THE NET CLOSES - BUT SLOWLY
UPDATE 16th December 2017
This, in my view, is what Brexiters are desperate to avoid, or evade. UK tax courts are still stuffed with tax-planners who let-off evaders. EU tax courts are slow, because they have to accommodate tax-evaders from 28 Member States, but are moving inexorably to close tax-havens, most of which were British boltholes for our aristocrats:
Firms forced to reveal real owners in tax evasion fight
Guardian news: ‘Today’s deal will make it much harder for the criminal and corrupt to use EU companies’
Companies across the European Union will be forced to disclose their true owners under new legislation prompted by the release of the Panama Papers.
Anti-corruption campaigners applauded the agreement as a major step in the fight against tax evasion and money laundering but expressed disappointment that trusts would mostly escape scrutiny.
The revised terms of the EU’s fourth anti-money laundering directive include:
• A requirement for companies to disclose their beneficial, or true, owners in a publicly available register.
• Data on the beneficial owners of trusts to be available to tax and law enforcement authorities, as well as sectors with an obligation to follow anti-money laundering rules, such as lawyers.
• A requirement for member states to verify beneficial ownership information submitted to their registers.
• Extending anti-money laundering and counter-terrorism regulations to apply to virtual currencies, provision of tax services and those dealing in works of art.
TAX JUSTICE EUROPE issued this press release on 4th April 2017.
One year after the
Panama Papers, the EU’s drive for increased financial transparency risks
falling short
[About
Panama Papers]
On the morning of 4 April 2016, one year ago this week,
citizens around the world woke up to yet another shocking tax scandal. The
leaking of 11.5 million confidential documents from Mossack Fonseca showed how the Panamanian law firm
helped its clients through the use of offshore anonymous company and trust structures
to launder money, dodge sanctions and evade taxation.
Tuesday, 5 April 2016
[Political
response]
In the weeks which followed, the Panama Papers put the
issue of anonymous company ownership high on the international agenda. The
European Commissioner responsible for taxation, Pierre Moscovici, said that the
use of offshore companies in order to hide financial assets from tax
authorities was “immoral, unethical and, in one word,
unacceptable”. He said that the EU had “a
duty” to act and put an end to the kind of tax dodging uncovered by the
Panama Papers.
In April 2016, European governments recognised the need
for action, and EU Finance Ministers invited the
European Commission to introduce changes to EU anti-money laundering
legislation in order to enhance the accessibility of beneficial ownership
registers for both companies and trusts.
[Insert
line about your own country – if relevant]
Soon thereafter, the European Commission responded with a
proposal
in July, announcing revisions to EU legislation that would allow for full
public access to the beneficial ownership registers of companies and
business-related trusts operating in the European Union.
[Why
this is important]
This was a welcome step towards greater transparency. The
types of schemes uncovered by the Panama Papers involved anonymous companies, whose
real owners hid behind hired ‘nominee directors’ that often had very little or
nothing at all to do with the business in question. They often also involved
the use of anonymous offshore trusts. Such anonymous vehicles are known as ‘getaway
cars’ for tax evaders, money launderers and criminals, which allow them to
obscure their identity and hide the proceeds of their crime.
Public registers would make anonymous trusts and
companies a relic of the past. Through such registries, the real owners – also
known as “beneficial owners” – would be required to disclose their true
identity. With public access to such information, journalists, civil society
and interested citizens would be able to peel back the layers of secrecy and
uncover wrongdoing. This would not reveal any details about bank accounts, but
simply allow us all to know who owns the companies and trusts operating in our
societies. Already today, public registers exist, including in the UK where a public register for companies is
up and running. One of the world’s largest banks, HSBC, has meanwhile also
indicated its support
for establishing public company and trust ownership registers.
[Political
backtracking by EU Member States]
However, one year on from the Panama Papers, we find that
commitments by European governments to put an end to the loopholes revealed by
the Panama Papers have waned. Meeting in December last year, negotiators from the
EU countries dropped key provisions from the European Commission’s proposal,
most notably the proposal to make the registers public. Instead, registers
would only be made accessible to those individuals who can prove a ‘legitimate
interest’. This would mean that journalists, civil society organizations
and the general public would have to demonstrate a ‘legitimate interest’ in
order to get any information, unless member states voluntarily opt for public
access. [Insert
reference to your own government, if relevant, and underline that they have
also agreed to this backtracking]
[Why
‘legitimate interest’ doesn’t work]
In reality, this could mean that the public would often
be left in the dark. How to define the concept of ‘legitimate interest’ would be
left to the discretion of EU member states. Experience from the ongoing
implementation of the current EU’s anti-money laundering directive shows that
EU member states cannot agree on a common definition. In the Netherlands,
following a lengthy consultation, the government came to the conclusion that
registers should be made public because attempting to assess who would have a
‘legitimate interest’ in accessing this information would be too “hard
to control, hard to enact, and costly.” Meanwhile, in other countries, such
as the Czech Republic and Italy, the interpretation of legitimate interest has
been so restrictively defined that individuals have to go through a court
procedure in order to demonstrate their legitimate interest in accessing
this information.
[Leadership
from the European Parliament]
But while EU member states have sought to backtrack the
European Commission’s proposals for further transparency, the European
Parliament has long recognised the need for transparency. And in February of
this year, MEPs voted in favour of an ambitious
response to the Panama Papers, backing rules that would introduce public
beneficial ownership registers for all companies and trusts operating in the
EU.
The European Parliament proposed to close several
loopholes in the Commission’s proposal, including by strengthening the
definition of when an individual is deemed to be the beneficial owner of a company
and requiring banks to terminate business relationships with companies who are
unable to identify their beneficial owner.
[The
scandals keep coming]
Meanwhile, the billion dollar scandals keep hitting the
news. Less than a month ago, a new expose showed
that dirty money from Russia worth US$ 20 billion had been laundered through
anonymous shell-companies and hidden outside of Russia. One of the favourite
hiding places was banks in the EU.
[Next
steps & conclusion]
In order to become EU law, the European Parliament and EU
member states need to negotiate a final agreement. Therefore, it is crucial
that EU governments rethink their unambitious position and instead deliver on
their commitment to enhance transparency following the Panama Papers. [Insert reference to your own
government, if relevant: “This includes…”]. Only fully publicly
accessible beneficial ownership registers of both companies and trusts will
allow for the transparency needed in order to put an end to the shadowy
business practices that were at the centre of the Panama Papers.
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