World Economy

EU to Curb Tax Evasion

EU to Curb Tax EvasionEU to Curb Tax Evasion

The European Union unveiled a raft of measures to tackle tax evasion as finance chiefs attempted to wrestle the issue back from populist groups using the Panama leaks to argue governments turn a blind eye to inequality.

EU economy chiefs, buffeted by anti-establishment anger from London to Madrid, showed a united front at a two-day gathering of the ministers by agreeing to work on a stepped-up regime of tax transparency and tax-haven blacklists, Bloomberg reported.

“The risk of populism is very real if we don’t act forcefully enough or quickly enough,” French Finance Minister Michel Sapin said in an interview in Amsterdam on Saturday. “People will get the impression that we’re supporting an unfair system, one with two different sets of rules. We can’t be behind the curve on this.”

The leak this month of millions of pages of financial records from the Panamanian law firm Mossack Fonseca, exposing billions of dollars hidden in tax havens around the world, comes as populist groups have made inroads at the ballot box with a mix of anti-elitism and criticism of austerity measures.

  Political Opportunity?

The EU’s finance ministers meeting in the Dutch capital on Friday and Saturday agreed to work together to come up with a joint tax-haven blacklist and common sanctions against them, to replace the existing situation where nations have individual lists. They also agreed to exchange information on the beneficial owners of companies and to explore tougher anti-tax avoidance and anti-money laundering rules.

“When the Panama papers were revealed, it was seen as both a danger and an opportunity,” European Economic Affairs Commissioner Pierre Moscovici told reporters. “The danger is that the public would take this as a confirmation that ‘they’re all bad, they’re all the same’—this would obviously fuel populism but it’s an extraordinary political opportunity; it gives us additional arguments.”

The leaks have already taken some political casualties. Iceland’s prime minister stepped down after the leaks revealed that he and his wife had investments in offshore accounts while Mariano Rajoy’s campaign to hold on to power in Spain suffered a setback when Acting Industry Minister Jose Manuel Soria resigned over his links to an offshore company listed in the leaks.

The global scale of the fallout has prompted four international organizations, the International Monetary Fund, the United Nations, the World Bank Group and the Organization for Economic Cooperation and Development to join forces to provide support and information-sharing on international tax matters they said in a joint news release this week.

Despite the promises of cooperation, governments face a long fight against tax abuse, Ronen Palan, professor of international politics at City University, London said.