Sunday

16th Jun 2019

EU tax havens drain money from developing nations

Tax havens in countries such as Luxembourg are zapping billions of euros from the coffers of developing countries and forcing weak governments to rely on dwindling international development aid, experts say.

Charles Abugre, the Africa regional director for the United Nations Millennium Campaign, says multinational corporations and the legal structures behind tax havens in EU member states prevent nations from developing and perpetuate a cycle of poverty.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

“The very concept of a jurisdiction selling secrecy as its competitive advantage is killing democracy,” he told this website in Brussels on Wednesday (12 November).

“Not only does it undermine wealthy countries, it totally destroys democracy because the essence of democracy and democratic accountability is transparency.”

The issue is of particular relevance for EU lawmakers, who on Monday evening in a closed-door meeting, were unable to reach a consensus on “beneficial ownership” in the draft EU anti-money laundering directive.

Beneficial ownership requires full disclosure of the people behind legal entities like anonymous companies and trusts. The structures are often set up by criminals to hide their true identities.

The schemes have been much criticised by pro-transparency experts and MEPs who want member states to reveal the true identities of people behind the firms and make the data accessible via a public register.

“This is one of the main problems and it hasn’t been resolved yet,” an EU source told this website following the talks.

Member states are reluctant to make the registers public arguing that family trusts, for example, carry a low risk of money laundering.

Both the Czech Republic and Luxembourg recently introduced ‘trusts’ into their national legislation after agreeing to abolish anonymous bearer shares.

But the European Network on Debt and Development (Eurodad), a Brussels-based NGO, says trusts could provide new options for anonymous ownership in the two countries.

For Abugre, trusts are just another huge loophole used by corrupt politicians and European-based corporations to enrich themselves.

“Anybody in political leadership is quite happy to create an entity, registered as a trust, in a secret jurisdiction,” he says.

Aburge, who is from Ghana, has plenty of examples.

“So I am a president. I’ve created a shady trust in Luxembourg. This company arrives back in Ghana as a foreign company to negotiate with me, the president, who co-owns this shady trust, on how we share the revenues in the oil and gas sector. This is what happens,” he says.

The origins of the dubious tax schemes date back to structural adjustment programmes in the 1980s when African governments were told to create big tax exemptions for foreign companies wanting to exploit natural resources.

“This was also incorporated in the EU-Africa agreements, which is the so-called Post-Lome agreement,” says Aburge.

Other problems include price transferring, corporate tax breaks, and the lack of country-by-country reporting.

Transfer pricing allows big firms operating in Africa to hide their profits from local governments.

“If you cannot verify the cost of structure of the operation then the only profit that you have to negotiate is what has been declared by the company,” says Aburge.

Country-by-country reporting would require companies to provide a breakdown of profits earned and taxes paid and accrued. It is an idea that the former governments in Germany and Sweden have opposed.

Aburge is not the only one to raise the red flag.

Cephas Makunike, a research and policy advisor at Tax Justice Network-Africa, a pan-African initiative set up in 2007, says rich countries have consistently ignored the concerns of poorer nations on taxes.

Makunike complains that international tax models set up by the OECD hurt poor nations because they have no say in the matter.

Pressure is mounting for a new model to be set up under auspices of the United Nations.

It has gained little support among EU member states.

According to Eurodad, only Poland backs the idea while all other member states are either hostile or ambivalent about giving poorer countries a say in a tax regime that directly affects development, poverty, and justice.

News in Brief

  1. EU plans to restructure eurozone bonds
  2. EU ups US imports in beef deal
  3. Unicef: UK among 'least family-friendly' in Europe
  4. Czech PM: No joint 'V4' candidate in commission race
  5. Johnson tops first round to replace May, three eliminated
  6. Bratislava will host new European Labour Authority
  7. Juncker cautions against further climate goals
  8. Study: Counterfeit medicine is a 'growing threat' in EU

Opinion

A fundamental contradiction in EU drug policy

The knock-on affects from a 'war on drugs' in Europe is creating problems in Albania - and as far afield as Guinea-Bissau, Mali, Bangladesh and the Philippines.

Stakeholders' Highlights

  1. Nordic Council of MinistersNo evidence that social media are harmful to young people
  2. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  3. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  4. Nordic Council of MinistersEducation gets refugees into work
  5. Counter BalanceSign the petition to help reform the EU’s Bank
  6. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  7. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  8. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  9. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  10. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  11. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  12. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody

Latest News

  1. 'Russian sources' targeted EU elections with disinformation
  2. Top EU jobs summit dominates This WEEK
  3. EP parties planning 'coalition agenda' ahead of jobs summit
  4. MEP blasts Portugal over football whistleblower
  5. Catalonia MEPs are a judicial, not political, issue
  6. Meet the lawyer taking the EU migration policy to the ICC
  7. Europe's oil supplies 'at risk' after tanker attacks
  8. EU paths fork for Albania and North Macedonia

Stakeholders' Highlights

  1. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  2. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  3. Nordic Council of MinistersNordic commitment to driving global gender equality
  4. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  5. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  6. Nordic Council of MinistersNordic talks on parental leave at the UN
  7. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  8. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  9. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  10. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  11. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  12. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law

Join EUobserver

Support quality EU news

Join us