UK

Prime Minister Calls For EU Action On Tax Evasion

21/05/2013 19:21 BST | Updated 21/05/2013 20:19 BST

David Cameron is to seek full EU backing for global action to counter tax evasion.

The prime minister wants a summit in Brussels to bolster the plan ahead of a G8 gathering he is hosting in Northern Ireland in June.

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David Cameron has written to EU leaders ahead of the June meeting

In a letter to fellow EU leaders on Wednesday, Mr Cameron has urged European governments to join forces to act against "staggering" losses from tax evasion and "aggressive avoidance" by adopting a US system of cross-border tax information exchange - something the UK, Germany, France, Spain and Italy are jointly testing and intend to implement by the end of this year.

And only two days ago the prime minister wrote to UK overseas territories and crown dependencies telling them he expects them to take action on tax transparency.

As well as moves towards establishing a new global standard for "multilateral automatic information exchange", Mr Cameron wants the EU and G8 meetings to increase transparency and extend country-by-country reporting by companies on where they pay tax.

But the risk is that some EU countries will want to set up their own, separate system rather than adopt the emerging international blueprint for tightening controls on large-scale tax avoidance schemes estimated to cost the European Union alone 1 trillion euro (£850 billion) a year.

Finance ministers from 17 EU countries including Britain and Ireland have already signed a declaration backing the global system, but 11 have not, and long-standing opposition has been driven by Luxembourg and Austria, where banking secrecy is traditionally sacred.

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On the eve of the summit MEPs meeting in Strasbourg voted for a range of anti-tax avoidance plans including an EU-wide "black list" of tax havens, a ban on awarding public contracts to companies avoiding tax, and a requirement on companies to publish a single figure for the amount of tax paid in each EU country.

Labour MEP Arlene McCarthy said afterwards: "It is time to get tough on those intent on avoiding tax. To those big businesses who say stop the talk on tax avoidance we say stop trying to find ways around paying your fair share of tax.

"According to HMRC figures, in the UK alone £9 billion is lost every year which could pay for the construction of more than 600 new schools or over 50 new hospitals or pay the annual salaries of over 330,000 police officers."

Labour's leader in the European Parliament, Glenis Willmott, said the summit should reinforce the MEPs' moves with international action.

She said: "We've made it clear today that there are cross-border solutions that can be used to tackle companies that don't want to pay their fair share. Here's an issue on which international co-operation is essential, but with Cameron under pressure from his backbenchers, will he deliver anything but warm words?"

UK Liberal Democrat MEP Sharon Bowles commented: "It is totally unacceptable that corporate tax avoidance is now the norm in Europe, aided and abetted by aggressive tax planning and tax consultancy firms.

"The European Parliament vote today sends a strong signal ahead of the EU summit tomorrow, that the time has come to clamp down on tax evasion and tax havens once and for all."

Conservative MEP Martin Callanan, who leads the European Conservatives and Reformist group in the European Parliament, said: "Nobody can blame companies for wanting to look after share-holders' capital by minimising their tax bill in a legal manner.

"However, Tax Research UK estimates that EU governments lose up to 1 trillion euro each year because of tax fraud.

"At a time when finances are tight and taxpayers are squeezed, it's only right that we crack down on those who pursue illegal means to avoid making any contribution to public coffers, and who put smaller competitors at a disadvantage.

"So I welcome David Cameron making this a priority for the UK's G8 Presidency.

"Tackling tax evasion needs a globally co-ordinated approach to increase transparency and reporting, and agree new standards for information exchange."