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Tax Avoidance in Europe May Call for Regulatory Tax Reform

European Parliament members have created a group of 20 nations to "close down all tax and regulatory havens" and put a stop to the regulatory loopholes that are contributing to widespread tax avoidance in several of Europe's major financial centers.

Following the outcome of the G20 Summit commitment to support reform for remuneration schemes, the European Parliament accepted a resolution for financial regulatory review. The proposed resolution calls the next G20 Summit even further in to action than the last April 09' Meeting, when several of the leading nations suggested implementing sanctions to "protect public finances and financial systems" from offshore and lower tax jurisdictions.

A press release by the European Parliament on April 24th, stated, "Parliament welcomes and fully supports the request made by the EUROLAT Parliamentary Assembly on April 8, 2009 to the EU-LAC (Latin American and Caribbean) countries 'to act at once to abolish all tax havens on their territory' and to work at international level for the abolition of the rest and for sanctions against companies and individuals resorting to their services."

Although the European Parliament showed favor to the G20's announcement that the "era for banking secrecy is over" and supported the reduction of tax avoidance through the automatic exchange of information, Members of the European Parliament suggest that the European Union should create "an appropriate legislative framework regarding tax havens" and also request their international partners to do so as well.

The G20 was considered a reprieve for many of the offshore financial hubs after they had been accused of nearly crippling the entire world economy down due to allowing risky business transactions to go on outside of the control of onshore regulation. Of all of the countries involved, only four were named on the OECD blacklist; Costa Rica, The Philippines, Malaysia and Uruguay. Furthermore, those countries have since been removed from the list for agreeing to follow minimum tax transparency standards.

Daniel J. Mitchell from the Cato Institute stated that the actions of the "high tax" states such as the "Old" member states of the EU and the United States, and the OECD, will oppose those that support financial privacy and international tax competition. Mr. Mitchell also stated, "These so-called havens are being assaulted by international bureaucracies such as the OECD ... These events do not bode well for supporters of fiscal sovereignty and financial privacy."

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