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European taxpayers may have paid millions for non-existent offices

    The EU’s decision-making bodies have long been accused of a lack of transparency and being detached from their citizens. A new report has uncovered how the lack of accountability has created a new scandal. Even the means of providing a more direct link between EU citizens and their representatives has become a source of widespread abuse and potential corruption, raising a number of moral and ethical issues.

    Members of European Parliament (MEPs) receive a tax-free monthly General Expenditure Allowance of around $4,870, or $58,400 a year to maintain offices in their home nations and other expenses. Their national offices are supposed to allow their constituents to communicate with them more easily. The overall cost of the program is $44.9 million (€40 million). But one-third of MEPs’ national offices either do not exist or cannot be located, according to The MEPs Project, run by Investigative Reporting Denmark. The report revealed that 249 out of 748 current MEPs “either said they have no offices, refused to reveal their addresses, or the location of the offices could not otherwise be tracked.”

    In some cases, the addresses of the national offices were not up to date, and the European Parliament did not have information on their exact location. How can the voters find their representatives, if even the European Parliament itself does not know where they are located? For those offices that exist and have been verified, there are no requirements that the national offices be located conveniently to the voters. And EU officials do not ask for a single receipt for any claimed expenditures.

    The new findings on MEPs’ national offices are troubling on numerous levels.

    First of all, they reveal that these payments, far from providing a direct link between MEPs and their constituents, further the divide between European citizens and those who are supposed to be their public servants.

    This report is a telling example of taxes being redistributed from the regular, hard-working European families to the well-connected elite.

    In some cases, the grants became means for the MEPs to further enrich themselves. In 41 instances, MEPs were found to be paying rent either to their own parties or even to themselves, as they own the buildings that house their national offices. For instance, in Bavaria, an MEP rented an office in a building that he owned, with the office sitting “in an annex to his private home in a small village in the Bavarian country side, far away from the more populated areas of his region.” This report is a telling example of taxes being redistributed from the regular, hard-working European families to the well-connected elite.

    In addition to this allowance, MEPs receive monthly salaries of $9,510, tax-free subsistence allowance at a daily rate of $340 for food and housing while the European Parliament is active, and may spend up to $27,080 a month on assistants’ salaries. This may explain why the share of EU citizens who feel attached to the EU currently stands at 51 percent, while 92 percent of EU citizens feel attached to their country.

    Eurocrats often seek to mask the extent of EU spending behind phrases such as “EU budget stands at about 1% of the EU countries’ gross domestic product,” or that the EP spends “only 1.2% of the EU’s general budget.” However, in absolute terms these are astounding figures. The European Parliament is set to cost the taxpayers $2.1 billion in 2017, with spending on the General Expenditure Allowance comprising $45 million. Taxpayers’ hard-earned money should not be redistributed to the elite with little or no oversight.

    It is equally worrying that generous payments without any accountability may be a possible source of corruption. MEPs do not need to account for how they spend the allowance; thus, it is impossible to discern whether this money is being spent according to its intended use. Previously lax rules on parliamentary assistance allowance were found to have been exploited by some MEPs, with one ex-MEP being jailed in 2016 for fraudulently using funds intended for support staff to lavish gifts on his wives, engaging in a “sustained pattern of stealing.” The report on MEPs’ ghost offices suggests there may be additional instances of corruption.

    Moreover, the opaque spending of taxes undermines MEPs’ moral authority in their demands for more taxpayer transparency. The European Parliament has been one of the most vocal proponents of the exchange of information among tax authorities, which invades privacy and undermines individual liberty.

    Instead of making MEPs more accessible to their constituents, the allowances have placed MEPs in a different world from the rest of taxpayers.

    Transparency is not the only area where different sets of rules apply to those who pay taxes and those who spend them. While taxpayers are burdened by the ever-growing complexities of tax laws and regulations, MEPs do not face any scrutiny over how they spend their General Expenditure Allowance. If a private, EU-based company annually spent $45 million tax-free with no documents to account for this spending, EU officials would be first to call for a thorough investigation and tighter rules, yet when MEPs spend taxpayers’ money without documenting their expenses, this is allowed, since the supranational government sets its own rules.

    This case demonstrates that taxpayers lack the means to increase their EU representatives’ accountability, pointing to the overall inefficiency of any remote government. The distance of Strasbourg or Brussels (physical or otherwise) makes it difficult for the citizens to oversee their representatives – or even name them. A 2014 UK opinion poll revealed only 11 percent of those polled could be confident about naming their MEP, compared with 52 percent being able to name their MP. The rules on MEPs’ General Expenditure Allowance are set by the European Parliament itself and – despite widespread public calls for more accountability – an overwhelming majority of MEPs recently voted against greater scrutiny of these allowances. This shows the EU is also not effective at self-governance. Thus, one can only doubt that the EU could effectively govern the “ever-closer union” that some of its leaders actively strive to achieve.

    At the end of the day, this is also a story about temptation short-sightedly created by MEPs themselves. Indeed, the report found that since 2010 only five to 20 MEPs (out of 748) have returned unused allowances for national offices. While this funding does not necessarily lead to corruption in every instance, the availability of these funds makes it tempting for honest MEPs to spend the full amount of the allowances provided to them, albeit not necessarily for their intended purpose.

    This problem is of course not exclusive to the European Parliament. It is inherent in any bureaucracy that seduces its members with ample resources without appropriate audits. The allegations made against French presidential candidate François Fillon are a case in point.

    Instead of making MEPs more accessible to their constituents, the allowances have placed MEPs in a different world from the rest of taxpayers, one with less scarcity and fewer external controls. No wonder the EU is demanding a $112 billion divorce bill from the United Kingdom: It needs their funds to keep up with this lifestyle.

    Can any large, remote government operate without also providing financial incentives for corruption and self-aggrandizement? Does the European Parliament, by removing these transactions a step further away from public scrutiny, increase the moral problems associated with governance? Is it possible to concentrate power without multiplying iniquity? This report, the Scriptures, and Lord Acton’s famous observations seem to point toward a disappointing answer.

    (Photo credit: jeffowenphotos. This photo has been cropped. CC BY-SA 2.0.)

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    Kaetana Leontjeva-Numaviciene is currently pursuing a Ph.D. at the Department of Political Economy at King’s College, London, where she is researching fiscal illusion among UK taxpayers. From 2007 to 2015, she was a policy analyst in public finance at the Lithuanian Free Market Institute. In this capacity, she analyzed draft laws, conceptualized reforms, was member of governmental working groups to reform the tax system, and prominently wrote in and commented to the Lithuanian media. Kaetana graduated cum laude from Tufts University with a B.A. in Economics and International Relations (double major), and also holds an M.A. in Religious Studies from Vilnius University, Lithuania.