These territories have corporate tax rates ‘in practice’ that are far lower than other countries in Europe, and in 2017 US firms shifted $115bn (€104.5bn) to the Netherlands, Luxembourg, the UK and Switzerland, the campaign group said in a new report.
These four countries make up the “axis of tax avoidance”, so-called by the Tax Justice Network after its Corporate Tax Haven Index 2019 report estimated they were responsible for half of the world’s corporate tax avoidance risks.
TJN chief executive Alex Cobham said the findings were made more worrying by the Covid-19 pandemic, which means governments are facing soaring costs and reduced revenue.
“Now more than ever, EU countries must re-programme their tax systems to prioritise people’s wellbeing over the interests of the wealthiest corporations,” he said.
“That starts with transparency, where the real obstacle comes from EU multinationals rather than their US counterparts, since it’s EU multinationals that have lobbied to prevent their country-by-country reporting data from becoming public.”
The report found Luxembourg was responsible for the biggest losses to the rest of the EU, with US firms booking profits there resulting in nearly €11bn of lost revenue for other European governments.
The Netherlands followed with €9bn, Switzerland with €2.7bn and the UK €1.4bn.
The countries losing the most revenue were France (€6.4bn), Germany and Italy (each about €3.6bn) and Spain (€1.8bn).
“Why wouldn’t a German healthcare company or a Portuguese supermarket chain want to show people that they are paying the right amount of tax in those countries where they make money, rather than shifting their profits to EU tax havens?” said Cobham.
“Why wouldn’t the German government, and every other EU government, want to show their citizens and smaller businesses that multinationals are being taxed fairly?”
Cobham said an EU-wide minimum corporation tax rate of 25% would remove most incentives for profit shifting, and during the crisis an excess profits tax of 50-75% “would ensure that companies making profits from the pandemic are sharing those fully with the states where they derive them”.
