The European Parliament special committee on financial crimes, tax evasion and tax avoidance discussed the after-effects from the Paradise Papers on Thursday.

Hot on the heels of a further leak on Wednesday of more than a million documents of Mossack Fonseca, the company at the centre of the Panama Papers, the European Parliament held a hearing with experts, journalists and company representatives of Nike and Mc Donalds on the effects on policy, law and company decisions since the subsequent scandal of the Paradise Papers began.

The hearing was organised along two panels, the first dealing with the possible loopholes in EU tax legislation exposed by the Paradise Papers, while the second sought to sound out the Vice-Presidents of Nike and McDonalds on aggressive tax planning within the EU.

You can watch the hearing again here whereas the programme can be found here.

Companies not attending

At the start of the hearing, the committee Chair, Petr Ježek (ALDE, CZ) pointed out that Apple, and Kering Group indicated their unavailability for the hearing, the first due to ongoing legal proceedings preventing it from public commentary, while the second due to the unavailability of its CEO on that date. Mr Ježek expressed consternation that intermediaries Appleby, and Baker McKenzie had, for their part, refused to attend the hearing.  He pointed out that such refusals to appear before a parliamentary body are “inadmissible” and go against the transparency that should be part of the core values of any company.

Addressing loopholes in EU tax legislation

MEPs, lead by the co-rapporteurs Luděk Niedermayer (EPP, CZ) and Jeppe Kofod (S&D, DK) were particularly interested in country by country reporting, legislation to counter law suits to silence journalists (SLAPP) and to protect whistle-blowers, ways to increase transparency, money-laundering, and the effectiveness of the EU’s black and grey lists of non-cooperative third countries.

While admitting that estimates showed that countries were currently losing around 240 billion USD in tax revenues due to tax avoidance, Achim Pross from the OECD voiced confidence that the country-by-country reporting just launched would make a “huge difference” in improving the situation.  He also said that companies would be forced into a “behavioural change” after the leaks and the international measures taken as a result. Researcher Lucía Rossel Flores said that estimates of money being laundered and tax avoided and evaded would soon be available.  Juliette Garside from The Guardian and a member of the International Consortium of Journalists called for the setting up of a European anti-money-laundering agency and EU anti-SLAPP legislation.

Aggressive tax planning within the EU

MEPs used the presence of Nike and McDonalds representatives to gain insight into large corporations attitudes to fiscal matters post-Paradise Papers. Mr Niedermayer for example asked to what extent had the companies re-evaluated their attitudes towards more transparency on taxation as a result of the developments.  Mr Kofod asked the representative of McDonalds for more information on changes to its European business structure and for why the company did not consider War on Want’s “Unhappy Meal report” correct in various instances.

Both representatives insisted that tax issues did not drive their companies’ business operation structure decisions nor their location.  Both also indicated possible support for the common consolidated corporate tax base which, they said could help simplify the tax environment.  After various requests from Mr Kofod to provide written explanations as to why the Unhappy Meal report was incorrect, the representative from McDonalds accepted to “consider the request”.

Next meetings

The committee continues its work next week with a hearing on Monday with European Commissioner Věra Jourová, responsible for Justice, Consumers and Gender Equality.  On Thursday it will hold two hearings, the first on VAT fraud and second on the use of VAT fraud to finance terrorism. All useful information on these meetings will be found here soon.