Q&A: European Tax Commissioner Pierre Moscovici Talks Tax Havens and the Digital Single Market

European Commissioner for Economic and Financial Affairs On Tax Havens

12 December 2017

European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici speaks to International Tax Review about the EU’s blacklist of tax havens, the struggle to tackle tax avoidance and how to tax the digital economy.

Before joining the European Commission in 2014, Frenchman Moscovici was finance minister in Hollande administration for two years and had been a prominent member of the Socialist Party going back to 1984. He also served the Jospin government before working for President François Hollande, who proposed Moscovici to represent France in the commission – where he was given the brief for the EU’s tax policy by incoming President Jean-Claude Juncker.

Two major objectives of the tax agenda of the Juncker commission have been to combat tax avoidance and establish a basis to fairly tax the digital economy. Moscovici has given the anti-tax avoidance agenda his own special kind of flare, even going as far as calling tax advisers complicit in such schemes "vampires" in the wake of the Paradise Papers scandal. He might also be a contender for succeeding Juncker in 2019.

International Tax Review: How should high secrecy, low tax jurisdictions respond to the blacklist?

Pierre Moscovici: The new EU listing process has already had a major impact on the global taxation landscape. A new and constructive exchange has emerged with jurisdictions that had previously refused to engage. We have now extracted commitments from those countries to change their legislation and to align with our criteria of tax good governance – something unimaginable only a few short months ago.

Open dialogue and pledges for change are replacing secrecy and opacity. Those that have been listed know what they need to do and what we expect from them. For those who have avoided the final list, we will keep up the positive pressure so that they make good on their promises. If that doesn’t happen, they should be added to the list. And I will be very strict on that point.

ITR: What do you hope the blacklist will achieve?

PM: The list will only be as effective as the countermeasures we apply. First and foremost, it should act as a barometer of public opinion. Our citizens and businesses should know which countries are not playing fair when it comes to tax revenues. But if we want to be credible, if we want to make this a real catalyst for change, there must be consequences for those listed.

That means that EU member states will have to agree on common, binding and effective countermeasures as soon as possible. I'm looking forward to being part of that conversation as we follow up on this process.

ITR: How optimistic are you about the prospects of a fair and growth-friendly tax policy on the digital single market?

PM: The digital economy is an industry that mainly deals with intangible assets and does not recognise borders. That is why we are actively contributing to the global work on this at the OECD to try to achieve international solutions. I’m looking forward to seeing the fruits of that work. But the EU must have specific and targeted solutions that suit and protect our single market.

A call for feedback from industry and civil society is ongoing and all options are being examined so that we can deliver those solutions in early 2018. I’m optimistic that we can quickly move ahead on this so that in the future, digital giants will contribute appropriately to the public finances of the countries in which they earn their profits. 

ITR: What are your main priorities next year when it comes to further developing the common consolidated corporate tax base (CCCTB)?

PM: The Panama and Paradise papers and tales of large-scale tax avoidance by big companies have brought much greater public attention to the ways in which tax avoidance and tax evasion have been able to infiltrate our tax systems on such a grand scale. We need to change mind-sets and attitudes, starting with how big businesses and multinationals are taxed in the EU.

That’s why I’ve called on member states to move rapidly ahead on the CCCTB with a view to having an agreement by the end of 2018. It’s absolutely imperative that we transform the current system for cross-border taxation, which at the moment is heavily skewed in favour of those companies that can afford aggressive tax planning. 

ITR: Are there any major challenges coming up in 2018?

PM: I prefer to talk of opportunities. The public debate around fairer taxation means that we now have a real chance to make lasting changes. We must seize that chance. We’ve already done a lot, but for 2018 I see three major avenues for progress. First, I want to see an EU level agreement on our proposal for new transparency rules for advisers and intermediaries who help to put in place tax avoidance structures.

I also hope that member states and the European Parliament can make progress on the important public country by country reporting measures put forward by the Commission last year. And finally, we will be keeping up the pressure on EU countries to adopt the CCCTB. True reform of how corporate tax works in the EU is needed to solve the problem of cross-border tax avoidance once and for all, to the benefit of all Europeans. We urgently need a transparent and fair tax system that can be relied on to create stable revenues for governments. 

ITR: How much engagement have you had from business on the CCTB?

PM: We made sure when proposing the CCCTB last year that we consulted businesses as widely as possible. The feedback has been broadly positive. At the most basic level, it simply makes sense for big companies to have an easier and cheaper way to calculate their taxes in the EU, in turn making it easier and cheaper for them to operate cross-border. A stable tax environment, attractive schemes for R&D; and the raising of equity complete the picture of the benefits this reform would bring for multinationals. But it’s not just the biggest companies that can take advantage of the new system.

SMEs that might be operating across borders for the first time will be able to opt-in to the CCCTB as soon as it makes sense for them to do so, safe in the knowledge that they finally have a level-playing field with other businesses.

ITR: Where does the EU approach to tax avoidance depart from the OECD’s BEPS project?

PM: The EU, and certainly this Commission, has been actively involved from the beginning in developing the OECD BEPS project. My own involvement dates back to when I was finance minister of France, when I worked closely with my then colleagues Wolfgang Schäuble and George Osborne to drive this forward. We are still engaging closely on issues like the taxation of the digital economy. But mere guidelines and recommendations are not enough to fully realise attempts to tackle base erosion and profit shifting.

That’s why the EU and its member states have been steadily putting in place ambitious and binding transparency and anti-avoidance measures, based on the OECD’s work. In the process, we have become global leaders in preventing tax avoidance. While further advances need to be made, we can be justifiably proud of that legacy.

ITR: What has the impact of the ATAD been on the economies of EU member states?

PM: The impact of the ATAD won’t be truly known until all elements have come into force. I’m confident that once the new rules have kicked in, we will see strong results and higher revenues for the coffers of member states.

The above article was published on www.internationaltaxreview.com on December 12 2017 and has been republished with the approval of the Publisher.