used for bribery and corruption, such as in the case of Glencore. See Glencore's Role in Paradise Papers: What You Need to Know
Secret moves by Apple and Nike to avoid billions in tax have been exposed in the leaked papers as both used offshore companies, quite legally, to minimise their global tax bills. Apple swerved around the 2013 Irish crackdown on tax avoidance by moving one of its most valuable subsidiaries to Jersey: again - legally OK but morally questionable.
Companies are inanimate and have no moral code, just a leagl framework. The actions of their directors most always is to 'maximise returns for shareholders' while minimising tax bills by the use of legal avoidance techniques. Much of what the Paradise Papers reveal is legal tax reduction activity and sensible actions to keep money from various Treasuries to the eventual benefit of shareholders, including UK pension funds. Other revelations will point to criminal activity and tax evasion.
Where crimes have been committed, these will be followed up but for Commissioner Valdis Dombrovskis to be moaning about companies being smarter than he is when skipping through the international tax minefield, is rather a weak stance to take, but perhaps the only one he can atke when faced with overwhelming evidence of legally avoided taxation.
