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Financial crime and corruption in the European Union

Serious work is going on to stop corruption and tax evasion in the EU, and it requires a Europe-wide approach. Necessary legislation is often blocked by individual governments, but ordinary citizens can make a difference. Much more needs to be done to implement protection for whistle-blowers.


Graham Douglas


The Prisma is publishing this interview as part of our effort to make up for the lack of attention in the UK mainstream press for voices from within other European countries – serious voices from people committed to improving the functioning of the EU, and to holding its politicians and administrators to account.

The UK press offers lots of soundbites from the top people, Juncker, Barnier and Tusk, and occasional articles from Varoufakis, but this doesn’t inform the UK public about the daily work of the EU. Is it just a huge ‘Junckernaut’, intent on creating useless bureaucracies and hiding corruption? Those who believe that will not find much to change their opinions in the UK press, even in the so-called quality dailies.

A quick outline of the main EU branches to start with:

The European Council is the highest authority, made up of the presidents and prime ministers of each member state. Its role is to set the general political direction of the EU, and deal with issues that cannot be easily resolved otherwise. It meets quarterly and most decisions are made by consensus, and subject to veto. It can pass laws but only with the agreement of the Parliament and the Commission.

The European Commission is charged with initiating legislation. In conjunction with the European Court of Justice, it enforces legislation that has been passed. They regularly put out issues for general public discussion and can also receive suggestions from EU citizens.

The European Parliament debates and votes on legislation. It is not permitted to initiate proposals, but it may convince the Commission to do so by presenting proposals to be formalised and returned to Parliament for debate.

Ana Maria Gomes is a Portuguese MEP, who was until recently the Deputy Chair of TAX3, the EU Special Commission on Financial Crimes, Tax Evasion and Tax Avoidance, and of PANA. Since 2014 she has worked on several Committees, concerned with civil liberties, justice, money-laundering and relations with the US.

She spoke to me for the The Prisma by phone from Brussels. In this first part she discusses general issues of concern to UK readers.

People in the UK are concerned that the EP has much less power than the European Commission – is that a problem for your work?

They have different powers: I will give you the example of taxation. We set up committees after the scandals of Luxleaks, the Panama Papers and the Paradise Papers.

And we have made a difference by pressing the Commission to act – enabling Ireland to recover € 13 billion in taxes from Apple, due to tax exemptions which were considered “illegal State aid” , against the competition rules of the internal market. A lot of work has also been done by the EP on new tax and anti-money laundering regulations.

The parliament doesn’t have power to initiate, but the Commission did it because the EP was pressuring them, so I don’t agree with this idea that the EP has less power than the Commission – it depends on how it uses the powers that it has to make the case publicly for action when problems are exposed.

In one of your recent reports you regretted that the European Council lacks the political will to implement the recommendations of the Commission.

Yes, using the example of taxation again: the EP proposed legislation, which was formalised by the Commission, but then it was blocked in the Council by some members, because a single country can oppose. Another example is migration, where the proposal for the Dublin Rules to be changed was blocked by the voting in the Council, despite support from the Commission.

Why was your Committee set up?

We began in 2014, in response to the Luxleaks scandal, which had to do with MNEs not paying taxes. It was a struggle to have the Committee established, but we managed, and since then we have produced four very important reports into big scandals including the Panama Papers and the Paradise Papers. We have looked into tax evasion and money-laundering, and more importantly, we took lessons from this for new legislation. We cannot initiate legislation, but the Commission can and the 4th and 5th Anti-Money Laundering Directives are the result of this. We work to facilitate administrative co-operation, and as a result of our investigations, there are new restrictions on the actions of the enablers of financial crimes, such as lawyers, tax consultants and accountants.

But not all our recommendations have been accepted, because they were blocked in the Council by individual governments – but this is a big fight and it’s going on. It is the European Parliament – not the national parliaments – that has been at the forefront of this fight, and we need citizens to keep feeding us information.

You deplored that: “some member states confiscate the tax base of other member states by attracting profits generated elsewhere”.

We need a minimum degree of tax harmonisation in the EU so that some members cannot confiscate the taxes of others in these tax-dumping schemes, in a race to the bottom. This needs European co-operation; if you want an honest internal market, you cannot accept the idea that taxation is confined to the realm of national sovereignty.

What needs to be done?

We need to get ordinary citizens to understand that if they want fair taxation and an effective fight against money-laundering, these problems are by their nature cross-border activities, so we need to act together at a European level. This idea of acting in the name of national sovereignty alone is the most effective way of allowing the tax base to be confiscated. It is very unfair to have unlawful competition inside the single market, and it creates an environment in which tax evaders and offshore businesses can thrive.

Do you think there is enough protection for whistle-blowers?

No, and in my own country, Rui Pinto, who was the main source of the football leaks scandal is now in jail, and in other EU countries whistle-blowers have been persecuted and subjected to enormous duress, when they should be protected. We have adopted a Directive, but it is still not in force in most member countries, and we need absolutely to mobilize to ensure this. And to encourage ordinary citizens who are fed up with the corruption that is going on, to report things that are against the public interest when they see them.

Secrecy around offshore Trusts exists in layers and layers, designed to make investigation difficult – how should the authorities be acting?

You cannot do away with the offshore industry by decree, the way to make it obsolete is to increase transparency through legislation which compels trusts, freeports, and companies to be transparent. The circulation of capital,one of the four freedoms, is enormously enhanced by digital technology. Digital platforms must be subject to absolute transparency, so that they cannot enable tax evasion and the laundering of criminal profits.

One of your Reports said that the structure of the tax burden is moving away from Multinational Enterprises (MNEs), and wealth, and taking more from Small and Medium Enterprises (SMEs), from personal salaries and from VAT. This hits the poor and especially women – why is this happening?

The European Commission figures show that SMEs pay on average 30% more tax than MNEs, and digital companies – so that is outrageous! You are taxed much more if you make a living by working than if you live off the rent on your capital. It absolutely has to change, and one country alone can’t do this. That’s why we are proposing a Financial Transaction tax, and a Digital Tax, not just to fund the EU budget, but also the national budgets.

Next week Ana Gomes will discuss specific countries highlighting the issues involving Brexit.

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One Comment

  1. Malcolm Wade

    Excellent article. Corrupt; undemocratic and wasteful: no wonder the majority of voters in the UK referendum voted to leave.

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