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Tax evasion is not a victimless crime.

The co-founder of the Tax Justice Network, John Christensen, talks about the €55 billion „cum-ex“ tax fraud scandal, and explains why the complicated world of shady, if not illegal, stock market dealings and tax claims matters to all of us.

By Joanna Bostock

Investigators have uncovered a tax fraud scandal affecting at least 10 European countries (including Austria), at a cost in terms of missing tax revenues of an estimated 55 billion Euros.

And yet no-one seems to care.

This might have something to do with the fact that most of us are not fluent in the complex details of stock market trading and probably find the technical details of how the “cum-ex” tax scandal operated rather confusing. So let’s stick with the simple (Financial Times) description of a “share-swapping scheme that allegedly allowed investors to reclaim billions of euros of tax they never paid”.

But what’s the bigger picture? How does is affect us? And what can be done to stop such practices?

An interview with John Christensen, an economist and forensic auditor who is currently the chair of the Tax Justice Network, which he co-founded.

What does this scandal mean for ordinary citizens?

The sums involved here are truly enormous. We’re talking about 55 billion Euros stolen from the coffers of EU member states over a period of 15 years or so.

The bottom line is: that’s money out of your pocket, out of my pocket, out of virtually everybody in Europe’s pocket. It translates into an awful lot of education, health and welfare cuts because governments across Europe are struggling to sustain their welfare states and 55 billion Euros by anyone’s standards is a hell of a lot of money.

Although it’s claimed that the loopholes have been closed off, I heard a similar claim made in 2013, and I’m not entirely convinced that they have been closed off, so I think there could be more to be uncovered.

How different is this from other investigations into tax evasion and avoidance, for example last year’s Panama Papers revelations about off-shore tax havens?

The difference between this case and the Panama Papers lies with the role of law firms and banks. The law firms seem to have been very actively developing these scams and marketing them to clients, and the banks appear to have been doing exactly the same.

In the German investigation it seems that nearly all the major German banks were implicated, which doesn’t inspire trust, so who is overseeing this?

We clearly have systemic problem. Our banks can no longer be trusted to act in protecting capitalism from the wilder and more criminal stuff, but it’s worse than that because it goes right to the very top. The people here must include not only the directors of banks and the non-executive directors, but also auditors and credit rating agencies.

I would also say there’s been a failure of regulators here – we’ve been aware of this for the better part of a decade. Investigative journalists are the people who have by and large uncovered the problem, and without investigation I suspect that this issue would simply never come to public notice and politicians would not have taken very much action against it. So – yes, we have a very deep systemic problem here: within the banks and within those who are supposed to monitor banks.

It’s interesting that data devices containing 180,000 pages of confidential files were provided to media organisations from 12 different countries, so someone was able to pass on that information, and that’s a vital part of uncovering such things…

Yes, as I understand it there has been quite a degree of involvement with whistle-blowers within the banks and within the law firms who realised what was going on, realised the scale of it and felt very uncomfortable and felt it was their duty to blow the whistle. And for that we must be thankful. But it also raises two important issues: first of all, although measures have been taken to strengthen whistle-blower protection in recent years, we still do not have an adequate, comprehensive European Union approach to protecting whistle-blowers and supporting them, because once you’ve blown a whistle from within a bank you’re never going to be able to work within the banking world again, and that effectively means the end of your career. So I think whistle-blower protection is a key issue here.

This scandal has revealed that exchange of information processes are not adequately helping regulators and national authorities and they need further strengthening. For all the work that’s been done in this area at the EU level the last ten years, we still haven’t reached that point where is sufficient information and sufficient cross-border cooperation, and I’d also suggest that this demonstrates the need now for a pan-European approach to deep financial investigation by an authority which is every bit as powerful as the Securities and Exchange Commission in the United States, because they have huge investigating powers. We do not have something equivalent within Europe.

So you mean a special European Union body that would have the power to do investigations, to get information, to get legal instruments to go and seize information, to investigate allegations of this kind of wrongdoing?

I mean precisely that, a pan-European body, very well-funded – because these scandals run very deep – and as we know from the Panama Papers, the cum-ex papers, and from other scandals like the Lux Leaks, they almost always involve cross-border information trails, collaborations between law firms and banks which are totally internationalised. Therefore we need to have a crime-fighting agency which is able to effectively mount cross-border investigations and sustain them over many years.

Very often when I talk to white collar criminals they imply that tax evasion is a victimless crime. They couldn’t be more wrong. Tax evasion has victims and they are typically the most vulnerable in our society, the poorest people who suffer from cutbacks in their education, their housing benefits and their welfare benefits generally. This is a crime carried out by elite people, and the victims are the poorest in society.

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