During the plenary session of the European Parliament in Brussels (08-11 March 2021), MEPs debate on the reforming the EU policy framework to stop tax avoidance in the EU after the OpenLux revelations: opening statements by Ana Paula ZACARIAS, Portuguese Presidency and by Paolo GENTILONI, European Commissioner for Economy (This transcription speech is the result of an automatic process. Check against delivery).

Brussels

statement

debate

plenary session

fight against tax fraud and evasion (T)

GENTILONI, Paolo (IT, EC)

ZACARIAS, Ana Paula (PT)

Reforming the EU policy framework to stop tax avoidance in the EU after the OpenLux revelations: opening statements by Ana Paula ZACARIAS, Portuguese Presidency and by Paolo GENTILONI, European Commissioner for Economy

SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs Mr President, Honourable Members, thank you for the opportunity to contribute to this discussion. Commission the challenges of European taxation constitutes one of our presidency priorities. Establishing a fair and efficient model of taxation, strengthening of good governance mechanisms, the global tax transparency, and to stepping up the fight against tax fraud, evasion and avoidance through noncooperative jurisdiction are some of the areas where we want to advance. As you are aware, it was under the Portuguese presidency that the dossier on country by country report the CBR's power has advanced substantially in the Council.

<p>SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs,  Over the last few years, the Council has achieved a lot by extending the scope of administrative cooperation in taxation matters, most recently also to digital platforms. Tax rulings issued to companies will not be a secret anymore. Tax authorities can now exchange information on country by country reports and potentially aggressive cross-border tax planning schemes. Administrative cooperation in the area of VAT as also taking a much higher level.</p>

SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs, In the context of enhanced transparency, it is also worth mentioning recent and planned improvements in the area of anti money laundering framework, including on determining beneficial ownership, a key aspect of the open looks investigation. And of course, there is the anti-tax avoidance directive, which provides a comprehensive framework of anti-abuse measures so that taxation occurs where value is created as regards the open looks specifically, allow me to underline some points. First, the EU as a set of clearly defined competences in the treaties where certain matters are left to national competence. This means that we have to look into what each of the other member states is doing so that the sovereign right of one country doesn't limit the sovereign right of the others.

SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs, Secondly, the Commission is doing what is necessary either through legislative proposals to through or well-established procedures to ensure the full compliance of all member states with EU law under equal conditions. We all have to act within the limits of our own competences. As far as the competences of the council are concerned. The presidency will continue to work on this matter, building on the political guidance of the Council, conclusions on fair and effective taxation in times of recovery, on tax challenges linked to digitalisation, and on tax good governance in the EU and beyond which the Council approved last November.

SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs, These conclusions touched also on international cooperation, which is an element of the Parliament's resolution on reforming the EU list of tax havens. Global cooperation is key to combating base erosion and profit shifting. Allow me to cite two well-known examples. First, the Code of Conduct Group with the EU list of noncooperative jurisdictions, member states have contributed to changing a considerable number of harmful tax practises in third countries. Most of the more than 90 jurisdictions are now engaging with have aligned themselves with the standards common to the EU member states. And this is in itself an achievement. Member states have also achieved a lot in the area of intergovernmental corporate tax policy coordination within the EU.

SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs, The EU Conduct Group examines existing laws, established practises in EU countries which affect or may affect in a significant way the location of business activity in the EU. And the group is regularly looking into further improving its functioning on the basis of its achievements. A second example is the digitalised economy. The digitalised economy enables structures that shift profits to entities that are taxed at very low rate or are not at all. The member states are working closely with OECD to find a global solution that covers both the allocation of taxing rights and anti-profit shifting rules.

