BRUSSELS (AP) — European Union leaders on Wednesday sought to advance their fight against tax fraud and close the loopholes for large corporations’ tax avoidance schemes.
European officials say tax fraud costs the 27-nation bloc an estimated 1 trillion euros ($1.3 trillion) a year at a time when much of the bloc is in recession and governments are forced to tighten their budgets despite record unemployment.
British Prime Minister David Cameron said the EU has to be sure “that companies pay taxes and that means international collaboration, sharing of tax information.”
The meeting comes as the row escalates over the amount of tax paid by high-tech multinational corporations such as Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Google Inc (NASDAQ:GOOG).
The bloc’s heads of state and government focused on the tax issue at their short afternoon summit Wednesday. The discussions follow an inconclusive meeting of finance ministers last week, which failed to agree on an automatic exchange of banking information between all EU countries to catch tax-evaders.
On the way into the meeting, leaders were hopeful of persuading Austria and Luxembourg, the two EU countries that prize themselves on their banking secrecy, from withdrawing their objections to the cross-border initiative.
“We will be able to decide crucial steps,” said German Chancellor Angela Merkel.
“There will finally be an exchange of the necessary tax data and there will be negotiations with third countries,” she added, referring to talks with non-EU members such as Switzerland to accept a similar automatic information exchange.
“That is a great leap forward but we’re not yet at the end,” Merkel said.
Austrian Chancellor Werner Faymann indicated his country was in principle prepared to give up its banking secrecy for cracking down on tax cheats.
“I expect that we will achieve this data exchange by the end of the year,” Faymann said. “All those who were betting on us fighting over this for so long to grant tax fraudsters a completely easy game (…) will be proven wrong,” he added.
But Luxembourg, whose financial sector makes up about a third of its economy and tax receipts, seemed determined to put its foot on the brakes for fear of losing its competitive edge to non-EU states that would not be bound by the new rules.
“The decision is not yet ripe because we still need the results with third countries, with Switzerland for example,” said Prime Minister Jean-Claude Juncker. “Once we have those results then we will get to decisions fast since we all basically agree with broadening the scope of the interest directive to all financial products,” he added.