EU Needs New Efforts Against Tax Evasion

Vladimir Putin, Bashar al Assad and Sigmundur Gunnlaugsson. That is probably not the company with whom the former Icelandic prime minister had hoped to be associated with in 2016, but connections with Panamanian law firm Mossack-Fonseca has brought him, along with the aforementioned dictators and many others, to occupy the same headlines.

Clients involved in the 2.6 terabytes of Mossack-Fonseca’s leaked data range from 140 public figures from 50 countries, current and former heads of state, members of parliaments, advisors and the world’s greatest soccer player.

The leak reveals connections with many other issues throughout the world. Mossack-Fonseca did business with Syrian dictator Bashar al Assad, whose family helps the government through numerous offshore accounts. Azerbaijan’s President Ilham Aliyev is linked to various offshore companies connected with the state’s major industries. Ukrainian President Petro Poroshenko, who is trying to lead the country out of corruption, is linked as a sole shareholder of a company named in the leak.

The massive scale of this discovery will continue to add layers to the unfolding stories of 2016 — but we already knew many public figures were evading taxes, just not exactly how. Through such a massive leak and exposure, the European Union must now make changes and increase its efforts to confront such tax evasions.

Many news outlets have mentioned that, in principle, creating shell companies and opening offshore accounts is not illegal. For individuals who need to access cash abroad or major companies moving operations abroad, this freedom to do this facilitates world travel and international business.

Yet, political figures will bear the brunt of the moral backlash from the Mossack-Fonseca leak, and in Europe this outrage could lead to more political changes. Former and current ministers and advisors from Italy, Spain, Poland, Great Britain and Iceland have already been named in the leak; there are no overarching regional or political patterns.

Wherever public figures are implicated in the EU, the Mossack-Fonseca leak will be used as fodder to criticize the political establishment. Greek left-wing party Syriza, emerging during a wave of anti-establishment frustration after the 2008 financial crisis, has already reacted sarcastically to the implicated former advisor to Prime Minister Antonis Samaras Stavros Papastavrou. The party leaders wrote, “we have to congratulate Mr. Papastavrou on the wide range of his business activities which, according to data, extend from the Lagarde list to the Panama Papers, from the Atlantic to the Pacific Ocean.”

In the United Kingdom, Prime Minister David Cameron benefits from his late father’s offshore company, which was set up through Mossack-Fonseca. Labor party leader Jeremy Corbyn argues that “his determination to conceal that arrangement over many years raises serious questions over public trust in his office and his willingness to be straight with the public.”

In light of the leak, EU member states must take such accusations seriously and be proactive in addressing the outrage. Furthermore, EU institutions must engage proactively to show they will not tolerate the corruption and hypocrisy of these select political figures who are hiding wealth offshore to evade taxes.

Before the leak the European Commission, the executive arm of the EU, had already announced a proposal to enforce the taxation of profits where they are created, making tax havens less lucrative. But the commission cannot be seen as complacent and inactive in light of new information. There should be an energetic response to this leak even in light of the possible tax evasion claims made against EU Commissioner for Energy and Climate Arias Cañete, in relation to his wife’s possession of an offshore company.

It will be crucial for the European Parliament to carry out an investigation through a special committee. Such an approach is required to adequately deal with this serious leak. Rather than a threat, this can be seen as an opportunity for the various organs of EU governance to demonstrate legitimate oversight and cooperation to address a serious issue.

 

Nathan Crist is a graduate student in the School of Foreign Service.

Have a reaction to this article? Write a letter to the editor.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>