Monday

24th Jul 2017

EU firms' tax dodging costs poor countries billions

  • Developing countries lose billions in revenue from tax dodging wealthy multi-national corporations (Photo: United Nations Photo)

Tax dodging by EU-based multinationals is costing developing countries billions in lost revenue.

A report out on Monday (16 December) by the Brussels-based development NGO Eurodad, says developing countries lose out between €660 and €870 billion each year mainly in the form of tax evasion by multinational corporations.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

“For developing countries, tax dodging is especially devastating, with more money leaving their economies than what they receive in aid,” Tove Maria Ryding, tax co-ordinator at Eurodad, said in a statement.

Ryding pointed out that while European citizens donate money to combat poverty in developing countries, EU-based multinationals are turning large profits in those same countries without paying taxes.

“Until our governments put a stop to this, Europe is giving with one hand and taking with the other,” she noted.

The report looked at 13 EU member states and their respective roles in tax-related capital flight from developing countries.

None has implemented adequate levels of tax transparency or full country-by-country financial reporting requirements for multinational companies.

While most have some sort of registry in place on ownership, the information is rarely disclosed to the wider public.

The implications of reigning in tax dodging is important, as developing countries face funding shortfalls of around €112 billion annually in order to meet the United Nation’s 2015 Millennium Development Goals.

Development NGO ActionAid earlier this year revealed how UK food giant Associated British Foods, via its subsidiary Zambia Sugar, used legal loopholes to avoid paying taxes in Zambia.

The company paid less than 0.5 percent taxes despite hitting record annual revenues of €200 million over five years.

Some of the biggest tax avoiders are also based in some of the wealthiest member states.

Eurodad says two out of three companies surveyed in Denmark pay no corporate tax whatsoever. Danish media in September reported some €36.8 billion in Danish funds are hidden away in tax havens.

The NGO also highlighted a lack of internal consistency in Denmark. Denmark speaks out against tax injustice on development policy but eschews policies to actually stop it, Eurodad said.

The Netherlands is described as one of the world’s most important financial conduits, allowing multinational corporations to channel profits to low-tax jurisdictions.

The amount of capital flowing through the country, unrelated to the domestic economy, is said to make it on paper, the world’s largest investor.

Some 8,500 multinational corporations have shell companies in the Netherlands.

Shell companies are legal entities set up to hide the owner’s identity and are often used to launder the proceeds of crime, corruption, and tax evasion.

The Netherlands also has around 12,000 trust offices or Special Financial Institutions, used to channel royalty, loans and interest payments or dividends between subsidiaries of a group.

Sweden is also becoming a haven for holding companies, by introducing favourable tax rules to compete with those found in Luxembourg and the Netherlands.

Last year, the Swedish government acknowledged capital flight from developing countries as a problem but has done little to crack down on it, Eurodad said.

“The government has not yet presented any concrete action plan,” its report noted.

For its part, the UK announced measures in October to increase transparency and to set up a public registry of companys' beneficial ownership.

It has also called for global action and international regulation, but Eurodad said none of its words have been turned into action so far.

The Eurodad report covered the Czech Republic, Denmark, Finland, France, Hungary, Ireland, Italy, Luxembourg, Netherlands, Slovenia, Spain, Sweden and the UK.

News in Brief

  1. Polish parliament adopts controversial justice reform
  2. GMO opt-out plan unlikely to go anywhere in 2017
  3. Slovak PM threatens to boycott inferior food
  4. France takes Google's 'right to be forgotten' to EU court
  5. Turkey accuses German companies of supporting terror
  6. Israel's Netanyahu caught calling EU 'crazy'
  7. UK does not collect enough data to expel EU nationals
  8. Polish president threatens to veto justice reform

Stakeholders' Highlights

  1. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  2. ACCAAnnounces Belt & Road Research at Shanghai Conference
  3. ECPAFood waste in the field can double without crop protection. #WithOrWithout #pesticides
  4. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  5. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  6. Martens CentreWeeding out Fake News: An Approach to Social Media Regulation
  7. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  8. Counter BalanceOut for Summer Episode 1: How the EIB Sweeps a Development Fiasco Under the Rug
  9. CESICESI to Participate in Sectoral Social Dialogue Committee on Postal Services
  10. ILGA-EuropeMalta Keeps on Rocking: Marriage Equality on Its Way
  11. European Friends of ArmeniaEuFoA Director and MEPs Comment on the Recent Conflict Escalation in Nagorno-Karabakh
  12. EU2017EEEstonian Presidency Kicks off Youth Programme With Coding Summer School

Latest News

  1. Dutch coalition talks lengthiest in 40 years
  2. Polish parliament steps up showdown with EU
  3. EU urges UK to clarify its Brexit positions
  4. Law expert: direct EU powers have become too complicated
  5. Winter is here for Spitzenkandidat, but he'll survive
  6. Mafia money pollutes the EU economy
  7. Central Europe should be wary of Brexit stopping
  8. Poland's 'July coup' and what it means for the judiciary