We need strong EU and UK action to tackle tax avoidance

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Normally, tax avoidance rarely hits the front page. Two sets of leaks, from Luxembourg and Switzerland, have changed all that, writes Anneliese Dodds MEP.

Normally, tax avoidance rarely hits the front page. Two sets of leaks, from Luxembourg and Switzerland, have changed all that.

Just this week we learned that, of the thousand people aided by HSBC to evade taxes in Switzerland, a piffling one person has been prosecuted.

The UK’s tax system seems to have as many holes in it as Swiss cheese. David Cameron and George Osborne have totally failed to tackle tax avoidance in the last five years.

Investigative journalists, including from the Guardian, stuck their necks out to publish material indicating the mindboggling extent of aggressive tax planning. In his announcement he would implement a ‘tax dodging bill’, Ed Miliband has also stuck his neck out.

But the many small and medium-sized business owners I’ve talked to about tax dodging are fed up with being undercut by multinationals who can engage in ‘transfer pricing’ - basically, shifting profits between countries to dodge tax.

We’ve had many warm but empty promises on tax dodging from Cameron. Under his leadership, the UK’s tax ‘gap’ - what should be paid in tax, versus what actually is - has risen by £3 billion. So it’s refreshing to hear Ed Miliband commit to well thought through measures which experts have been demanding for decades.

Miliband’s announcements have also placed Britain firmly in the lead within debates in Europe on how to tackle tax avoidance. Ever since ‘Lux Leaks’ broke, the pressure has been on European politicians to show real action is being taken - not least on Jean-Claude Juncker, President of the European Commission and a former leader of Luxembourg during some of the worst excesses of creative tax avoidance schemes.

This pressure is now resulting in tangible action. Registers of beneficial ownership for companies have now been agreed at EU level, after years of campaigning by NGOs and the European centre left. And Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs, has declared his support for country-by-country reporting of profits by multinationals - a measure also promoted by Miliband - which would make it much harder to shift profits around to avoid tax.

Finance ministers from Italy, France and Germany have all also broken ranks to argue for strong action against tax dodging, including automatic transfer of information between tax authorities on so-called ‘tax rulings’- special agreements  between individual companies and tax authorities.

But that is not enough; more is needed to stop tax dodgers feasting on Swiss fondue, not to mention Caymans caviar. I’m one of two MEPs leading the Parliament’s legislative response to Lux Leaks, and am determined we use this chance to stop the race to the bottom on tax. We need an EU-wide definition of tax havens, and must consider measures like blacklisting tax evaders and the advisers who help them do it.

Despite countries agreeing on paper they want action taken, the need for consensus amongst member countries within the EU on tax issues has consistently been blocked, as parochial interests have intervened. Acting alongside France and Italy, Britain could make real progress on tax justice in Europe - but only according to Miliband’s progressive agenda. Cameroonian window-dressing will get us nowhere.

Anneliese Dodds MEP is a member of the European Parliament economic and monetary affairs committee (ECON), and is the Socialists & Democrats (S&D) Group co-rapportuer of the parliament’s legislative initiative report on tax avoidance

This blog originally appeared on Left Foot Forward

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