EU official criticises OECD, UK, Germany on transparency

November 24th, 2010

Last week Algirdas Šemeta, EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, made a presentation entitled The Importance of Information Exchange in Tax Matters.

He was speaking in an official capacity, it seems. Like the Italian Finance Minister Giulio Tremonti, who recently criticised Germany’s and the UK’s tax deals with Switzerland, Šemeta gives short shrift to those who think a witholding tax regime alone is good enough:

“It is much more interesting for a tax authority to receive comprehensive information about the assets owned by its residents abroad than to receive only a withholding tax on the income produced by such assets. Such a withholding tax may generate some revenue, but it does not allow Member States to assess the overall tax base of their residents. As a consequence, the progressivity of some tax scheme cannot properly be applied. This leads to less revenue and the unequal treatment of taxpayers.”

And he criticises the OECD’s woefully flawed “on request” model of information exchange

Undoubtedly, the OECD standards of transparency and exchange of information have paved the way for international consensus on the importance of effective exchange of information for collecting taxes. But as you may know, the OECD standards, which prevent States from invoking bank secrecy to refuse access to information, concerns exchange of information on request. This approach only works if the State that needs the information already has indications that a tax resident may have financial interests in another State.

Quite so. It’s the OECD’s Catch-22 approach. And then, back to the UK’s and Germany’s deeply flawed deals:

In this context, a distinction must be made between our closest neighbours and other international partners. Our European neighbours are closely associated to all our policies, through the EFTA and EEA agreements and, particularly in the case of Switzerland, also through a series of bilateral EU agreements. As a result, our respective markets are closely integrated and cross-border trade and investment are intense.

It is therefore only logical that we have higher expectations for these countries, and that we expect them to cooperate more closely with the EU on the exchange of information. In this context, it is not sufficient that individual EU Member States conclude bilateral agreements with third countries which provide for the OECD standards of transparency and exchange of information.

He is quite right. Fantastic to see influential people speaking truth to power.

Written by Nicholas Shaxson

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