MEP Tang: ‘Tax avoidance must be tackled at a European level’

Paul Tang had known the Flemish expression for some time, but it was only in Brussels that he really understood what Belgians meant by it: that the Dutch have a “thick neck”. “We really, really like to think that we are the best kid in the class,” says Tang. “That is so arrogant. And often just not right.”

Tang, MEP for the PvdA since 2014, had just noted that his colleagues in Brussels certainly notice it: that the Netherlands is now taking a more constructive position in European discussions. For example, when it comes to reforming the European budget rules, which the Netherlands used to be strict about, but now advocates much more flexibility.

Tang just wants to say: you don’t just change an image. “We were budget hawks at a time when cuts really weren’t necessary. And we have had other people’s tax money stolen through our role as a tax haven.”

Brussels is starting to get into an electoral mood in the run-up to the European elections next June. And so parties will start drawing up lists of candidates this autumn. The deadline for the PvdA list expires this week and Tang has already decided: he will not be on it anymore. Staying in one place for too long is a risk, says Tang: giving in and not continuing to challenge and innovate yourself enough. He doesn’t know yet what he’s going to do.

Tang has worked in Brussels over the past decade to limit the power of major economic players, such as Big Tech, and was also one of the most prominent prosecutors of tax avoidance. In response to scandals such as the Panama Papers and the Pandora Papers, a committee was set up within the European Parliament for tax affairs, partly on his initiative, of which Tang became chairman. He did not spare the Netherlands – on his initiative, the European Parliament officially designated the Netherlands as a tax haven in 2019.

But, Tang sees, things have changed 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. The Dutch Central Bank noted last year that the amount of money channeled through the Netherlands has decreased significantly.

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

Tang: “I am now using it as an example: the Netherlands shows how you can change as a country.”

At the same time, he also emphasizes that many investments are still channeled 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? And why don’t you also go to Switzerland? We must clean up these centers of tax avoidance together, and the Netherlands can take the lead in this.”

But the Netherlands deserves praise?

“Certainly – I’m not cynical, I have really seen a change. Marnix van Rij (State Secretary for Tax Affairs, CDA) started his term by saying that the Netherlands is not a tax haven, but he subsequently sounded the alarm. 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 this at European level and the Netherlands is strongly in favor of this. But unanimity is required among member states, and there is none. So Van Rij gets bogged down in good intentions on crucial topics and everything remains the same.”

What should the next State Secretary do here in Brussels?

“Make sure you argue for the democratization of decision-making. So: decisions about taxation in the EU can be taken by majority, instead of the unanimity that it currently requires. And: taking the plunge and putting pressure on countries that have not yet made the change in thinking.”

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

“I understand all that, but what we have seen in the meantime is one race to the bottom where tax havens exploit other countries – the Netherlands has also done that. So when taxes cross borders due to the mobility of capital in particular, it is also a European subject. In fact, as a country you have already lost sovereignty here, and you can regain it by arranging it at European level.

“Then you also have to get rid of the unanimity rule. For example: we cannot now increase the tax on kerosene, because vetoes make it impossible to do so at European level. As always, the only ones who benefit from this European stalemate are companies and shareholders. That cannot be explained.”

In ten years, Tang says, he saw a growing awareness in the Netherlands that Europe is needed. And recently that a different, much more constructive attitude is required in Brussels. Yet he also sees “stubborn” old trends. “For example, in the discussion about social security now,” he says. “In my experience, this is very much linked to budget policy. Because if anything can endanger social security, it is cutting back in times of crisis. And yet you now again see parties that insist on the importance of strict standards for deficits and go back to the old austerity policy.”

At the same time, it recently became clear during Budget Day that the government is indeed making a big deal and continues to support people.

“I really hope so. But that is also why I think that tax in the Netherlands should become an even more important topic. We must invest enormously in sustainability, on top of the existing challenge of an aging population and expanding healthcare. So the demand on government continues to increase. At the same time, we do not want debts to rise further. How is that possible? That is only possible if you levy taxes better, and also arrange this better at European level.”

Adjusting taxes is already difficult in the Netherlands, but in Europe the discussion about this is even more complicated.

“Maybe. But when you ask people what Europe should do, they have a very good feeling about what is important and too big to tackle nationally. And now that it has become clear how internationally the tax avoidance network runs, it is also clear that the approach must be European.

What still really shocks me is how uninformed 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 actually only part of a discussion that should be much more European. If you want to tackle this seriously, you cannot avoid it. Because (individual) assets are also hiding internationally from national tax authorities. Why shouldn’t we do our best to argue for some form of wealth tax in Europe, or even with more countries beyond? And yes: I really think there is support for that in the end. Because the unfair thing is that people who work pay much more tax than people who put their money to work.”

The existing unanimity rule makes tax policy in Brussels an extremely difficult dossier. 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 the country by country reporting (legislation that requires multinationals in Europe to be open about where they pay taxes). But European input has also been very significant in the new tax agreements of OECD countries. 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 EP 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 Tax Affairs Committee is also intended to get all discussions about taxes out of the backrooms and into the public domain. I have witnessed the OECD negotiations on a global minimum tax up close, and at times it really feels nineteenth century. With a French finance minister who has to call an American minister to make arrangements. Truly a small group of Western countries that decide. It is still really not democratic. And it will help enormously if such agreements are subsequently discussed publicly within a parliamentary committee.

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

It seems like a subject that can make you despondent.

“Yes, but I remain patient when I notice that the goal is still in sight. If you don’t do that, you will only be concerned with small topics. With what can be achieved within four or five years. But sometimes you also have to pick up topics and think: someone will come after me who will also do that. And I am firmly convinced of that.”