Euro News: Year-end deadline set on ending banking secrecy

Hollande speaks to the media on arrival to a European Union leaders summit in Brussels.

European leaders yesterday targeted a year-end deadline to do away with banking secrecy, hoping to recoup a trillion euros in lost tax each year to help beat recession and unemployment.

But British Prime Minister and current G8 chair David Cameron, backed by French President Francois Hollande, struggled to extend the crackdown to corporate multinationals – despite technology giants Google and Apple coming under fire for paying low tax rates, notably in Ireland.

“Tax evasion is a serious crime, one which, thanks to protracted legal proceedings and trifling penalties, can be committed virtually with impunity,” said European Parliament head Martin Schulz at the summit.

At talks during which leaders also prioritised streamlining energy policy, German Chancellor Angela Merkel also insisted tax fraud and avoidance simply “has to end”.

But the ambitious goal of automatic cross-border sharing of European Union bank records was held hostage to demands by Luxembourg and Austria for a similar deal first with non-EU Switzerland and four other financial centres.

At this stage, the exchange of information regime is intended to cover only savings – a more limited policy than that brokered by the United States with overseas partners in 2010.

In final draft conclusions seen by AFP yesterday, leaders were to call for EU rules first agreed in 2008 to be adopted “before the end of the year”.

But veteran Luxembourg Prime Minister Jean-Claude Juncker said that his country will only move in line with a broader deal between the EU and Switzerland, Andorra, Monaco, San Marino and Lichtenstein.

The European Commission last week won a mandate to negotiate information-sharing norms with the five.

“We are going to abandon banking secrecy and move towards the automatic exchange of information we want to bring in for January 1, 2015,” Juncker said.

However, this “necessitates negotiations with third countries, notably Switzerland, so (that) we are in a position that does not skew competition”, he insisted.

Austrian counterpart Werner Faymann agreed. “We want data exchange with third countries.”

Oxfam estimates that more than $12tn (9.5tn euros) is hidden in EU-anchored tax havens – with the UK and its dependencies alone, from Guernsey to Grand Cayman, accounting for more than half.

In London yesterday, Google executive chairman Eric Schmidt defended the Internet giant’s readiness to exploit government rivalries for investment, as media reported him stressing that Google follows “the tax laws of the countries we operate in”.

That intervention followed US lawmakers’ attacks on Apple chief executive Tim Cook for running “sham” subsidiaries as part of “convoluted” strategies to shift profits offshore.

A US Senate report found that Apple Incorporated had paid just 2% tax on $74bn in overseas income, largely by exploiting a loophole in Ireland’s tax code.

“We cannot accept that a certain number of companies can put themselves in situations where they escape paying taxes in ways that are legal,” French President Francois Hollande said. “We must co-ordinate at a European level, harmonise our rules and come up with strategies to stop this.”

British Prime Minister David Cameron, who has put tax at the top of the agenda for a meeting of the G8 in Ireland next month, was equally clear about the need for co-ordination steps.

“There is a real chance of seeing the sort of international action that we need to fix this problem,” he said. “You can’t do it on your own, you have to have that international action and that is why I think today has been a bit of a breakthrough.”

German Chancellor Angela Merkel, who avoided commenting on the issue ahead of the summit, expressed her frustration that existing laws were not sufficient to capture taxes fully.

“We will work towards ensuring companies have to pay more where they are based,” she told reporters, saying that new rules would affect big companies most, although it many cases companies are basing themselves in low- or no-tax jurisdictions.

Irish Prime Minister Enda Kenny however denied “special” deals and said Dublin would continue to compete for international business using a “transparent” tax regime.

Belgian Greens EU lawmaker Philippe Lamberts said the summit’s lofty tax goals amounted to little more than “gesticulation”, telling reporters that “there is clearly no political will” to undermine nationally-controlled tax-setting powers.

Britain’s Cameron, who faces a threat by Scotland to cut its business tax rates if an independence referendum succeeds next year, said securing a level playing field on corporate tax was key.

“I believe in low taxes for businesses,” he said. However, “we have got to be sure that when we set those taxes, companies pay them”.

Key power-producing states like the UK also used the summit to press a request to open access to “indigenous sources of energy with a view to their safe and sustainable exploitation”.

As massive importers of energy needs, EU governments are aware that a shale oil and gas revolution in the United States has left them trailing.

Alongside Britain, EU partners Hungary, Poland, Romania and Spain are in favour of developing shale energy but others, including France, are opposed, citing the environmental issues involved.

Lithuania’s President Dalia Grybauskaite said Europe was at last “realising we need to talk with one voice” on energy.

Reported by: Caye Global News, AFP/Reuters/Gulf Times

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