Will the Paradise Papers make a difference…this time?

The latest revelations from the International Consortium of Investigative Journalists (ICIJ), dubbed the Paradise Papers, highlight the failure of governments to stop the scourge of tax dodging and financial crime facilitated by offshore financial centres and law firms such as Appleby.

Following the Swiss Leaks, Lux Leaks and Panama Papers in addition to evidence from NGOs and trade unions (such as the European Federation of Public Service Unions (EPSU)-backed report on €1 billion worth of unpaid tax by McDonald’s), will EU governments finally act?

The Paradise Papers are a sorry reminder that money is available to finance the quality public services that are the backbone of social democracies.

The Tax Justice Network, which EPSU is a member of, estimates that governments lose US$500 billion a year in tax revenues due to tax avoidance by large companies. An additional US$200 billion a year is estimated to be lost due to the undeclared offshore wealth of tax evading individuals.

Untaxed wealth is not about the malfunctions of financial capitalism; it is, at the heart of it, causing and feeding on the unequal times we are living in. As 80 per cent of the offshore money belongs to 0.1 per cent of the global population and 50 per cent to the 0.01 per cent, it is no surprise that some of the world’s biggest multinationals feature in the Paradise leaks: Apple, Nike, Facebook, as well as some of the richest individuals, from the Queen to Bono.

What you won’t find are the public service workers that EPSU represents: nurses, carers, labour or tax inspectors, waste workers…for those workers, the Paradise Papers are hell. They pay twice: first through income tax and VAT to make up for the tax gap, and then again through wage cuts because public money is so scarce.

EPSU has been calling for years to end austerity-led cuts in staff resources in tax administrations and enforcement units. The fight against white-collar crimes must be as tough as the fight against terrorism that breeds on global inequalities.

Tax collectors must be sufficiently armed to process the information flow from the Paradise Papers. They are also the ones, not companies, who can say whether activities revealed by the Paradise Papers are legal or not.

As a matter of urgency EU governments must improve and adopt the Commission’s corporate transparency proposal called ’public country-by-country reporting’ so that multinationals disclose publicly, for every single country where they have operations, the profits made, number of employees, information on subsidiaries through which profit is shifted to low or no tax jurisdictions. Yet, half of EU governments oppose the proposal.

The Paradise Papers bring further information on the real beneficiaries of letterbox companies and trusts. This is enough to establish a long-awaited public registry that should not be limited to money laundering. We would also argue, on the basis that the purpose of offshore companies is, in most cases, to circumvent not only tax but all kinds of regulations: shouldn’t they simply be banned? This would have the advantage that the likes of Appleby would lose the market that they benefit from.

On Tuesday, EU governments discussed a blacklist of non-cooperative jurisdictions. Many don’t want such a list. Yet, the proposal on the table does not go far enough to be effective. It should be comprehensive and include EU-based tax havens. It must deter companies, banks law firms and audit firms such as the ’big four’ from using offshore jurisdictions.

Sanctions must include removal of licenses as well as a ban on public contracts; those that dilapidate public services by not paying their fair share of tax cannot then be awarded public contracts to build roads or hospitals.