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Fight against tax fraud

Published on April 16, 2013
Excerpts from the interview given by M. Pascal Canfin, Minister Delegate for Development, to the daily newspaper Les Echos

Paris, April 12, 2013

Q. – François Hollande wants to wage war on tax havens. Why would this battle be any more successful than the previous ones?

THE MINISTER – Because there’s a fiscal need to recover the money placed in those territories with a view to evading tax, and because momentum is being created at global level. President Obama paved the way with the FATCA [Foreign Account Tax Compliance Act], which introduced automatic tax information exchange. If Europe ends up adopting similar legislation, no more Cahuzac affairs will be possible. France was a driving force on this path with her banking law, and the environmentalists were able to secure the adoption in Brussels of an obligation for every European bank to declare not only its payroll and turnover by country but also its profits, the taxes it pays and the subsidies it receives. In practice, this means we’re putting an end to the opacity of the tax optimization systems enjoyed in particular by CAC 40 companies. If I were to echo the words of Arnaud Montebourg, I’d say we’re deglobalizing bank accounts. And the ball is rolling at last: Luxembourg has just abandoned banking secrecy and Austria is about to give way.

Q. – Switzerland likewise?

THE MINISTER – There’s a domino effect she’ll find very hard to resist. Because all 27 of us are in agreement, Brussels will be able to renegotiate the tax conventions with that country but also with others further afield, such as Singapore. Swizerland’s argument was that we couldn’t apply a rule to her without applying it to ourselves; that no longer stands up. Moreover, she agreed to automatic exchange with the United States for fear that Swiss banks might no longer be able to operate on the other side of the Atlantic; she’ll have to do the same with the EU.

Q. – You want to oblige companies to declare the details of their activities in tax havens. Can France afford to impose this alone?

THE MINISTER – No. But we do intend to persuade our European partners. And it’s not an impossible task, because even the United Kingdom has been shocked by the attitude of companies which make a huge turnover there while paying practically no tax. Let me remind you that in France, the CAC 40 companies pay an tax of 8% on average – i.e. a lot less than SMEs.

Q. – Don’t tax havens have some uses? To protect business confidentiality, serve as a refuge for people threatened with unfair expropriation in some countries and discourage the imposition of excessively high taxes in European countries?

THE MINISTER – This is what those defending tax havens argue. I note that the vast majority of companies don’t need tax havens to carry out their activities. For people threatened with unfair expropriation, by undemocratic regimes, exceptions to automatic tax information exchange may be contemplated. But let me remind you, as Development Minister: the first victims of tax fraud are the poor countries – just as it’s clear that those who carry out tax avoidance are rich households and big corporations, an indirect consequence of which is higher taxes for SMEs and the middle classes. Consequently, getting rid of tax havens will allow a better distribution of taxes. The battle against tax havens is about fighting for justice and about politics regaining control over globalization. (...)./.

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