SOUNDBITE (English), Ana Paula ZACARIAS, Portuguese Secretary of State for European Affairs, We do everything we can to reach an agreement by mid 2021. Both the Council and the European Council will discuss these matters in March to conclude. I believe that not least in the context of the pandemic, we should continue to explore avenues for adjusting the EU policy framework for combating tax avoidance. I'm convinced that the council and member states will swiftly make further progress in the area of taxation and the contribution of the European Parliament to this endeavour will be of the highest value for this discussion. Thank you very much.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, Mr President, honourable members, press investigations and public disclosures have been a great propeller of positive change by exposing weaknesses to the public and creating political momentum for the European Parliament and the European institutions to act. Thanks to open looks, we know more than before about issues concerning the implementation of anti money laundering rules and transparency of beneficial ownership. Information on the use of aggressive tax planning strategies, and on the existence of companies with no or very little economic substance. The so-called shell companies open looks points to problems which by nature have no borders.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, We need EU solutions. The aim to increase transparency of information is a key driver for the Commission agenda after the fifth anti money laundering directive that enabled, by the way, the Open Looks investigation a step further in transparency will be achieved soon. With the interconnection of the system of national registers, which will allow national competent authorities to have direct access to information held by national registers of the other member states. Other very important steps have been achieved thanks to the two anti tax avoidance directives and the Dec. six on the mandatory disclosure of potentially aggressive cross-border tax arrangements.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, As a result, the EU today has a legislative framework in place which makes a front runner on standards of transparency and antiavoidance rules compared to other global players. But we cannot be complacent. While national governments are struggling to face revenue needs a decisive step up to ensure more effective EU wide compliance with the principle of progressive tax is needed. It would support redistribution and reduction of inequalities amongst our economies. Moreover, we also need improvements to the EU list of non-cooperative jurisdictions, as we discussed here last month with a resolution of the Parliament.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, So first we have to make sure that all the rules we have adopted the EU level are effectively enforced by all member states. Second, we need to constant work to further strengthen our legal tools to kerb illicit behaviours. The Open Looks investigation revealed that a large number of companies have failed to meet their reporting obligations. This is a matter of monitoring and of course it is not acceptable neither in the case of Luxembourg nor or any other EU member states. We have EU rules. All member states have to follow them. In addition, in an ever evolving world, tax practises continuously evolve as well. This is why clamping down on tax avoidance and tax fraud remains high in our political agenda.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, In July last year, the Commission has tabled an action plan for fair and simple taxation, which now has to be put in practise. And we will not stop there. The commission services are working intensively on additional proposals, including on the fight against tax avoidance and on the public disclosure of certain information about income tax by large undertakings. We intend to provide more detail on some of those initiatives in the forthcoming communiqu&eacute; on business taxation. Let me briefly speak about some of them.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, First, shell companies, entities with no or very low economic substance can pose a real threat within the internal market in terms of tax base erosion and profit shifting and also play a role in transaction linked to money laundering and tax evasion. My services are currently reflecting on an additional amendment to the anti-tax avoidance directive as soon as possible in order to tackle the challenges linked to the use of shell companies in relation to tax avoidance. As regards the fight against tax aggressive planning, it is worth mentioning to parallel initiative the reform of the mandate of the Code of Conduct on Business Taxation Group and the Recovery and Resilience Facility.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, The Reform of the Code of Conduct Mandate aims of broadening the scope to assess and ensure the proper monitoring and assessment of all relevant tax measures in member states in the facility context. The member states, concerned by a recommendation on aggressive tax planning, are currently submitting to the commission their national plans. Due consideration will be given to tax reforms, aim to decisive steps against aggressive tax planning strategies to foster corporate transparency. I am pleased to see the recent unblocking in the Council on the Proposal for a directive on country by country reporting, and I congratulate the Portuguese presidency for this step forward.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, The Parliament, the Council will hopefully soon start the trialogues and finalise the negotiations. Honourable members action. Only the EU would not be sufficient as shown in the open looks investigation. Their potential harmfulness seems to have been exacerbated when complemented with reduced transparency in third countries, especially those with no income tax or with significant deficiencies in their anti money laundering on tax transparency frameworks. This is why tackling the international dimension of the beneficial ownership related deficiencies is one of the priorities for the future of the EU list.

SOUNDBITE (English), Paolo GENTILONI, European Commissioner for Economy, We need to integrate effectively beneficial ownership within the EU listing process and last but not least, a few words on minimum effective taxation to put a floor to tax competition. I only see two possible scenarios. If an agreement is reached at the OECD on Pillar two, within the timeline that we have, this will be transposed into EU law. If no agreement is reached at the OECD, the commission is committed to take EU action to ensure a minimum level of effective taxation, taking into account the landing point of the current global discussions. Thank you.