12 Jul Fabio De Masi questioned German and Irish Finance Minister in PANA hearing
The Finance Ministers Wolfgang Schäuble (DE), Paschal Donohoe (IE), Pier Carlo Padoan (IT) and Jeroen Dijsselbloem (NL) were invited to the European Parliament’s Investigation Committee on Money Laundering, Tax Avoidance and Tax evasion (PANA) on 11 July 2017 to report on the processing and follow-up of the “Panama Papers” in their respective countries. In addition, the members of the committee consulted the finance ministers on their views on the initiatives undertaken by the European Commission in the field of taxation and anti-money laundering.
Fabio De Masi (DIE LINKE), Vice Chairman of the Panama Papers Inquiry Committee, represented the European Parliament’s Left fraction (GUE/NGL) during the hearing and focused his questions in particular on the German Finance Minister Wolfgang Schäuble. The latter’s replies followed the motto of the entire hearing in which the finance ministers avoided the critical questions and instead choose to emphasize their respective national efforts to counter money laundering, tax avoidance and tax evasion, and to defer existing problems to uncooperative third countries.
In this spirit the German minister voiced his determined action in the fight against money laundering and tax avoidance and the emulative implementation of European agreements in Germany. In reality the matter is, however, not so clear-cut, because, as De Masi pointed out in his questions to the minister, Germany blocks the Commission’s efforts in at least two matters.
De Masis’s first question concerned politically exposed persons (PEP), a term describing persons who have been entrusted with a prominent public function. A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold and hence are subject to stricter requirements than a normal citizen with regard to money laundering. Schäuble excused the question after why Germany continues to block the Commission’s proposal in the 4th anti-money laundering directive regarding enhanced due diligence measures towards politically exposed persons with the behaviour of the German parliament. Several members of parliament from different parties are blocking such enhanced due diligence measures.
Schäuble’s answer to De Masis’s question about Germany’s blockade against a central, nationwide real estate register was not very thoroughly either. He simply referred to the responsibility of the Ministry of Justice in this case. All the same if the Minister of Finance were to take his determination in the fight against money laundering serious he should show interest in such a register since the real estate sector in Germany is a paradise for money launderers.
Schäuble did not even make an effort to answer the last and at the same time probably the most delicate question. In this De Masi pointed out that a considerable amount of capital reserves are being built up in Switzerland, which are accompanied by a de facto tax exemption of dividends. This is made possible by a reform of the Swiss corporate tax adopted in 2011 in conjunction with the German-Swiss double tax treaty (which states that what is a dividend, is decided by what counts as a dividend under Swiss). De Masi wanted to know whether Schäuble was aware of the extent to which this massive loophole is used by German taxpayers and if so what measures the BMF intended to take in this regard. Due to the missing reply De Masi handed in the question after the hearing together with the request for a written reply from Mr. Schäuble.
The last question by De Masi was addressed to the Irish Minister Paschal Donohoe and concerned the Double Irish, one of the most notorious tax avoidance schemes used in recent years for profit-shifting by multinationals. De Masi welcomed the fact that the Irish government committed to phasing it out for new companies – but criticized that the Irish government left it in place for companies already using it until 2020. He noted that there can be no justification for tolerating massive tax avoidance in this way for four full years. How many billions from its non-US sales will Google be able to shift to Bermuda before 2020?
Leaving aside the long phase-out period, De Masi warned about another glaring loophole, which allows the Double Irish to stay fully in place for many companies beyond 2020. This loophole can be found in Ireland’s extensive network of double taxation treaties. Several tax treaties -including those with tax havens such as Panama, Bermuda, Bahamas and the United Arab Emirates – keep the Double Irish structure in place beyond 2020.
De Masi asked the Irish Treasury Secretary whether he would commit to review Ireland’s network of double taxation treaties in order to remove the Double Irish loophole. Paschal Donohoe simply replied that through its 73 double tax treaties and its membership in the OECD, Ireland already undertakes measures to prevent discrepancies in taxation between two jurisdictions.
picture by JouWatch.