Bloc looks to recoup €1 trillion a year in lost tax

EU summit ends banking secrecy


European leaders on Wednesday targeted a yearend deadline to do away with banking secrecy, hoping to recoup €1 trillion in lost tax each year to help beat recession and unemployment.

However, British Prime Minister and current Group of Eight chair David Cameron, backed by French President Francois Hollande, struggled to extend the crackdown to corporate multinationals — despite technology giants Google and Apple coming under fire for paying low tax rates, notably in Ireland.

“Tax evasion is a serious crime, one which, thanks to protracted legal proceedings and trifling penalties, can be committed virtually with impunity,” European Parliament chief Martin Schulz told the summit.

German Chancellor Angela Merkel also insisted tax fraud and avoidance simply “has to end.”

However, the ambitious goal of automatic cross-border sharing of European Union bank records was held hostage to demands by Luxembourg and Austria for a similar deal first with non-EU Switzerland and four other financial centers.

At this stage, the exchange of information regime is intended to cover only savings — a more limited policy than that brokered by the U.S. with overseas partners in 2010.

In final draft conclusions released Wednesday, leaders were to call for EU rules first agreed in 2008 to be adopted “before the end of the year.”

But veteran Luxembourg Prime Minister Jean-Claude Juncker said his country will only move in line with a broader deal between the EU and Switzerland, Andorra, Monaco, San Marino and Lichtenstein. The European Commission last week won a mandate to negotiate information-sharing norms with the five nations.

“We are going to abandon banking secrecy and move towards the automatic exchange of information we want to bring in for Jan. 1, 2015,” Juncker said.

But this “necessitates negotiations with third countries, notably Switzerland, so (that) we are in a position that does not skew competition,” he insisted.

Oxfam believes more than $12 trillion is hidden in EU-anchored tax havens — with the U.K. and its dependencies alone, from Guernsey to Grand Cayman, accounting for more than half.

In London, Google CEO Eric Schmidt defended the Internet giant’s readiness to exploit government rivalries for investment as media reported him stressing that Google follows “the tax laws of the countries we operate in.”

That intervention followed U.S. lawmakers’ attacks on Apple CEO Tim Cook for running “sham” subsidiaries as part of “convoluted” strategies to shift profits offshore.

Irish Prime Minister Enda Kenny, however, denied “special” deals and said Dublin would continue to compete for international business using a “transparent” tax regime.

Belgian Greens EU lawmaker Philippe Lamberts said the summit’s lofty tax goals amounted to little more than “gesticulation,” noting “there is clearly no political will” to undermine nationally controlled tax-setting powers.

Britain’s Cameron, who faces a threat by Scotland to cut its business tax rates if an independence referendum succeeds next year, said securing a level playing field on corporate tax was key. “I believe in low taxes for businesses,” he said. However, “we have got to be sure that when we set those taxes, companies pay them.”