'Blood on carpet' predicted in EU tax avoidance inquiry

A proposed MEP inquiry into a tax evasion scandal that gripped headlines last year has led to a behind-the-scenes power struggle in the European Parliament as key figures are said to be nervous about just who will be brought before the enquiry and what questions will be asked.

The Greens last month obtained enough MEP signatures to set up an inquiry committee into favourable regimes - known as tax rulings - that allow multinationals to pay very little tax, less than one percent in cases.

The inquiry was prompted by the LuxLeaks scandal which saw hundreds of companies benefit from such regimes, set up while the current European Commission president, Jean-Claude Juncker i, was prime minister.

The EP’s political group leaders are set to endorse the inquiry and then establish the composition of the committee when they meet later this week.

But concerns are mounting that parliament procedures, led by EP president Martin Schulz i, to verify the authenticity of the collected signatures and review the legal basis of the committee’s mandate may seek to limit the reach of the probe.

The legal service was supposed to have delivered the mandate last week. The delay has raised suspicions among the Greens that moves are being made to water it down.

Schulz’s spokesman Armin Machmer told this website on Monday (2 February) that “the expertise of the legal service, which was requested unanimously by all political groups was not available yet. It is due anytime today.”

Belgian Phillippe Lamberts, co-president of the Greens group, told reporters to expect major political repercussions once the inquiry is launched.

“There will be so much blood on the carpet that no one will want to do it because no one can clean it up afterwards,” he said of those that he wants grilled.

Among those on the hit list are Dutch politicians - including finance minister and Eurogroup chief Jeroen Dijsselbloem i. The Netherlands has around 12,000 mailbox companies that help channel hundreds of billions of euros each year.

He also wants the EP’s liberal leader, Guy Verhofstadt i, on the stand for the tax rulings passed under his tenure as Belgian prime minister.

Verhofstadt has taken party credit for having had the idea of setting up a tax enquiry in the first place.

But Lamberts noted Verhofstadt never signed the cross-party list of signatures needed for the committee to see the light of day.

“Mr. Verhofstadt has already supported an inquiry report and it would be inappropriate for him to put his signature twice,” said Verhofstadt’s spokesperson Bram Delen in an email.

Lamberts also took a shot at Socialist group leader Gianni Pittella.

“Pittella is no better,” he said, noting that the Italian MEP had instructed the members in the group not to sign the Green petition.

Lamberts accused the Liberals and the Socialists of having taken their orders from the centre-right EPP group.

“So I decided to speak to Weber [EPP group leader Manfred Weber] rather than the other two. I prefer speaking to God rather than his saints or disciples,” he said.

In a further twist, a confidential legal document distributed by the Greens indicates that Juncker’s suggestion, made in the wake of the LuxLeaks scandal, to draw up a law that would oblige member states to share information on these favourable tax regimes, is nothing new.

A directive on the exchange of information to prevent tax evasion has existed since 1977.

It was then revised and updated in 2011.

The directive says when tax rules in one member states result in a loss of tax income in another member state, then member state A has to inform member state B.

The 38-page document, dated 4 June 2012, compiles responses from member states on their application of the directive. Responses were mixed, with some like France providing no information.

“Our legal advisor found over the weekend a jurisprudence [of the European Court of Justice] from 1998, which confirms basically that there is an obligation to exchange information on the most egregious cases of tax rulings,” say the Greens.

The revelation means the Greens want to expand the scope of the inquiry to cover maladministration and breach of EU tax law.

Lamberts says the inquiry should be up and running once it goes to vote in the plenary later this month.