MEPs take their first step to curb corporate secrecy and phantom firms

Added 21 Feb 2014

Yesterday MEPs started getting things right when it comes to cracking down on corruption, corporate abuse and tax dodging. Their support for setting up centralised registries of the real owners of companies, trusts and similar legal structures - and granting public access to that information - is a significant first step.

However, this is a long process and many other challenges still persist. The next step is the vote in the plenary of the European Parliament. Afterwards, negotiations will start with the European Commission and the Council (of ministers) - the latter is notoriously torn between the need for change and defending the status quo. Further complicating the situation are national interests which emerge when an issue as sensitive as beneficial ownership is discussed.

The price of keeping the status quo

The message for the next stage of this process remains the same. The price of the existing level of secrecy is continuing corruption, tax evasion and other crimes - with devastating consequences. These illegal activities amount not only to great injustice, but also to a huge loss in state revenue. Furthermore, the cost of fighting this type of crime is costly and inefficient specifically because of its hidden nature.

The year in review – Political promises but slow progress

This vote has significantly improved the original proposal as presented by the European Commission more than a year ago, on 5th of February 2013. It includes public access to the registries and it covers companies, as well as trusts, foundations and other legal structures.  

In between the publication of the proposal and what happened today, a year of impressive political commitments has passed. The May 2013 European Council set the bar high, and then the G8 and then the G20 seem to have recognised the need for change. José Manuel Barroso, president of the European Commission, underlined this when he sent a letter to the President of the European Council, Herman Van Rompuy, reiterating the need for progress in light of findings that 90% of EU citizens think more needs to be done to make corporates pay their fair share of tax. CSOs welcome these political statements, but want to see words put into actions. Ultimately, 2013 was a year of unfulfilled promises our European leaders.

Eurodad: Optimistic, but a lengthy road ahead

The road ahead is long, and the track record of some governments involved leaves room for improvement to say the least.

However, it seems that there could now be a wind of change. Parts of the business community have come out in support of more transparency and joined the call for public disclosure of information about who owns and controls companies.  One can only hope that this extraordinary coalition of citizens, members of the European Parliament from left to right, CSOs, and prominent representatives of the business community is heard by our governments. Over to the Council of ministers, the ball is squarely in their court.