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.
EU leaders at Brussels summit say they are committed to tackling tax evasion and will push for global action to curb banking secrecy
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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The head of the European Commission has told the European Parliament he wants EU-wide exchange of income data as part of the fight against tax evasion.
Jose Manuel Barroso said he would urge Wednesday’s summit of EU leaders to support automatic exchange of people’s earnings data between tax authorities.
Tax evasion costs EU states 1 trillion euros ($1.3 trillion) a year, more than was spent on healthcare in 2008.
MEPs are expected to call for a Europe-wide blacklist of tax havens.
Pressure is likely to be put on Switzerland to relax banking secrecy amid anger over revelations about Greek and French politicians holding secret Swiss bank accounts.
The debate comes a day after UK Prime Minister David Cameron urged British overseas territories which operate low-tax regimes to “get their house in order” and sign up to international treaties on tax.
Jose Manuel Barroso said he wanted to see the principle of automatic exchange “become the standard at international level as well”.
The US Senate is currently scrutinizing the low global tax payments of Apple Inc and its subsidiaries in the Republic of Ireland in particular.
The main subsidiary, a holding company that includes Apple’s retail stores throughout Europe, has not paid any corporate income tax in the last five years, a Senate memorandum says.
In his speech to the parliament, Jose Manuel Barroso asked: “How can we explain to honest households and businesses who are feeling the squeeze yet still paying their fair share of taxes, that there are other parts of society and enterprise who are deliberately avoiding paying up?”
Jose Manuel Barroso said he would urge Wednesday’s summit of EU leaders to support automatic exchange of people’s earnings data between tax authorities
A trillion euros was, he said, “a huge amount of money to simply let through the net”.
He said he would make a call at Wednesday’s summit of EU leaders for the EU to adopt automatic exchange of income information on 1 January 2015.
EU tax authorities, he pointed out, already automatically exchanged information for income such as employment, pensions and insurance but he was proposing to include “all relevant types of income, such as dividends and capital gains”.
Austria, which has a strong tradition of banking secrecy, would support EU efforts to exchange information on foreign depositors, Chancellor Werner Faymann was quoted as saying by Reuters news agency on Tuesday.
“We won’t be the ones who put on the brakes and block things, and not the ones whose concerns put up blockades,” he said.
He noted that 1 trillion euros was “pretty much exactly the EU budget for the next seven years”.
Europe’s cash-strapped governments cannot afford to lose a single cent in tax revenue, let alone 1 trillion euros a year.
At Tuesday’s debate, non-EU member Switzerland is expected to come under pressure to put in place new rules.
Even top Swiss bankers now admit time is running out for its trademark banking secrecy.
Last week EU finance ministers agreed to start talks with Switzerland, along with Liechtenstein, Monaco, Andorra and San Marino, on swapping bank account information.
Attempts to tighten up on tax evasion follow a furor in Greece over the so-called Lagarde list, containing the names of more than 2,000 Greeks including senior politicians with Swiss bank accounts.
More recently, France’s Socialist government was hit by a scandal, as former Budget Minister Jerome Cahuzac was forced to resign over tax fraud allegations.
He later admitted that he had hidden about 600,000 euros in a Swiss bank account.
Luxembourg has announced it would ease the secrecy surrounding its banks by implementing rules on the automatic exchange of bank account information with its European Union partners from 2015.
PM Jean-Claude Juncker said Luxembourg would introduce the reforms in two years, in line with the EU Savings Directive.
The rules of the Directive are aimed at creating greater transparency and minimizing tax evasion.
Luxembourg would ease bank secrecy by implementing EU rules on the automatic exchange of bank account information from 2015
Calls for a crackdown on bank secrecy have been increasing, as governments seek to raise more taxes to support their finances.
“We can introduce [the rules] without any danger from January 2015,” Jean-Claude Juncker said.
Luxembourg is a country of only 500,000 people, but its banks and other financial institutions have assets worth more than 20 times the country’s economic output.
Luxembourg’s foreign minister, Luc Frieden, said at the weekend that he wanted to “strengthen co-operation with foreign tax authorities”.
Last week, Germany signed a tax evasion treaty with Switzerland – another European banking centre known for its secrecy.
The treaty is designed to give the German tax authorities the ability to claw back taxes from their citizens who may be hiding money in Swiss banks.
Luxembourg’s announcement leaves Austria as the only European Union country not signed up to the EU Savings Directive.
Austria’s finance minister, Maria Fekter, said recently that she would “fight like a lion” to defend the country’s banking secrecy regime.
However, Austrian Chancellor Werner Faymann indicated on Tuesday that change may have to come.
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