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Promoting an appropriate policy on tax havens

Doc. 12894: collection of written amendments | Doc. 12894 | Final version

Caption: AdoptedRejectedWithdrawnNo electronic votes

ADraft Resolution

1Sound tax systems are the cornerstone of public finances: they underpin democratic governance, State authority, macroeconomic stability and social cohesion. This delicate balance relies on tax compliance by all tax payers, be they individuals or enterprises. It is extremely worrying that certain activities by secrecy jurisdictions, tax havens and offshore financial centres facilitate massive tax avoidance, evasion and fraud which cause serious harm to the public interest of all Council of Europe member States, as well as many other countries, in particular the developing ones.

In the draft resolution, before paragraph 1, insert the following paragraph:

"According to the OECD, four key factors are used to determine a tax haven: the fact that a jurisdiction imposes no or only nominal taxes; that it lacks transparency; that there are laws or administrative practices preventing the effective exchange of information; and that there is no requirement for the activity to be substantial."

Explanatory note

The objective of this report is to promote an appropriate policy on tax havens, which is an objective we fully support. However, nowhere in the draft resolution is there a definition of what is meant by tax haven. We therefore suggest inserting a definition in the operative part of the draft resolution, based on the four criteria set out by the OECD for determining a tax haven.

2The Parliamentary Assembly is concerned about the extent of the offshore financial system, in particular tax havens, and its impact on public finances, stability of financial markets and society at large. With all countries having surrendered some of their sovereignty to globalisation and the global economy, tackling global distortions due to harmful or predatory tax practices is both a moral duty and a common cause.
3Thanks to growing public outcries, international co-operation has intensified, notably at the G20 level, to tackle the root problems concerning tax havens: bank secrecy, lack of transparency and effective public oversight, regulatory dumping, predatory tax arrangements and abusive accounting techniques within multinational companies (notably abusive transfer pricing). However, the situation is far from satisfactory and further progress is needed to close legal gaps and loopholes and to ensure more effective consolidated supervision of the offshore financial system and jurisdictions considered as tax havens.
4The Assembly therefore calls on the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) to step up their action – complementing each other’s efforts whenever feasible – on measuring and analysing financial flows to and from the offshore financial centres and jurisdictions deemed tax havens, as well as their interaction with the mainstream economic activity of other States.

In the draft resolution, paragraph 4, replace the words “the offshore financial centres and jurisdictions deemed tax havens, as well as their interaction with the mainstream economic activity of other States” with the following word: "States".

5The Assembly also invites the IMF and the OECD to:
5.1enhance surveillance of their member States' tax regimes and to stimulate improvements aimed at eliminating harmful tax practices;
5.2study ways of strengthening corporate social responsibility and ethics and make proposals for defining more clearly the responsibilities of multinational enterprises towards the society in all countries where they operate;
5.3issue recommendations to their member States to introduce country-by-country reporting with a view to increased corporate tax accountability and disclosure of financial information (notably on costs, profits and taxes paid) concerning the activities of multinational companies in all countries in which they operate and across all business sectors, starting with the financial sector.

26 April 2012

Tabled by Mr Valeriy SUDARENKOV, Mr Alexey PUSHKOV, Mr Anvar MAKHMUTOV, Mr Igor LEBEDEV, Mr Alexey KNYSHOV

Votes: 50 in favor 9 against 2 abstentions

In the draft resolution, after paragraph 5.3, insert the following paragraph:

"consider the possibility of setting minimum acceptable tax rates in tax havens to minimise national budgets' losses."

6In this context, the Assembly welcomes the entry into force, in 2011, of the Convention on Mutual Administrative Assistance in Tax Matters as amended by the Additional Protocol (CETS No. 208) after the launching of it in 2010. The Council of Europe and the OECD should vigorously promote this instrument, not only among their member States and their dependent territories, but also among their economic partners across the globe. Moreover, they could jointly assess the implementation of this convention in the near future.
7The Assembly hails the outcome of the G20 Cannes Summit (3-4 November 2011) where the leaders of G20 countries committed to sign the amended Convention on Mutual Administrative Assistance in Tax Matters, strongly encouraged other jurisdictions to join the convention and undertook to “consider exchanging information automatically on a voluntary basis as appropriate and as provided for in the convention”.
8Moreover, the Assembly strongly supports steps taken by the European Union towards gradual harmonisation of tax practices among its member States and, in particular, efforts to introduce automatic exchange of information for certain categories of income and capital as from 2015. It considers that this process could be accelerated and that similar efforts should be undertaken by non-European Union countries.
9In the same spirit, the Assembly urges the European Union member States to support efforts to put in place country-by-country reporting obligations (notably on costs, profits and taxes paid) in respect of accounts of multinational enterprises that are registered or operate in the European Union. This practice should gradually be extended to all Council of Europe and OECD member countries, as well as G20 member States.
10With a view to holding governments to account in tax matters, the Assembly urges national parliaments to:
10.1examine domestic tax standards, policies and collection procedures in order to spot artificial tax minimisation techniques which may be legal but not ethical, and propose legislative steps to remedy the distortions thus detected;
10.2closely monitor the work of governments on the enforcement of national tax laws, the administration of tax collection and the respect of international commitments in tax matters;
10.3ensure in-depth scrutiny and revision, if need be, of any draft bilateral tax agreements, in particular with secrecy jurisdictions and countries considered as tax havens, before their ratification.

