GUE/NGL MEPs grill PwC official in latest Panama Papers hearing

Find all background material for this hearing on the event page.

The European Parliament’s Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion (PANA) today discussed the role of intermediaries as revealed in the Panama Papers scandal.

This was the first of three hearings focused on the role of lawyers, accountants and bankers in cases such as those exposed in the Panama Papers.

The first panel hosted Professor Ronen Palan, who has researched, among other things, the role of tax havens in globalisation; Professor Brooke Harrington, who has researched in-depth into the role of wealth managers; and Daniel Hall, director of an asset tracing and enforcement intelligence firm.

Addressing the panel on the issue of tax havens, globalisation and the role of wealth managers, GUE/NGL MEP Miguel Viegas was adamant that “the capacity of tax administrations in EU member states must be reinforced so that they can prosecute illicit activities more effectively.”

In agreement with Miguel Viegas’s observation, Ronen Palan noted that tax administrators’ capacity has indeed declined, as governments have cut expenses; and this poses a problem as the investigation of the structures that were very clearly presented by Brooke Harrington, is a very expensive task in which constant decisions on where and how to most effectively use the resources need to be made. In this respect, companies such as Exxon can have at least 60 separate accounting books which require a lot of time to be analysed in depth. Therefore, a lot needs to be done in terms of capacity building within the EU.

The second panel hosted Rupert Manhart and Rochard Frimston, from the Council of Bars and Law Societies of Europe (CCBE), Wim Mijs from the European Banking Federation (EBF) Roger Kaiser from the European Banking Federation (EBF), and Stef van Weeghel from PricewaterhouseCoopers (PwC).

Irish MEP Matt Carthy questioned the PwC representative on behalf of GUE/NGL about the role of PwC and the Big Four in advising EU governments on tax issues and the potential conflict of interest issue that raises.

“In Ireland, the PwC managing partner has been involved in advising Google, Apple, Facebook and others on how to use Ireland as the centerpiece of their global tax avoidance strategies, including by setting up the Double Irish.

“But this same leader of PwC is also the chair of the American Chamber of Commerce tax group in Ireland. In this role PwC successfully ensured the withholding tax that required the ‘Dutch Sandwich’ to be used in conjunction with the Double Irish was scrapped.

“Of course there is also the role played by PwC in the LuxLeaks scandal. So in at least two Member States of the EU we can see that PwC has played a major role not only in facilitating massive tax avoidance by multinationals – but also in directly designing the whole system, even at the government level.

“How can the Big Four justify the conflict of interest between advising multinationals on how to avoid paying tax, while at the very same time playing a major role in designing states’ tax laws?”

Prof Stef van Weeghel (PwC) avoided the question, saying that he was not familiar with the points raised and would therefore not be able to provide an answer on the conflict of interest they could represent.

Cypriot MEP Takis Hadjigeorgiou asked: “How come you can establish/register a company without your name being registered anywhere? What other reason can this be justified on if it’s not to avoid taxes? Is there any other reason that we do not know?”

After the hearing, GUE/NGL members held an informal meeting with Ronen Palan in order to have a more in-depth discussion on the role of enablers and tax havens; the role of banks in the use of more sophisticated techniques, such as derivatives and swaps to hide the location of the taxable event; some of his envisaged solutions, such as an European FATCA; and the way in which EU rules have prevented in-depth research on the roles of such enablers.