If the EU is serious about tackling tax havens, it needs to clean its own house first.
Battling the tax havens and legislative loopholes which plague the bloc would be a potent weapon against the continent's surging populists, who frequently invoke tacit agreements between political elites and fat cats to avoid taxation.
Tax avoidance costs EU countries hundreds of billions of euros—some estimates suggest as much as $1 trillion [€0.88 trn]; Europe loses as much as 20 percent of the corporate taxes to which it is entitled.
Widespread tax evasion also allows corrupt politicians and criminals to launder money and protect ill-gotten gains, but the continent's tax havens also undermine fair competition between EU states and encourage tax malpractice.
Dutch historian Rutger Bergman shed some light on the problem at the recent Davos World Economic Forum: "I hear people talking the language of participation, justice, equality and transparency, but almost no one raises the real issue of tax avoidance, right? And of the rich just not paying their fair share."
Secretive 'tax limbo' freeports
The EU will be unable to lead the global fight against tax evasion, however, while there are still tax havens on EU soil, notably on some British islands and in Luxembourg.
Recently, members of the European Parliament raised concerns about the risk s presented by Le Freeport, a 22,000 square meter high-security facility located near Luxembourg airport, where goods can be stored with confidentiality—and without being taxed.
German MEP Wolf Klinz of the parliament's special committee on financial crimes, tax evasion and tax avoidance in early January sent the European commission president Jean-Claude Juncker an official request to take action against legal loopholes used for tax evasion and money laundering at Luxembourg's Le Freeport.
Last February, committee members and MEPs Ana Gomes and Evelyn Regner visited Le Freeport and called it a "black hole" with "a real lack of transparency".
The MEPs aren't the first to point out problems with the Freeport.
In 2014, journalist James Moore highlighted the potential of this facility to serve as a kind of tax haven.
He noted how "the Luxembourg facility opened in the same week that the OECD unveiled proposals to tackle multinational corporate tax avoidance. Critics argue that the growth [of] freeports represent a new battleground in the fight against tax avoidance by individuals."
Perhaps most notably, there are concerns that paintings and masterpieces could be stashed in freeports as a means of laundering money.
According to a recent report in the Art Newspaper, "the rise of art as an asset class has contributed to a sharp increase in freeports – from less than 100 in 1975 to around 3,000 in 135 countries in 2008".
A number of the world's biggest freeports, including Le Freeport Luxembourg, facilities in Geneva and Singapore are linked to Yves Bouvier, a Swiss art dealer who has been investigated in a number of jurisdictions for complicity in money-laundering and tax-evasion.
As a report by the European Parliamentary Research Service pointed out: "This concentration of a worldwide network of connected freeports and different roles could imply a risk of conflicting interests and insider trading. The fact that Mr Bouvier is entangled in an affair involving alleged fraud and insider trading may justify such considerations."
Courtesy of euobserver.com