The EU’s role in supporting an unjust global tax system

The banking-corporate dominated EU exposed one more time

In the past year, scandal after scandal has exposed companies using loopholes in the tax system to avoid taxation. Now more than ever, it is becoming clear that citizens around the world are paying a high price for the crisis in the global tax system, and the discussion about multinational corporations and their tax tricks remains at the top of the agenda. There is also a growing awareness that the world’s poorest countries are even harder impacted than the richest countries. In effect, the poorest countries are paying the price for a global tax system they did not create.

A report by Eurodad

Key findings:

• A large number of the scandals that emerged over the past year have strong links to the EU and its Member States. Many eyes have therefore turned to the EU leaders, who claim that the problem is being solved and the public need not worry.

• Although tweaks have been made and some loopholes have been closed, the complex and dysfunctional EU system of corporate tax rulings, treaties, letterbox companies and special corporate tax regimes still remains in place. On some matters, such as the controversial patent boxes, the damaging policies seem to be spreading in Europe. Defence mechanisms against ‘harmful tax practices’ that have been introduced by governments, only seem partially effective and are not available to most developing countries. They are also undermined by a strong political commitment to continue so-called ‘tax competition’ between governments trying to attract multinational corporations with lucrative tax reduction opportunities – also known as the ‘race to the bottom on corporate taxation’. The result is an EU tax system that still allows a wide range of options for tax dodging by multinational corporations.

• On the question of what multinational corporations pay in taxes and where they do business, EU citizens, parliamentarians and journalists are still left in the dark, as are developing countries. The political promises to introduce ‘transparency’ turned out to mean that tax administrations in developed countries, through cumbersome and highly secretive processes, will exchange information about multinational corporations that the public is not allowed to see.


• On a more positive note, some light is now being shed on the question of who actually owns the companies operating in our societies, as more and more countries introduce public or partially public registers of beneficial owners. Unfortunately, this positive development is being somewhat challenged by the emergence of new types of mechanisms to conceal ownership, such as new types of trusts.

• Leaked information has become the key source of public information about tax dodging by multinational corporations. But it comes at a high price for the people involved, as whistleblowers and even a journalist who revealed tax dodging by multinational corporations are now being prosecuted and could face years in prison. The stories of these ‘Tax Justice Heroes’ are a harsh illustration of the wider social cost of the secretive and opaque corporate tax system that currently prevails.

• More than 100 developing countries still remain excluded from decision-making processes when global tax standards and rules are being decided. In 2015, developing countries made the fight for global tax democracy their key battle during the Financing for Development conference (FfD) in Addis Ababa. But the EU took a hard line against this demand and played a key role in blocking the proposal for a truly global tax body. Not one single EU Member State challenged this approach and, as a result, decision-making on global tax standards and rules remains within a closed ‘club of rich countries’.

• France, once a leader in the demand for public access to information about what multinational corporations pay in tax, is no longer pushing the demand for corporate transparency. Contrary to the promises of creating ‘transparency’, a growing number of EU countries are now proposing strict confidentiality to conceal what multinational corporations pay in taxes.

• Denmark and Slovenia are playing a leading role when it comes to transparency around the true owners of companies. They have not only announced that they are introducing public registers of company ownership, but have also decided to restrict, or in the case of Slovenia, avoided the temptation of introducing, opaque structures such as trusts, which can offer alternative options for hiding ownership.

• However, a number of EU countries, including in particular Luxembourg and Germany, still offer a diverse menu of options for concealing ownership and laundering money.

• Among the 15 countries covered in this report, Spain remains by far the most aggressive tax treaty negotiator, and has managed to lower developing country tax rates by an average 5.4 percentage points through its tax treaties with developing countries.

• The UK and France played the leading role in blocking developing countries’ demand for a seat at the table when global tax standards and rules are being decided.

• 50.4 per cent of the population in nine EU Member States surveyed consider taxing the rich and subsidising the poor to be an essential characteristic of democracy.

• 87.4 per cent of the population in eight EU Member States surveyed agree that cheating on taxes is never justifiable.

• 133 out of 488 protests (27%) in the world between 2006 and 2013 linked to ‘Economic Justice and Austerity’, had ‘Tax Justice’ as one of their main motivations.

• In November and December 2014, the LuxLeaks dossier exposed tax rulings with hundreds of multinational companies in Luxembourg.

• In February 2015, SwissLeaks laid bare the financial information of more than 100,000 bank clients in a Swiss bank.

• ... two separate studies on the mining industry published in 2015 showed that the Netherlands had been used to minimise tax payments in Malawi and Greece.

• 30% share of financial wealth in Africa held offshore, corresponding to €370 billion. 10% share of financial wealth held offshore in Europe corresponding to almost €2 trillion. €1.85 trillion funds held offshore originating from Asia, Latin America and Africa, corresponding to an estimated tax revenue loss of €52.6 billion.

• 78% of citizens in 18 EU Member States agree that their government should require companies to publish the real names of their shareholders and owners.

Full report:

http://www.eurodad.org/files/pdf/56378e84d0fac.pdf