European Parliament adopts Resolution on the Cum-Ex scandal

Last November 29 the European Parliament adopted in plenary the final text of the Joint Resolution tabled by GUE/NGL together with S&D, the Greens, ALDE and EPP.

This Joint Motion for a Resolution (JMR) came as a result of the individual resolutions that had been tabled by different political groups in November 7 (see GUE/NGL’s here), and the joint resolution that had been tabled by GUE/NGL, S&D and the Greens on one side, and EPP and ALDE on the other side on November 27; and the decision on issuing a resolution based on these revelations came as a result of the Plenary debate that took place in Strasbourg on October 23.

GUE/NGL’s leading MEPs in this resolution were GUE/NGL’s shadow rapporteur in the TAX3 Special Committee, Miguel Urban Crespo (Podemos), and GUE/NGL member of the ECON Committee, Dimitrios Papadimoulis (SYRIZA).

The final resolution adopted was the result of very fruitful negotiations between political groups, and GUE/NGL endorsed it and supported it, as it understood that even when it was weaker that the original one proposed by our group and the joint one proposed with S&D and the Greens, the adopted text was quite strong, as it demands for an inquiry from EBA and ESMA into the dividend arbitrage schemes, it calls to review EU member States’ tax treaties, it calls to review exchange of information and the Directive on Administrative Cooperation on reportable cross-border arrangements (DAC6), and it calls for a revision of the parent-subsidiary directive, as well as the role of Special Purpose Vehicles (SPVs).

The following paragraphs in the final adopted text had originated from GUE/NGL’s resolution:

  • whereas the investigation by the consortium of European journalists identifies Germany, Denmark, Spain, Italy and France as allegedly the main target markets for cum-ex trading practices, followed by Norway, Finland, Poland, Denmark, the Netherlands, Austria and the Czech Republic, and whereas these practices potentially involve an unknown number of EU Member States as well as countries of the European Free Trade Association (Switzerland, for example);
  • whereas it has been reported that these criminal practices involve EU Member States’ financial institutions, including several large well-known commercial banks;
  • whereas in some cases relevant authorities did not conduct in-depth investigations into the information shared from other Member States regarding the cum-ex revelations;
  • whereas the fact that foreign investors are entitled to claim a refund of the withholding taxes on dividends plays a central part in the revelations;
  • whereas the sixth Directive on Administrative Cooperation (DAC6) requires any person that designs, markets, organises, makes available for implementation or manages the implementation of a reportable cross-border arrangement which meets pre-defined hallmarks to report those arrangements to national tax authorities;
  • whereas the role of whistle-blowers over the last 25 years has proven significant in revealing sensitive information that is at the centre of public interest, which has also proven to be the case in the cum-ex revelations1;
  • Notes with concern that the cum-ex scandal has shaken citizens’ trust in tax systems and stresses how crucial it is to restore public confidence and ensure that any damage caused will not be repeated;
  • Requests the European Securities and Markets Authority and the European Banking Authority to conduct an inquiry into dividend arbitrage trading schemes such as cum-ex or cum-cum in order to assess potential threats to the integrity of financial markets and to national budgets; to establish the nature and magnitude of actors in these schemes; to assess whether there were breaches of either national or Union law; to assess the actions taken by financial supervisors in Member States; and to make appropriate recommendations for reform and for action to the competent authorities concerned;
  • Calls also on national competent authorities, where appropriate, to open criminal investigations, use legal tools to freeze suspicious assets, launch inquiries into the management boards potentially involved in this scandal and impose appropriate and dissuasive sanctions on the parties involved; takes the view that both perpetrators and enablers of these crimes, including not only tax advisers but also lawyers, accountants and banks, should be brought to justice; stresses the urgent need to end white-collar impunity and ensure better enforcement of financial regulations;
  • Calls on national tax authorities to reap the full potential of DAC6 with regard to the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements, including the use of group requests; calls, furthermore, for DAC6 to be strengthened in order to require the mandatory disclosure of dividend arbitrage schemes and all information on capital gains, including the granting of dividend and capital gains tax refunds;
  • Urges the Commission to assess and the Member States to review and update bilateral taxation agreements between Member States and with third countries to close loopholes that incentivise tax-driven trading practices with the purpose of tax avoidance;
  • Calls on the Commission to assess the role of Special Purpose Vehicles (SPVs) and Special Purpose Entities (SPEs) revealed by the cum-ex papers and, where appropriate, to propose limiting the use of these instruments;
  • Notes the fact that the 2008 crisis has resulted in generalised resource and personnel reductions in tax administrations; calls on Member States to invest in and modernise the tools available to tax authorities, and to allocate adequate human resources so as to improve surveillance and reduce timing and informational gaps; calls on Member States to improve the capacities and capabilities of their financial authorities to ensure they are fully functional for detecting tax fraud;
  • Stresses the need for the protection of whistle-blowers who disclose information for example on tax fraud and tax evasion at national and EU level; invites anyone who has information of value for the public interest to report it, either internally, externally to the national authorities or where necessary to the public; calls for the proposal for a directive of the European Parliament and of the Council on protection of persons reporting on breaches of Union law to be swiftly adopted considering the opinions adopted in the different European Parliament committees;
  • Takes the view that the work of the TAXE, TAX2, PANA and TAX3 committees should be continued, in the forthcoming parliamentary term, in a permanent structure within Parliament such as a subcommittee to the Committee on Economic and Monetary Affairs (ECON);

 

How much did the cum-ex deals cost us? How did this happen? Which banks are ripping us off (again!)? What’s being done about it? Read the explainer here