Sunday

24th Mar 2019

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.

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

“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.

EU commission to map gender recognition

The European Commission will start looking at how EU states determine genders - as part of an effort to make it easier for people to determine their own identities.

News in Brief

  1. EU leaders at summit demand more effort on disinformation
  2. Report: Corbyn to meet May on Monday for Brexit talks
  3. Petition against Brexit attracts 2.4m signatures
  4. Study: Brexit to cost EU citizens up to €40bn annually
  5. NGOs demand France halt Saudi arm sales
  6. Report: Germany against EU net-zero emissions target
  7. Former top EU official takes job at law firm
  8. Draft text of EU summit has Brexit extension until 22 May

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  2. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  3. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  4. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  5. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  6. Nordic Council of MinistersNordic commitment to driving global gender equality
  7. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  8. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  9. Nordic Council of MinistersNordic talks on parental leave at the UN
  10. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  11. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  12. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID

Latest News

  1. Italy takes China's new Silk Road to the heart of Europe
  2. What EU leaders agreed on climate - and what they mean
  3. Copyright and (another) new Brexit vote This WEEK
  4. EU avoids Brexit crash, sets new date for 12 April
  5. Campaigning commissioners blur the lines
  6. Slovakia puts squeeze on free press ahead of election
  7. EPP suspends Orban's Fidesz party
  8. Macron is confusing rigidity with strength

Stakeholders' Highlights

  1. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  2. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  3. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  4. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  5. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  6. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  7. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  8. Nordic Council of MinistersSeminar on disability and user involvement
  9. Nordic Council of MinistersInternational appetite for Nordic food policies
  10. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  11. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  12. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”

Join EUobserver

Support quality EU news

Join us