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EU's Moscovici urges fast action against tax 'vampires' after Paradise Papers

Reuters  |  BRUSSELS 

By Francesco Guarascio

BRUSSELS (Reuters) - The European Union needs a quick agreement on proposed rules for lawyers, bankers and other advisers that help devise ways to aggressively cut bills, the European commissioner said on Tuesday.

The appeal for more transparency on matters comes after new revelations, known as the Paradise Papers, of widespread use by companies and wealthy individuals of off-shore jurisdictions.

In a speech in the European Parliament in Strasbourg, Pierre Moscovici called on member states and legislators to agree "in the next six months" on proposals made by the EU's executive commission in June that would force advisers to report tax- planning schemes devised for their clients.

"We know that multinationals, wealthy individuals, consultants, banks work hand in hand to subtract massive amounts of revenues," Moscovici said.

The practices were "systemic," he said, questioning their legality. He likened professionals that help evasion to "vampires that fear the light," and against which only transparency can work as a deterrent.

Moscovici also urged member states to agree by the end of the year on an blacklist of havens, to reduce the appeal of off-shore jurisdictions that charge little or no corporate

Aggressive planning and avoidance are not illegal in themselves, but they are controversial and in some cases could hide illicit activities.

The proposal on stricter rules on advisers would impose sanctions on lawyers, accountants, banks and other consultants that do not disclose arrangements that could help avoidance.

So far, the commission's proposal has made little progress.

On matters, all 28 states have to agree on reforms, a provision that has allowed smaller, low-countries to block several overhauls.


Luxembourg and the Netherlands are the countries with the largest volume of assets held in financial vehicles owned by corporations that shift funds within companies across borders, data cited by the European Central Bank in an October report show.

In total, those corporations hold about 10 trillion euros in the two countries, ECB data show, making up around one-eighth of the euro zone's entire financial system.

The entities "are mainly set up in Luxembourg for financial engineering and tax-planning purposes," a report prepared for the Grand Duchy's central bank, and cited by the ECB, said in April.

The report on the country's shadow banking system added that most of these companies "have virtually no physical presence in Luxembourg".

They are usually part of larger oil, food, pharmaceutical or telecoms corporations and "are mainly used to channel funds from or via Luxembourg to other entities of the group domiciled abroad," the report said.

Under the proposals on advisers made by the commission, lawyers or banks that helped set up these structures would probably be required to report them to authorities to shed more light on these dealings.

However, professional confidentiality may prevent advisers from disclosing data on their customers.

In an report published last week, lawmakers raised concern that Luxembourg-based advisers used such confidentiality to avoid giving information to Luxembourg's administration on clients involved in the so-called Panama Papers, another massive leak of financial documents last year.


Moscovici also urged progress on commission proposals to disclose publicly the ultimate owners of trust companies and other financial entities that benefit from exemptions on revealing who their clients are.

But a new round of talks between lawmakers and states to find a compromise failed later on Tuesday.

Negotiations on this reform have been going on for more than a year without much progress, and Britain, Malta, Cyprus, Luxembourg and Ireland are among countries opposing more transparency, the lawmaker in charge of the issue, Dutch Green Judith Sargentini told

She said trusts were legitimate vehicles to manage assets, but "could be used to hide money."

Britain, which is home to a large trust industry, has defended confidentiality to protect privacy. Other countries fear more public scrutiny could lead the firms to move outside the

"We cannot let countries like Malta, Luxembourg and Cyprus, who have benefited from financial secrecy, set the agenda on reforming anti-money laundering rules," said Laure Brillaud, anti-money laundering officer at Transparency International, a rights group.

(Reporting by Francesco Guarascio; editing by Philip Blenkinsop, Larry King and Richard Balmforth)

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First Published: Tue, November 14 2017. 23:28 IST