26 April 2012

Tabled by Ms Olga BORZOVA, Mr Alexey PUSHKOV, Mr Anvar MAKHMUTOV, Mr Igor LEBEDEV, Mr Valeriy SUDARENKOV

Votes: 47 in favor 9 against 4 abstentions

In the draft resolution, after paragraph 10.3, insert the following paragraph:

"adopt national legal provisions allowing legal entities registered in offshore territories to carry out business activities in the country only if they disclose their founding members and ultimate beneficiaries."

11Convinced that tax compliance by all tax payers and due diligence by all intermediaries in tax matters are essential to upholding good governance, justice and prosperity, the Assembly calls on the Council of Europe member States to:
11.1step up pressure, particularly on those States that have direct influence over secrecy jurisdictions and tax havens identified in this report with a view to enhancing their co-operation in tax matters and phasing out fiscal bank secrecy;
11.2identify and eliminate legal provisions permitting the holding of anonymous accounts, off-balance-sheet bookkeeping and bearer shares;
11.3ensure that all entities (notably trusts and funds) are properly registered and beneficial ultimate ownership disclosed, in particular in respect of capital flows originating in or destined for European countries and their dependent territories;
11.4ensure that all corporate registries provide a set of standard information on registered entities’ shareholders, boards, directors and historical background and allow for online access to such data;
11.5support efforts to harmonise European corporate tax policy, such as through adoption of the common consolidated tax base as a first step towards taxing profits of multinational corporations on the basis of a formula that takes account of genuine economic substance (namely sales turnover, assets invested and employment) in the various countries of activity;
11.6move towards the automatic exchange of information in tax matters and ensure good use of safeguards for personal data protection, notably the Convention for the Protection of Individuals with regards to Automatic Processing of Personal Data (ETS No. 108) and its Additional Protocol (ETS No. 181), including with their international economic partners;

In the draft resolution, delete paragraph 11.6.

Explanatory note

A report by the European Policy Forum on the application of the European Savings Tax Directive noted that in the field of taxation, a withholding tax system may be more effective than one based on the automatic exchange of information, which can entail serious problems regarding personal data protection and privacy rights (the Bialiatski case).

11.7broaden the scope of action of financial intelligence units beyond strategies for tracing money laundering in order to also help tackle tax evasion;
11.8strengthen the capacity of national tax authorities – through expanded investigative powers, training and resources – to enable more effective controls, prosecution and repatriation of funds lost through tax evasion involving secrecy jurisdictions, tax havens and offshore financial centres;
11.10review their policies on transfer pricing in order to reduce opportunities for multinational businesses to manipulate reporting of profits and taxes due;
11.11modify legal provisions that are used to bend their domestic rules, notably on tax breaks, and to escape proper scrutiny or regulation in tax matters, both national and international;
11.12join the Global Forum on Transparency and Exchange of Information for Tax Purposes, if they have not yet done so, and strengthen the process by shifting from peer review to expert review;
11.13use the United Nations Committee of Experts on International Cooperation in Tax Matters as the appropriate forum for both setting standards and supporting developing countries in their efforts to counter abusive tax practices.
12Finally, the Assembly invites the OECD and the European Commission to work together towards optimising the prevailing tax models, helping developing countries to counter abusive transfer pricing and maximising tax receipts in countries where multinationals carry out a substantial part of their activities.

In the draft resolution, paragraph 12, replace the words "maximising tax receipts in countries where multinationals carry out a substantial part of their activities" with the following words: "guaranteeing the right repartition of multinationals’ tax receipts according their activities in different countries."