Brussels Summit: EU leaders in drive against tax evasion

EU leaders at Brussels summit say they are committed to tackling tax evasion and will push for global action to curb banking secrecy.

The president of the European Council, Herman Van Rompuy, said there was a “strong political will” in Europe to make tax systems fairer.

He said the EU would draft tougher rules this year on banking transparency. Herman Van Rompuy was speaking after summit talks in Brussels.

A key goal is to prevent multinational firms exploiting legal loopholes.

There is widespread public anger that some big corporations have minimized their tax payments at a time of economic hardship.

Tax evasion and avoidance cost EU states 1 trillion euros ($1.3 trillion) a year – more than was spent on healthcare in 2008.

The EU is now promising action against “aggressive tax planning” – that is, the complex yet legal accounting tricks used by some companies to minimize their tax payments.

EU leaders also want global standards on exchanging bank account data. The issue will be high on the agenda of a summit of the G8 industrialized nations in Northern Ireland next month.

Herman Van Rompuy said the economic crisis had injected new momentum into the debate on fair taxation. But he insisted that the EU was not seeking tax harmonization across Europe.

“It’s a real breakthrough… I am really convinced there is a strong political will by leaders not just on the European level, but on the global level, to tackle tax fraud,” he told a news conference.

Germany’s Chancellor Angela Merkel said that EU members Austria and Luxembourg – famous for their banking secrecy – agreed on the need for tax authorities to exchange information on private income. But “they attach great importance to also holding negotiations with third countries”, she added.

Switzerland, outside the EU, is a major competitor in the market for rich bank clients. Austria and Luxembourg want to ensure that Switzerland and other low-tax jurisdictions in Europe, such as Monaco and Liechtenstein, do not have an unfair advantage.

Austrian Chancellor Werner Faymann on Wednesday joined the call for a crackdown on tax evasion.

A European Parliament resolution on tax evasion on Tuesday urged the EU to halve the 1tn-euro annual losses by 2020, by curbing tax loopholes and havens.

The MEPs also called for a joint EU blacklist of tax havens.

The European Commission is pressing for automatic exchanges of people’s earnings data between tax authorities.

Some experts argue that business tax planning also reduces the revenue that developing country governments can collect, for example by shifting declared profits to countries where they are lightly taxed.

Politicians are keen to show voters that tax systems are fair, after a wave of unpopular budget cuts aimed at reducing deficits.

Starbucks and Amazon are among the companies that have faced tough questioning over their tax affairs recently.

And this week Apple came under fire in the US Congress over its low tax payments.

The other main theme at the Brussels talks was energy policy – especially the need to improve Europe’s energy infrastructure, develop renewables such as solar and wind power and remove barriers to competition. Much of Eastern Europe relies on Russia for gas – and in the past pricing disputes have led to supply shortages in mid-winter.

The Commission is urging EU governments to enact energy legislation that was agreed in 2011, warning that on current trends imports of gas will rise to 80% of the gas consumed in the EU by 2035.

The EU already imports 406 billion euros’ worth of oil, gas and coal annually – 3.2% of total EU economic output (GDP).

The fragmentation of Europe’s energy market makes it difficult to woo long-term investors willing to commit to multi-billion-euro infrastructure projects. The energy mix varies greatly across Europe, from nuclear-dominated France to coal-dependent Poland.

But a key goal is to connect Europe’s isolated “energy islands” – former Soviet bloc countries like Estonia and Bulgaria – to European grids and storage facilities.

The distortions in Europe’s energy market mean that Bulgarians – the EU’s poorest citizens – pay more for their electricity than consumers in the UK or Germany.

In the global economy the energy blockages threaten to put Europe at a serious disadvantage. The gas price index for EU households rose by 45% in 2005-12, compared with 3% in the US, while the figures for electricity were 22% and 8% respectively, the Commission says.

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