Thursday

22nd Feb 2018

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 for a 30 day free trial.

  1. €150 per year
  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.

Focus

EU court bars tests for gay asylum seekers

Authorities in EU countries can no longer impose controversial psychological tests to determine whether an aslyum seeker is telling the truth about their homosexuality.

News in Brief

  1. Juncker's right-hand man warns of 'institutional blockage'
  2. Greek parliament to open probe on PMs and EU commissioner
  3. May gathers Brexit ministers to hammer out UK position
  4. Tajani asks Juncker for all EMA Brexit relocation documents
  5. Hahn: EU to back entry talks with Albania and Macedonia
  6. UEFA signs deal to promote 'European values' at EURO 2020
  7. Belgian PM to host 11 EU leaders ahead of summit
  8. Tusk all but rules out pan-EU candidates in 2019 elections

Stakeholders' Highlights

  1. Aid & Trade LondonJoin Thousands of Stakeholders of the Global Aid Industry at Aid & Trade London
  2. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  3. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  4. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  5. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  6. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  7. EPSUMovie Premiere: 'Up to The Last Drop' - 22 February, Brussels
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. Dutch MPs vote on ending 'Ukraine-type' referendums
  2. Corruption report: Hungary gets worse, Italy makes progress
  3. UK seeks flexible transition length after Brexit
  4. Commission defence of Barroso meeting leaves 'discrepancies'
  5. MEPs bar WMD and killer robots from new EU arms fund
  6. Canete gets EU parliament pension while still commissioner
  7. Bank of Latvia sends deputy to ECB amid bribery probe
  8. We are not (yet) one people

Stakeholders' Highlights

  1. Dialogue PlatformBeyond the Errors in the War on Terror: How to Fight Global Militarism - 22 February
  2. Swedish EnterprisesHarnessing Globalization- at What Cost? Keynote Speaker Commissioner Malmström
  3. European Friends of ArmeniaSave The Date 28/02: “Nagorno-Karabakh & the EU: 1988-2018”
  4. European Heart NetworkSmart CAP is Triple Win for Economy, Environment and Health
  5. European Free AlllianceEFA Joined the Protest in Aiacciu to Solicit a Dialogue After the Elections
  6. EPSUDrinking Water Directive Step Forward but Human Right to Water Not Recognized
  7. European Gaming & Betting AssociationGambling Operators File Data Protection Complaint Against Payment Block in Norway
  8. European Jewish CongressEJC Expresses Deep Concern Over Proposed Holocaust Law in Poland
  9. CECEConstruction Industry Gets Together to Discuss the Digital Revolution @ the EU Industry Days
  10. Mission of China to the EUChina-EU Relations in the New Era
  11. European Free AlllianceEnd Discrimination of European Minorities - Sign the Minority Safepack Initiative
  12. Centre Maurits Coppieters“Diversity Shouldn’t Be Only a Slogan” Lorant Vincze (Fuen) Warns European Commission