Published on May 19, 2009

Paradise lost? Europe's tax havens greylisted

Luxembourg, Austria and Belgium all figure on the OECD's 'grey list' of countries who are not yet up to standard in taxation rules. MEPs discuss the implications of the OECD standards in Europe.

Lenght: 17 minutes

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Jean-Paul Gauzès, should we get rid of tax havens?

It depends what you mean by tax haven. If a tax haven is somewhere where taxation is low but honest and loyal, then it’s up to the country to chose. There is no reason to get rid of it.

Is ‘honest tax haven’ not a contradiction in terms?

No. In every day language, a tax haven is a place where embezzlement takes place, or one avoids paying tax. We have to differentiate. There are states that chose low taxation which are not tax havens. A reprehensive form of tax haven is when the system in that country allows tax evasion. So money which would normally be taxed in its country of origin is taken from this tax regime in an improper way.

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I am saddened by what happened at the G-20 summit. I think the OECD showed a lack of governance, they caused public disapproval, without prior discussion. But the worst is the EU. Representatives of the EU, of the Commission and large countries allowed other European countries - the allies- to be put on a grey, black or other list. I really think this is a regression in the EU.

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I agree with you when speaking of money coming from drugs. Luxembourg was the first country in Europe in 1989 to penalise the money laundering of drug money. But I can tell you that there are countries which are on the white list where there are no... basic mechanisms.

For example?

We know that there are jurisdictions in the USA where you can create a company anonymously and no one will ever know who is the economic beneficiary of this company. Those at the forefront of the movement would do best to manage their internal problems first.

Jean-Paul Gauzès is there a link between banking secrecy and tax havens? Or are they two completely different questions?

I think there is some confusion between the two. A tax haven, in the bad sense of the term, is a place where one can avoid giving money to the administration. What has just been said by our Luxembourgish friend is true. EU countries have set up mechanisms against money laundering. If you go to any of these countries with cash or if you have money but can’t explain exactly where it comes from the bank will refuse it.

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What is the Parliament’s message to citizens? The layman can not use a tax haven. He doesn’t earn enough. He looks at bankers, at the big shots, which use tax havens. What do you do for the layman?

I think that tax havens are a foreign notion for the average citizen. They don’t have the means to put their money in tax-friendly countries. They can’t easily move money out, it’s not worth it. In the current system everyone looks at what is on the other person’s plate. There is an ongoing debate about money. The salaries of directors, or EU commissioners, MEPs, people keep asking me what I earn. When I tell them, they say, it must be more you’re not telling me the truth. There is a sort of jealousy, related to the crisis. I have the feeling that most of the Parliament - because it will be a question during the vote - will there be an amendment allowing the two systems to continue, with taxation at source or passing on information. The amendment on taxation at source will probably be set aside. Why? Because it is a vaguely populist way to tell citizens ‘don’t worry, those who made the best of it will no longer be able to do so’. ‘We are setting up mechanisms to ensure better justice’ The question is, will we strike in the right place? Will we not paralyse investment? And growth? The EP majority opinion is in favour of severe regulation for countries with favourable tax regimes. at least those where tax evasion is made easier. Both the right and left wing parties agree.

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All types of fiscal infractions are going to be pursued in future.

Violations?

Yes, violations.

In the beginning certain countries; Switzerland, Luxembourg, Austria, only gave information when faced with a tax violation under penal law, known as tax crime. Now that also includes tax fraud, after accepting the OECD standards. In this way all countries must now be as confident as possible, so that they could obtain from their partners, all information on their citizens that are suspected of tax fraud. Banking secrecy will continue to exist, but there will be more information regarding tax administration in future.

Jean-Paul Gauzès. Is banking secrecy dead, should it be?

I share the same approach as my colleague. Banking secrets will always exist for the disclosure of citizens’ accounts. It protects privacy, it’s a right we have to possess, as long as the possession is legitimate. What is going to disappear is the refusal to inform in cases of suspected tax fraud. Banking secrecy as protection against tax authorities is dead, but not banking secrecy itself.

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It’s the economic crisis that is leading everything.

It’s the economic and financial constraints that carry much weight on legislation. Even though banking secrets are not the cause of the crisis, Mr Purvis is right to point that out. It’s true that the crisis puts many perspectives into question and we do not feel we will leave the crisis the same way that we entered it lead to many questions. The citizens asked for this equality that is sometimes a bit formal, but is justified.