European Commission bids to fight ‘unfair’ tax evasion

European Commission President Jean-Claude Juncker.

European Commission President Jean-Claude Juncker.

BRISBANE: European Commission head Jean-Claude Juncker urged a global fight against tax evasion while defending his position after revelations top companies paid less tax during his time as Luxembourg premier.

“I really do think that on the international, on the global level, we have to fight all together against tax evasion,” he said in Brisbane on the sidelines of the G-20 summit in Brisbane.

Tax is a key issue at the gathering of world leaders, with the host country vowing a “very aggressive” crackdown on tax avoidance as part of an agenda that focusses on growing global growth by more than 2.0 percent by 2018.

“At the beginning of the year we set out to restore integrity and resilience to our tax bases, and give our citizens the confidence that everyone is paying their fair share of tax,” Australian Treasurer Joe Hockey told finance ministers.

“Now I can say that we will bring international tax rules into the 21st century and ensure the rules keep pace with changing business models.”

His comments came as Juncker, who took over the European Commission on November 1, faces pressure over generous tax concessions offered to top global companies when he was prime minister of Luxembourg.

An international journalistic investigation revealed this month that Luxembourg allowed hundreds of top companies — including Pepsi, IKEA and Deutsche Bank — to enjoy preferential tax treatment.

The revelations show that in some cases tax bills were as low as 1.0 percent of earnings for some of the world’s richest companies — a politically explosive development at a time when cash-strapped EU governments have sharply cut budgets.

Asked whether he agreed that Luxembourg’s tax policies had been “picking peoples’ pockets,” Juncker said: “Tax avoidance is an important issue for each and every one of us.

“We are decided in Europe to fight against tax evasion,” he said, adding that when he had addressed the EU before being voted into office as president he had mentioned this as an issue.

Juncker, who was Luxembourg’s prime minister from 1995 to 2013, has previously denied he was the “architect” of the system and vowed to fight “unfair” tax evasion as head of the EU’s executive.

He said that tax evasion sometimes happened due to the “interactions between very divergent national tax rules” and Europe was working to change this.

“In accordance with the law you can create a situation, the result of it is a very low taxation for companies. This has to be avoided,” he said.

“What we are intending is not a fully fledged harmonization on each and every detail, but eliminating from our national tax legislations the open gates for tax evasions.

“I am in favor of tax competition but I am also in favor of a fair tax competition in Europe.”

The commission is currently investigating several member states over allegations they offered corporate giants such as Apple, Starbucks and Amazon state aid in the form of sweetheart tax deals.

Australia has enthusiastically backed calls to close corporate tax loopholes in its role as host of the G-20, with Hockey describing profit-shifting by corporations to avoid tax as theft.

Campaigners for greater financial transparency said the G-20 must address tax dodging and profit shifting, which they say create problems not just for the tax haven countries that enabled them but all nations.

They argue that developing countries often suffer the worst impacts, as profits are siphoned out of their jurisdictions into tax havens depriving them of valuable revenues.

“G-20 leaders don’t want to be on the wrong side of history,” said Porter McConnell of the Financial Transparency Coalition, which represents more than 150 civil society organizations and some governments.

“As financial transparency becomes more and more central to the strength of the global economy, G-20 leaders can take concrete steps to ensure a healthy financial system.”

 
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