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60 • Fifty Shades of Tax Dodging EU solutions France has the long-standing position as a champion of the EU proposal on a Common Consolidated Corporate Tax Base (CCCTB). Even before the many tax scandals hit France, President François Hollande publicly pledged to push for a European CCCTB by 2020. 503 Research published in July 2014 by the French Conseil d’Analyse Economique (CAE) outlined the feasibility of a CCCTB starting with a harmonisation of the banking sector in a reduced number of EU countries. 504 Finance Minister Michel Sapin also sent a letter co-signed by his German and Italian counterparts, pushing for further EU harmonisation. 505 Yet as the European Commission introduced a watered-down version of CCCTB as part of their package on fairer corporate taxation – lacking the core measure of consolidation – Sapin praised the EU for taking ambitious steps to reform the tax system. 506 Following the Luxleaks scandal, the French government supported a first EU package on transparency allowing for the automatic exchange of tax rulings. Sapin was very vocal regarding the tax rulings granted by Luxembourg to companies, stating that “aggressive tax planning [was] not acceptable anymore” and the tax dodging was to be “tackled at the global stage.” 507 French authorities consider the EU package as sufficient proof of transparency, 508 despite the fact that only tax authorities would have access to the information, which would not entail any public transparency. The government has not indicated any willingness to push for further transparency or to go beyond EU initiatives. 509 Global solutions Whether within the EU or on the international stage, in a few years France has changed from often taking unilateral actions to lead the way against tax dodging to becoming more passive. This has coincided with the OECD BEPS reform project, which France is warmly in favour of and which officials insist is the right forum for discussing tax issues. As such, France has been repeatedly pledging its support to the OECD and its BEPS action plan 510 and has expressed its intention to implement part of the BEPS outcome (including confidential country by country reporting) into law by the end of the year. 511 Consequently, France is opposed to any UN initiative regarding tax and transparency, such as the creation of a UN intergovernmental tax body. This position has been repeatedly expressed during the international rounds of negotiations. Although the public explanation for such a position is that a UN initiative would be inefficient and would embody an “institutional proliferation”, 512 the actual reason seems to lie elsewhere: the creation of a UN tax body would shift the decision-making agenda away from the restricted OECD countries’ club, thus diminishing their power to shape the tax agenda. Furthermore, it might mean that decision making will no longer happen in Paris, where the OECD is based. During the Financing for Development Conference last July in Addis Ababa, France was one of the most active rich countries to block this proposition, and, curiously, seemed to be questioning multilateralism. Reflecting France’s view on the central role of the OECD when it comes to taxation and developing countries, the government remains one of the top funders of the OECD initiative Tax Inspectors without Borders (TIWB). 513 Conclusion Numerous tax scandals involving multinational companies doing business in France were followed by sweeping declarations from the French Government. The time of tax dodging was “over” 514 for multinational companies that could not now “place themselves beyond this obligation.” 513 Yet despite ambitious speeches, France showed little determination to tackle tax dodging at home and refused to push any legislation outside the EU and the OECD. This strategy often ended up in delaying – if not killing – the application of a fairer tax system, as exemplified by France’s attitude in the FfD negotiations around the UN tax body. The government’s argument for such a position has consistently fallen on protecting business interests. Any tax justice measure considered as harmful to the French business environment has been delayed. And in terms of the business environment, France is no amateur, granting large tax incentives to businesses – particularly for R&D. Despite large abuses of R&D tax incentives by multinational companies revealed by several institutional reports and investigations, the government seems unwilling to restrict access to R&D tax credits and flags R&D as one of the criteria of French attractiveness – at the potential expense of other countries. Once a leader in terms of promoting tax transparency in the EU, France has definitely taken a much more conservative approach over the recent year. Disappointingly, the Ministry of Finance has stated that it will neither implement fully public registers of beneficial owners nor support public country by country reporting unless other countries push for this. By taking such positions, there is a real sense that France is quickly losing its previous reputation as a champion of positive change on tax.
Fifty Shades of Tax Dodging • 61 Germany “Just because something is legal, does not mean it is fair in tax terms. Multinationals must contribute their fair share to public budgets – just like any other company has to.” Wolfgang Schäuble, Minister of Finance, Germany 516 General overview Tax dodging has featured as a prominent media and policy issue in Germany over the last year. The government has continued its aggressive pursuit of tax evaders, securing convictions of prominent public figures and purchasing account information from Liechtenstein and Swiss whistleblowers. 517 These efforts have caused the number of voluntary disclosures by Germans of previously hidden offshore wealth to sky rocket, with an all-time record of about 40,000 disclosures in 2014, and a further 10,000 in the first half of 2015. 518 Amidst a growing number of scandals showing the role that the German financial industry has played in facilitating tax dodging, 519 the German authorities have also pursued a number of investigations against some of the biggest banks in the country. 520 As the EU’s biggest Member State, Germany has a unique opportunity to influence the tax agenda in the EU and globally. The German government in some instances uses this influence for good, actively encouraging more coordination of tax issues in the EU and speaking out against harmful tax practices such as patent boxes. 521 Despite this constructive role on coordination, the German government plays a decidedly more negative role when it comes to corporate transparency, where it is often a powerful stumbling block against more progressive action in the EU. The same unconstructive role is apparent when it comes to supporting solutions that would help developing countries and not only the EU. Tax policies According to an assessment in mid-2014 by the audit company KPMG “never before has the topic [of tax avoidance] been discussed so widely both in the press and by the German public.” 522 Despite this high level attention, 2015 has not brought major reforms to Germany’s corporate tax system. In December 2014 the Federal government and the Länder governments set up a special working group to discuss policy measures to address base erosion and profit shifting (BEPS). 523 However, by May 2015 the group had reportedly only met once since January, leading the auditing firm EY to note that they “do not expect more than first steps towards BEPS implementation by the end of this year [2015].” 524 The regulatory authorities have been active in trying to pursue cases against tax dodging. In the process they have exposed the important role of the sizeable German financial sector in facilitating these practices. In February 2015, 150 tax agents raided Germany’s second largest bank – Commerzbank – in relation to investigations into the bank’s possible facilitating of clients’ tax evasion through Luxembourg. 525 The move is said to have led to a number of other banks revisiting their practices in Luxembourg, and resulted in one bank reportedly settling with the German authorities for €22 million over their role in helping to set up shell companies to hide funds in Luxembourg. 526 Other investigations into at least three more banks are ongoing. 527 There has also been progress on what Der Spiegel has called “one of the biggest tax scandals in postwar history” 528 in Germany – a structure that was reportedly set up by several banks including Deutsche Bank and HypoVereinsbank. According to the allegations, the banks helped taxpayers to exploit loopholes in tax law that enabled taxpayers to get two tax payment certificates for only one real tax payment on the same share transaction. The problem stretches back decades and the German authorities have tried to close the loophole several times. While banks now state that their advice was still legal (backed by at least one higher court ruling, which was however largely annulled by the highest German tax court, the Bundesfinanzhof, in 2014), 529 the German authorities insist that it was illegal. In July 2015, HypoVereinsbank agreed to pay a fine of €20 million and also to help the tax authorities with further investigations – the first time ever that a large German bank has done so in this kind of case. 530
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