On 17 May 2017, the members of the Finance Committee of the Bundestag cast their votes for ultimate amendments to Germany’s anti-money laundering law. The governing conservatives CDU/CSU and Social Democrats SPD rejected amendments supported by the left and Green party that would have remedied three fundamental flaws in the law which prevent the public from accessing beneficial ownership information on German legal entities. These flaws consist of
- the failure to make the registry of beneficial owners public
- the registry’s restricted scope which is likely in breach of the 4th EU Anti-money laundering directive
- a watered down the definition of beneficial ownership.
The law will be voted on in its current form by the Plenary of the Bundestag in the evening of the 18th May, with no opportunity to change the text further. The only way to stop and/or amend the law would be through the Bundesrat, Germany’s upper chamber. However, after recent elections, this outcome appears to be less likely.
Despite severe critiques presented at the law’s public hearing in the finance committee on 24 April, none of the fundamental weaknesses identified by TJN, German Netzwerk Steuergerechtigkeit and Transparency International have been addressed by the amendments voted for by the governing coalition (TJN’s written statement can be read and downloaded here).
On the contrary, the law has been further watered down in at least two (relatively minor) aspects (one change involves exempting trusts, Treuhandstiftungen and limited partnerships from the obligation to document the steps taken for identifying a Beneficial Owner; another is extending a restricted obligation to report suspicious transactions which was applicable in the previous version of the law only to lawyers and auditors to all professions covered by professional confidentiality, e.g. tax advisers).
The three main problems persist which prevent the public from accessing beneficial ownership information of German legal entities. Two concern the watering down of the definition of the beneficial owner, the first of which relates to the senior manager opt-out clause, which the 4th EU AMLD is allowing, but which the UK did not implement and the EU-parliament in March 2017 actually rejected in its comment on the interim proposal for amending the 4th AMLD (and which we have analysed in depth here).
The second problem relates to the obligation to identify the beneficial owner for the purposes of the registry. The obligation to identify and report the beneficial owner of the company is limited to situations in which the German company or its shareholders are directly controlled by a beneficial owner. The graph below (or in the written statement on page 4) illustrates the problem.
TJN proudly unveils today its first public call among business leaders in Germany in support of a fully public and effective register of beneficial ownership (BO, or the real owners of companies). So far 12 German businesses with a combined turnover of more than €500 million have signed the petition for amending the current draft law on beneficial ownership. The call proposes amendments by making a BO registry fully public, and by ensuring that the real ultimate beneficial owner is always published, no matter in how many “shells” the German legal entity might be wrapped.
The call emphasises that the publication of the information on beneficial ownership would create a level playing field between currently transparent GmbHs (with domestic, non-legal person shareholders), and currently opaque AGs and GmbHs (with foreign legal person shareholders). At the moment, the users of offshore legal entities can enjoy the (rather sinful) fruits of anonymity while the names of domestic business owners with nothing to hide are often already made public.
Here is the call for signature, and here is the signed call with the current list of signatories (and here is a blog in German introducing the call). The timeline for signatures is tight. The parliamentary schedule foresees that on Wednesday, 26th April, the finance committee will discuss the law and the final discussions in the finance committee are scheduled to happen on 17 May. The final votes in the plenary Bundestag are planned on 18 and 19 May.
Please share this call among any business leader you know who might be interested and who might do business (including) through a German legal entity.
The Bundesrat has today voted to recommend implementing a public register of the beneficial ownership of companies and trusts.
Great news from Germany, as the country takes an important step forward towards corporate transparency.
Press Release: Has the European Commission’s Apple decision signalled the beginning of the end of tax wars?
Has the European Commission’s Apple decision signalled the beginning of the end of tax wars?
Today, the European Commission has ruled that two tax rulings issued by the Irish tax administration on the tax treatment of Apple’s corporate profits represent illegal state aid under EU law. As a consequence, Apple has to pay up to €13 billion of taxes plus interest to Ireland. This sum due to the Irish exchequer can be reduced if other countries from Europe, Africa, the Middle East or India or the United States decide to claim a share of those profits. This lays bare the core of a global problem: secretive tax rulings issued by tax haven states are not an instrument for the avoidance of double taxation, but a tool for the achievement of non-taxation of profits. In practice such rulings destroy fair market competition and undermine the tax sovereignty of democratic states.
This decision is remarkable on at least three counts.
Press Release: For immediate release, July 22, 2016
This weekend G20 Finance Ministers from the G20 countries will meet in China. One of the items on their agenda will be to agree the criteria for identifying non-cooperative jurisdictions with respect to tax transparency, which the OECD has been mandated to establish. The first details of the proposals have become public and our analysis gives rise to grave concerns that the criteria are, in the same way as past attempts at blacklists, weak and ineffective. The USA in particular is likely to escape blacklisting because of the peculiar nature of the criteria.
The three criteria the OECD has come up with for assessing non-cooperative jurisdictions are summarised below. Each country has to meet two of the three in order to escape blacklisting:
- If the country gets a rating of “largely compliant” or better from the OECD’s Global Forum, as regards the “exchange of information on request” standard of transparency.
- The country commits to adopting automatic information exchange (the so-called Common Reporting Standard, CRS), and to begin exchanges by 2018 at the latest.
- The country has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCMAA), a multilateral framework for all kinds of information exchange, or if it has what the OECD considers a sufficiently broad exchange network providing for exchange of information on request and automatic exchange of information.