Nick Shaxson ■ The secret EU Tax “Code” that needs to be cracked open


Guest Blog: The secret EU Tax “Code” that needs to be cracked open

A guest blog by Tove Maria Ryding, Eurodad

Yesterday Fabio De Masi, a German member of the European Parliament, filed a lawsuit against the European Commission after being denied the right to see the minutes from meetings in the Code of Conduct group on Business Taxation. Ever since the famous LuxLeaks tax scandal exploded, members of the European Parliament have been fighting to get access to these documents, which could shed light on the failed political processes that have allowed multinational corporations to use tax loopholes in EU Member States to avoid paying their fair share of taxes. 

The European Commission has never let any outsider read the minutes from the secret meetings of the Code of Conduct group.

What is the Code of Conduct Group on Business Taxation?

Member States and the Commission often refer to this group as “The Code”. It was set up by European Member States in 1998 as a top secret forum to discuss harmful tax practices and taxing multinational corporations. It includes the Member States and the European Commission, and as we understand – though information is scarce – Member States bring their potentially harmful tax practices into the group for discussion, and if all other Member States are against the measure, “peer pressure” is supposed to be applied to the Member State with the harmful measure, to remove the practice.

Only after months of pressure did the Commission agree to give members of the European Parliament access to a strictly limited number of its documents, and even then the “access to information” came with tough conditions: the members of parliament were given a very limited time period when they could come to a secured room at the European Commission and read the documents. They were not allowed to bring any of the documents, or even their own notes, out of the room, and they were not allowed to tell anyone what they had read!

Though the vast majority of the documents from the group (including the minutes) were not included in this “access to information”, the secured room still contained hundreds of pages of information. In response to this, some of the parliamentarians released the video Mission Impossible to illustrate the kafkaesque absurdity of the situation.

The lawsuit that Fabio De Masi has now filed is supported by a legal analysis which shows that the Commission violated EU law when refusing to share the documents from the group. 

In parallel to the battle at the EU level, several organizations have also filed access to information requests at the national level in EU Member States to get access to the minutes of the group. 

Code mission

Click on the link to the video: it’s great fun

While we don’t know very much about the workings of this secretive group, we do know that this system has obviously failed.

It’s been in operating more than 15 years and has failed to remove everything from patent boxes to harmful tax rulings (also known as “sweetheart deals” that are signed between Member States and multinational corporations, such as those that caused the LuxLeaks scandal). In some cases, it appears that the discussions in “The Code” have not only failed to remove the harmful tax practices that have been discussed in the group, but in fact inspired more EU Member States to introduce similar harmful tax practices in an attempt to “compete” with other Member States. This seems to have been the case with both patent boxes and tax rulings.  

Some of the participants of the group, of course, have attempted to paint the group as a big success. See for example this presentation by the Commission, which claims that: “The Code has effectively eliminated harmful tax practices”. That was in 2014 – shortly before the LuxLeaks scandal broke out and revealed hundreds of harmful tax rulings in Luxembourg.

“The Code” and all the secrecy that comes with it is something the EU Member States want to continue with in the future as the key place to resolve corporate tax issues. At the end of 2015, the EU member states did a review of the group. The resulting decision said that the EU Member States:

EXPRESSES the wish to improve the visibility of the work of the Code of Conduct Group and AGREES therefore that its results, in particular its 6-monthly reports, are systematically made available to the public;

INSISTS however on the confidentiality of the Group’s deliberations with a view to protect the public interest as regards the economic policy of Member States, maintain the efficiency of the assessment process and counter related risks of aggressive tax planning”.

In other words, “The Code” itself should be known to the public along via its 6-monthly reports which (surprise surprise) only contain very limited amounts of information: but the work of the group should remain highly confidential.

The most surprising element of this decision is the claim that this confidentiality is upheld to “protect the public interest“. Keeping in mind that harmful tax practices have already cost EU citizens billions of Euros in lost tax income, and that their continued existence is likely to lead to the loss of even more billions of Euros, surely the public interest is to get full clarity on why “The Code” has gone so badly wrong, and whether there is any hope of seeing improvements in the future.

Bearing in mind that tax policies, including taxation of multinational corporations, are key elements of our national EU democracies, it also seems clear that the meetings and discussions in “The Code” should never have been secret in the first place. 

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