Financial fraud was the subject matter at a conference held in the European Parliament in Brussels on Thursday 9 November. In light of the recent revelations of the 'Paradise Papers' on the vast use of off-shore companies in tax havens by the wealthiest in societies for the purpose of tax evasion, the conference paid particular attention to recent large-scale international cases of financial fraud and embezzlement.
The conference was attended by several MEPs, journalists and representatives from NGOs and associations. The speaker panel consisted of Honorary MEP Frank Schalba-Hoth, economist Björn Hultin, journalist Gary Cartwright and journalist Jarosław Jakimczy.
Hultin highlighted “the sheer size and scope of many recent cases of financial fraud, amounting in some instances to several billion euro, which can have severe consequences and endanger not only a few individuals or institutions, but also put whole economies and societies at risk as these actions deprive governments of public money and resources.”
Schwalba-Hoth commented on the opportunism of criminal fraudsters in many post-soviet countries and their use of complex secretive structures in offshore companies to embezzle and launder stolen money, using the same schemes revealed in the paradise papers by large corporations to hide assets for tax evasion purposes.
In particular, one of the largest financial fraud cases in history was brought up and discussed during the conference, relating to the embezzlement and laundering of up to $10 Billion by Kazakh businessman Mukhtar Ablyazov. Ablyazov currently resides in France where he fled after British courts sentenced him to prison in 2012 and demanded the recovery of more than $4.5 Billion back to Kazakh BTA Bank. Journalist Gary Cartwright explained in detail the process and timeline of how Ablyazov is believed to have undertaken the theft. It included, amongst others, the use of a vast number of shell companies set up in off-shore tax havens, who received large scale loans for fictional property and business deals.
During the conference, journalist Jakimczy also discussed an ongoing investigation into a NGO called Open Dialogue Foundation. The organization, which was set up in Poland and has an office in Brussels, is among others, advocating for the defence of Ablyazov on political persecution grounds. However, the organization is believed to at the same time also have been funded, among others, by money donated from the network of companies owned by Ablyazov. “Several companies that have donated to the NGO’s activities are flagged and sanctioned by the West,” Jakimzcik argued. Gary Cartwright, who has followed the case closely, said: “There are more questions than answers related to the funding of ODF.”
In the audience, Henri Malosse, former president of the European Economic and Social Committee called for the EU to set up better mechanisms to trace the funding of Brussels based NGOs, especially those who abuse the system. He also criticized the uneven playing field whereby large corporations and high-net worth individuals use secretive schemes to channel money to off-shore tax havens.
Mukhtar Abylazov was released from prison by French authorities in December 2016. Russia, Ukraine and Kazakhstan have requested that he is extradited. Meanwhile, Ablyazov is believed to be asking for asylum in Belgium or other countries in the EU. Schwalba-Hoth said that he “did not find it likely that Belgian authorities would grant Abylazov asylum”. And Cartwright argued that Ablyazov and other financial fraud fugitives should be brought to justice and also highlighted the importance of a fair and balanced trial and process. In the meantime, BTA Bank is still trying to recover the several billion euro that are believed to remain hidden in various off-shore tax havens.
Commission launches new learning portal for tax and customs professionals across the EU
The European Commission has launched a new EU learning portal offering tax and customs professionals across the EU an opportunity to build, upscale or share their knowledge on important topics in the field. Capitalising on the advantages of online learning, it aims to build common expertise and improve the skills of customs and tax professionals working in national administrations and authorities, businesses, academia and researchers in the field of tax and customs, with some specific content for staff of public administrations.
The new portal includes a combination of different learning formats – from self-paced learning and development to interactive exchanges of best practices - and should help to modernize customs and tax competencies in the EU by providing a new way for people working in the field to share experiences and knowledge. It can also help professionals to build common skillsets to address shared challenges, such as fraud, tax avoidance and digitalisation. Tax and customs play a vital role in our societies and in the functioning of the EU's Single Market by ensuring efficient revenue collection, contributing to the prosperity of businesses, supporting the safety and security of citizens, and by facilitating legitimate trade. Customs and tax professionals and their administrations and enterprises must be able to respond to and anticipate change to remain effective in a constantly evolving social, political and economic global context. More details and the new learning portal can be found here.
Gentiloni says digital levy to fund NextGenerationEU will be proposed by summer
Today (28 April) the European Parliament debated the future of a digital tax. In a report by Andreas Schwab MEP (EPP, DE) and by Martin Hlaváček MEP (Renew, CZ) the Economic and Monetary Affairs Committee reporters and their colleagues in the Budget Committee called for a fairer outcome and the creation of a new ‘own resource’ to fund the NextGenerationEU and the recovery and resilience fund (RRF).
The MEPs would prefer to have an international agreement negotiated through the OECD Inclusive Framework (IF), but after many delays, MEPs say that a European solution needs to be prepared by the summer even if the IF process has not been resolved.
Economy Commissioner Paolo Gentiloni agreed with MEPs and said that the US administration did offer a new dynamic in resolving this question, nevertheless the EU would be coming forward with a proposal by the summer that would be compatible with the OECD process and which would respect the EU’s other international commitments, including those under the World Trade Organization.
Gentiloni said that the two pillars - one based on allocation of taxes based on profits and the other on the need for a minimum corporate tax level - should not be treated separately and should be agreed as a package.
Both MEPs and the commissioner were aware of the need to create the new ‘own resource’ mandated by heads of government and needed to pay back debt accrued in helping the EU’s COVID-hit economy recover. The deadline for the new resource to become operational is the start of 2023.
Lagarde reiterates need for timely ratification of own resources decision
European Central Bank (ECB) President Christine Lagarde confirmed that the ECB would maintain its very accommodative monetary policy stance. The Governing Council will continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) and expects purchases to be conducted at a significantly higher pace than during the first months of the year.
Lagarde said that the eurozone still had a long way to go before phasing out of monetary easing. She compared the situation to an economy on crutches, that has to cross the bridge of the pandemic, and in the meantime it needs two crutches, one fiscal and one monetary.
On national fiscal policies, Lagarde said an “ambitious and co-ordinated” approach remained crucial as a premature withdrawal of support would delay recovery and amplify long term scarring effects. She said firms and households would need ongoing support.
At a European level, she said the ECB Governing Council reiterated the need for a timely ratification of the own resources decision, to finalize recovery and resilience plans promptly and the need for the NextGenerationEU programme to become operational without delay. She said that this could contribute a faster, stronger and more uniform recovery and thereby add to the effectiveness of monetary policy in the eurozone.
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