On 23 April a two-day informal meeting between European Union economy and finance ministers drew to a close. The ordinary occasion from which no decisions of any sort had been expected suddenly developed significance. It was at this meeting that the differences between EU countries regarding how to heighten transparency in business and fight tax fraud first became apparent. The response to the Panama Papers, which should have been swift and decisive has become increasingly tied up in the inevitable tangle of national interests.
In early April the International Consortium of Investigative Journalists published over 11 million documents exposing the involvement of leading politicians and sports and entertainment stars in dubious financial operations with offshore companies in Panama. The materials sparked a major reaction around the world, resulting in the resignations of high-ranking officials in various countries.
The leading European states responded impetuously. Apparently, they had been waiting for just such a scandal. It was within a mere week’s time that that specific measures were published by the German Ministry of Finance, French Ministry of Finance and European Commission; аnd the UK Ministry of Finance presented an ambitious international project.
The gist of the main proposals is introducing an offshore blacklist, creating standardised national registers and automatic data sharing on the tax and ultimate beneficial owners of companies, and requiring international companies to publish reports on taxes and revenues in each country.
The proposals were supported by the G-20 for literally a week, and on 22 April the UK’s project was approved at a meeting of EU finance ministers. Treasury head George Osborne then
made the official announcement that over 20 countries and jurisdictions, including several British overseas territories and offshores had joined the initiative. At the same time, Eurogroup President Jeroen Dijsselbloem expressed the hope that a pan-European agreement could be concluded as early as May.
It was evident from the very start of active norm-setting that the obstacles would be inescapable. Examples could easily be found in recent initiatives of an analogous nature. For instance, the European Union Fourth Anti-Money Laundering Directive took two years to be adopted; or the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Sharing project (known as BEPS) has been gathering 130 countries and jurisdictions under its banner for three years but is still not working properly because of issues with common agreement and implementation.
HM Treasury was optimistic when submitting the joint project with Germany, Spain, Italy and France. But even then the feedback was skeptical regarding the possibility of implementing it on a wide scale (other countries joining). “Some might see any such extension as unlikely,” reported the BBC. In turn, the Financial Times listed the obstacles, among which are highlighted Britain’s hitherto unsuccessful attempts to force even its own offshores fully disclose information.
Against this backdrop, the two-day meeting between the finance ministers was indicative. At first, the majority of the ministers were in favour of the proposals in principle, permitting their press services to release several ecstatic tweets. But on the following day, the very same countries brought to the table recommended changes showing how each point must be accepted while simultaneously taking national interests into account.
The German minister Wolfgang Schäuble opposed the idea of companies making public reports on taxes and revenues in every country where they do business, citing the standpoint of regional elites. Of the same opinion are Malta and Austria, who urged not dramatizing the situation with Panama or overreacting, writes Süddeutsche Zeitung.
The situation surrounding the idea of offshore black lists is unclear insofar as there is no common vision regarding what criteria to include in them. (In particular, the views of Spain and the United Kingdom diverge over whether Gibraltar is a tax haven.) In the end, the UK opposed tightening requirements on trust funds and Ireland stood against restricting companies in relocating profits from one country to another, reports the Financial Times.
It is obvious that the attempts to, under the guise of an operative reaction to the Panama scandal, come to an agreement over impromptu new standards and cooperation turned out to be exceedingly ambitious. Considerable enthusiasm has quickly been replaced by the laborious consideration of details. Indeed, there being a large number of countries on the list of signatories is not only a cause for solemn communiques but also for unavoidable conflicts of national interest.