Member of European Parliament Paul Tang: “Tax avoidance must be tackled at the European level”

Source: P.J.G. (Paul) Tang i, published on Friday, October 6 2023.

After ten years, PvdA member Paul Tang is leaving the European Parliament. His efforts for transparent and ‘more European’ taxation have made an impact, he believes, also in the Netherlands. But that work is far from finished.

By Clara van de Wiel | Read the original article in Dutch on the website of the NRC

October 5, 2023 at 20:48

Paul Tang had known the Flemish expression for some time, but only in Brussels did he really begin to understand what Belgians meant by it: that the Dutch have a “thick neck.” “We very, very much like to think that we are the best kid in the class,” says Tang. “That is SO arrogant. And often simply not justified.”

Tang, MEP for the PvdA since 2014, noted just before that his colleagues in Brussels really do notice it: that these days the Netherlands is more constructive in European discussions. For example, when it comes to reforming European budget rules, where the Netherlands used to be strict, but now advocates much more flexibility.

Tang is just saying: you don’t change an image overnight. “We were budget hawks at a time when one really should not have made cuts. And we allowed other people’s tax money to be stolen through our role as a tax haven.”

Brussels is starting to get into an electoral mood ahead of the European elections next June. And so this autumn, parties are starting to prepare candidate lists. This week the deadline for the PvdA list expires, and Tang has already decided: he won’t be on it. Staying somewhere for too long is a risk, Tang says: to lose sight of the ball, to keeping yourself insufficiently challenged and renewed. What he will do after leaving the Parliament, he does not yet know.

Paul Tang (1967) has been in the European Parliament on behalf of the PvdA since 2014 and was elected chairman of a new parliamentary committee on tax matters in late 2020. In the EP, Tang further dealt with regulation of technology companies and sustainability of the financial sector. Between 2007 and 2010, he was a member of the Dutch House of Representatives. Tang received his doctorate in economics in 2010 and worked at the Central Planning Bureau from 1995 to 2005.

Tang spent the past decade in Brussels working to curb the power of major economic players, such as Big Tech, and was also one of the most prominent prosecutors of tax evasion. Partly on his initiative in response to scandals such as the Panama Papers and the Pandora Papers a committee within the European Parliament was set up for tax matters, of which Tang became the chair. He did not spare the Netherlands in the process - on his initiative, the European Parliament officially dubbed the Netherlands a tax haven in 2019.

But, Tang observes, things did change in recent years. Under the last two cabinets, the Netherlands set a new course, including the introduction of a “withholding tax” on interest and royalties. Last year, de Dutch Central Bank found that the amount of money being funneled through the Netherlands has fallen sharply.

As always, the only ones who benefit from this European stalemate are companies and shareholders

Tang: “I am using it here now as an example: The Netherlands is showing how to change as a country.” At the same time, he also stresses that many investments are still being funneled through the Netherlands. And that The Hague could do even more. “I would very much like to see the Netherlands continue, and go to Luxembourg and Ireland. Why don’t they do the same thing? And why not also go to Switzerland? We need to clean up these centers of tax evasion together, and the Netherlands can take the lead in that.”

But the Netherlands does deserve credit?

“Certainly - I am not cynical, I have really seen a turnaround. Marnix van Rij [State Secretary for Tax Affairs, CDA] started his term by saying that the Netherlands is not a tax haven, but he has subsequently belled the cat. At the same time he is also trying to solve a lot via the European route, for example the problem with letterbox companies. There is a European proposal to tackle these at the European level and the Netherlands is a strong supporter of this. But unanimity is required among member states, and there is none. So Van Rij gets lost in good intentions on crucial issues and in the end nothing changes.”

What should a next secretary of state do here in Brussels?

“Make sure you make a case for democratisation of decision-making. So: allow for tax decisions in the EU to be taken by majority, instead of the unanimity it now requires. And: with that go out and engage. Put pressure on countries that have not yet made the shift in thinking.”

