What was Europe’s debt problem is starting to look like Europe’s taxation problem. Words emerging from a one-day European Union summit in Brussels show EU leaders aren’t focused just on spending and deficits: they announced an investigation into “aggressive” use of tax loopholes.
So the EU’s taking another swing at aligning member countries’ rules on tax and transparency. Loopholes allow individuals and businesses to avoid what Finnish Prime Minister Jyrki Katainen described as “a trillion euros worth of tax revenue” that slips through governments’ hands each year. France has announced measures including the threat of longer jail sentences to help stem tax dodging, which amounted to as much as 80 billion euros in lost government revenue for France last year, according to Budget Minister Bernard Cazeneuve. If the 27 EU members could agree they have a common interest here and a shared means to defend it, some members’ deficits may be seen in a different light: a sum like that could pay for a Greek bailout many times over.
Many of the tax loopholes are no mystery. Luxembourg is one loophole-rich haven. Liechtenstein, Andorra, San Marino and Monaco are others. The U.K., which isn’t in the euro zone, has another set of tax havens of its own.
But the hurdles to any agreement are obvious. Jean-Claude Juncker, the prime minister of Luxembourg, surprised no one saying he wants transparency rules to affect all tax havens equally. His country’s economy depends more than any in the EU on banking secrecy. Other tax havens also have their defenders.
As it stands, corporations are able to pick and choose locations for domiciling their business and negotiate tax incentives for investments with individual EU members. The bloc will struggle to find a consensus from which to push back against the loophole tactics from the likes of Apple and Google.