By Don Quijones, Spain & Mexico, editor at WOLF STREET.
Given the scale of last year’s Lux Leaks scandal as well as the revelations early this year about HSBC’s massive Swiss-based tax avoidance swindle, it’s hardly a surprise that the issue of tax compliance is high on the agenda in Europe these days.
Most European taxpayers, many of whom pay upwards of 30% income tax, were less than enamoured with news that Europe’s richest individuals and corporations were paying next to nothing (and in some cases nothing) in tax – and all with the help, no less, of the recently unelected president of the European Commission, Jean Claude Juncker.
Never one to let a good crisis go to waste, the Commission milked the public outrage for all it was worth, expertly playing down Juncker’s involvement while pushing forward with its long-harbored plans to harmonize tax rules and levels across the continent — all part and parcel of its long-term dream of fiscal union.
When questioned about Juncker’s previous role as Luxembourg’s prime minister and unofficial tax avoidance consultant to the world’s largest multinationals, Pierre Moscovici, the European Commissioner for economics, said that what mattered was not Juncker’s past actions but his current commitment to a new era of “cross-border information exchange” among tax authorities and steps towards “tax harmonization.”
“I haven’t talked to Jean-Claude Juncker specifically about this investigation, but I know I have his commitment to move rapidly to a new world of fiscal transparency,” Moscovici told a news conference in Paris.
Transparency for Whom?
Transparency is hardly a word you would normally associate with Europe’s long (and growing) list of supranational institutions. As such, one can’t help but wonder: transparency for whom exactly? More to the point, if Europe is to have a more transparent tax regime, who will be writing the new rules? As the non-profit research and campaign group Corporate Europe Observatory (CEO) reports, the answer should serve as a stark reality check for all European taxpayers.
In October last year, just before the Lux Leaks scandal broke, the directorate-general responsible for taxation issues, DG TAXUD, set up a new expert group on the automatic exchange of financial account information (AEFI) between countries. The aim of the group is to advise the Commission on how to implement the exchange of personal financial information across the EU, helping to facilitate cross-border tax investigations and combat tax avoidance and evasion.
The problem is that most of its members (16 out of 25) are either banking executives (in particular from the UK financial sector), bank lobbyists or representatives of the Big Four accountancy firms widely blamed for helping the world’s wealthiest companies and individuals avoid or evade the attentions of national tax authorities. Chief among them is John Everett, the head of Operational Tax Compliance at (cue drum roll)… HSBC Holdings Plc.
No, seriously. Here’s more from CEO:
On the same day the Swissleaks tax dodging scandal broke across Europe, a tax expert from the very same bank involved, HSBC, took a seat in the European Commission. Not there to answer questions on his employers’ outrageous and highly-illegal tax avoidance practices, John Everett was invited to give the Commission advice on tackling tax dodging as a member of a newly-formed advisory group. Alongside him were colleagues from Barclays (the British bank once accused of running a “tax avoidance factory”) and three employees from KPMG, one of the accounting firms exposed in the Luxleaks files.
Everett represents not only HSBC but also the British Bankers Association. And not only is he advising the European Union on tax matters; he sits in similar groups in the UK, the U.S. and the OECD. Indeed, even if Everett was not a member of the group, HSBC would have plenty of other avenues to defend its interests, being a known member of at least eight of the participating associations in the AEFI expert group.
Wolves Guarding the Sheep
In other words, one of the leading participants in the European Commission’s highly publicized crusade against tax avoidance and evasion is an organization that in its 150-year existence has committed just about every financial crime imaginable (read: This Is How HSBC Celebrates 150 Years of Banking Crime & Corruption). That includes promoting tax avoidance schemes among over 100,000 of its global high-net worth clients. In the process it broke the tax laws of multiple national jurisdictions, for which it is now under criminal investigation in France, Belgium, Spain, Argentina and the U.S. Yet unbeknownst to almost all European citizens, that same bank is now leading the EU’s efforts to “clean up” [read: centralize and consolidate] Europe’s tax system. Talk about inviting the wolves to guard the sheep!
As I warned in Beware, the Borderless Taxman Cometh, governments around the world are desperately trying to sell the idea that they have suddenly seen the light. They tell us that they now understand the importance of tackling the “scourge” of tax avoidance and evasion. To do that all they need are new powers to track every penny or cent we earn, spend and save. A transaction tax or two may even be needed, they claim — all in our best interest of course!
Meanwhile in the dark shadows they hire the world’s most prolific tax avoidance artists to set the new rules for a new age of fiscal propriety – rules to which they, their wealthiest clients and the senior servants of high finance (e.g. IMF and World Bank employees) will almost certainly not be subject. By Don Quijones, Raging Bull-Shit.
Bankers, politicians, academics, even startup guys are all lining up on the same side, for different reasons. Read… The “War on Cash” in 10 Spine-Chilling Quotes