The argument of opponents is: tax policy is such a fundamental part of a nation-state that any EU country should be able to veto changes to it.

“I get all that, but what we have seen in the meantime is a race to the bottom where tax havens are giving other countries a leg up - the Netherlands has also done that. So the moment taxes become international due to the mobility of capital in particular, it is also a European issue. Actually, as a country, you have already lost sovereignty here, and you can get it back by regulating it at the European level.

“Then you also have to get rid of the unanimity rule. For example: we can’t raise the tax on kerosene now because vetoes make it impossible to do so at the European level. As always, the only ones who benefit from this European stalemate are companies and shareholders. It’s impossible to explain to people.”

In 10 years, Tang says, he saw a growing awareness in the Netherlands that Europe is needed. And recently that a different, much more constructive attitude in Brussels is required. Yet he also sees “persistent” old tendencies. “For example, in the discussion about the cost of living crisis” he says. “In my experience, that is very much linked to fiscal policy. Because if anything can jeopardize one’s economic security, it is austerity in times of crisis. And yet you already see parties again hammering on the importance of strict deficit standards and going back to the old austerity policy.”

At the same time, the Dutch budget proposal recently also showed that the government does seek to stay big and continue to support people.

“I really hope so. But this is another reason why I think tax should become an even more important issue in the Netherlands. We have to invest enormously in sustainability, on top of the existing task of aging, of an expanding healthcare system. So the call on the government continues to grow. At the same time, we don’t want public debt to increase further. How can that be done? That is only possible if you start taxing better, and also regulate that better on a European level.”

In the Netherlands adjusting taxes is already difficult, in Europe the discussion about it is already complicated.

“Perhaps. But if you ask people what Europe should do, they have a very good feeling about what is important and too big to tackle at national level. And now that it has become clear how international the network of tax evasion really is, it is also clear that tackling it has to be European.

What still scares me enormously is how ill-informed many national parliaments are.

“And as far as I’m concerned it goes further. The discussion we have in the Netherlands about taxing wealth is really only a part of a discussion that should be much more European. If you want to tackle this seriously, you can’t escape it. Because [people’s] wealth is also hiding internationally from national tax authorities. Why shouldn’t we do our best to advocate for some form of wealth taxation in Europe, or even with more countries outside the EU? And yes: I really think that there is ultimately support for that. Because the unfair thing is that people who work pay far more taxes than people who make their money work.”

The existing unanimity rule makes tax policy in Brussels an enormously tough file. Has anything really changed in recent years?

“Not enough of course, but steps have been taken. On the one hand through more transparency - for example, country-by-country reporting [legislation requiring multinationals to disclose where they pay taxes in Europe]. But also in the new tax agreements of OECD countries, European input has been very big. So there is progress, only you still see the concentration of money in tax havens. The problem is definitely not gone yet.”

At the same time: the creation of the new tax committee in the European Parliament was seen as an important step in response to all those tax scandals. But in practice, the new mandatory transparency rules are the only concrete result.

“That is not entirely true. The Taxation Committee is also meant to get conversations about tax away from the backrooms and into the public domain. I have witnessed up close the OECD negotiations on a global minimum tax, and it really does have a nineteenth-century feel to it at times. With a French finance minister having to call an American minister to agree on something. Really a small club of Western countries deciding it. It’s still really not democratic. And then it helps enormously if such agreements are then discussed publicly within a parliamentary committee from now on.

“What still scares me is how badly informed many national parliaments are. I now have frequent contact with the German Bundestag and the French Assemblée and here in Brussels we are so much better informed. While we don’t have the competence! They decide, for example on multilateral tax agreements. But they are often poorly informed. In cooperation, the European Parliament can assist such parliaments and really add something.”

It seems like a subject that can make one despondent.

“Yes, but I remain patient so long as I notice that the goal is still in sight. If you don’t, you only occupy yourself with small issues. With what can be dealt with within four, five years. But sometimes you also have to pick up topics and think: after me someone will come who will do the same. And I’m firmly convinced of that.”