Sant abstains on resolution on tax transparency package

Labour MEP says tax harmonisation inhibits competitiveness of disadvantaged regions

Labour MEP and head of delegation Alfred Sant has abstained on a European Parliament vote on a resolution on tax fairness.

The resolution, which touches on a wide variety of tax related-issues, lays a basis for further parliamentary work on tax, inter alia fact finding by the Special Committee on Tax Rulings and the legislative work of the Economic and Monetary Affairs Committee. It was passed by 444 votes to 110, with 41 abstentions.

The former prime minister told the EP that calls for tax harmonisation or “fairness” in so called tax competition, could inhibit even further the competitiveness of areas which find themselves at a disadvantage compared to better endowed areas within the monetary zone.

“In the absence of a well-organized transfer union, tax competition will remain a tool by which peripheral or disadvantaged regions can survive… The challenge is to make such competition transparent,” Sant said.

Sant said that operational conditions for enterprises across the single monetary area were not the same. “In the real world, things shape up differently. Physical endowments are an obvious example of this. When the monetary zone operates as a federal system, or a so-called transfer union, mechanisms exist to ensure that those who are less well endowed with competitive attributes, received compensation for their handicaps. This is done by financial or other transfers, automatic or politically directed. None of this is possible in the eurozone,” Sant said.

In the text, MEPs welcome the “tax transparency” package tabled by the European Commission on 18 March, but call for further effective proposals to be tabled in the coming months to combat tax havens and tax avoidance.

“The fight against aggressive tax planning, tax evasion and tax avoidance is in the spotlight of public concern. This European Parliament resolution sends a strong political message, by advocating immediate action for tax transparency, taxation with social justice, and taxation policies that boost growth in a business-friendly environment,” said Eva Kaili (S&D, EL), who steered the text through Parliament.

Parliament insists that tax competition should be fair and transparent. It severely criticises member states that allow their tax authorities to make tax deals with multinational companies, even when the activities taxed take place elsewhere. “Secret tax rulings go to the detriment of other countries’ tax systems and distort free competition,” the resolution says.

MEPs also recommended:

simplifying national tax systems so as to reduce the administrative tax burden on individuals and companies,
doing away with obstacles that hinder cross-border activity,
that more EU member states should join the eleven countries introducing a Financial Transaction Tax (FTT),
introducing a Common Consolidated Corporate Tax Base (CCCTB) for EU companies and – as a second step – for all other companies too,
taking action against harmful tax incentives on income from patent boxes (intellectual property rights),
improving transparency around tax rulings, since they create opportunities for tax avoidance and tax competition,
improving access for national parliaments to content of tax rulings,
acting against selective tax benefits for certain companies,
that the European Commission should prepare a blacklist, before July 2015, of tax havens and countries whose tax practices distort competition,
suspending or revoking the banking or advisory licences of accountants, law firms and other financial advisors convicted of tax fraud,
shifting tax burdens away from labour to other forms of taxation, and improving VAT collection.