Germany and Luxembourg ‘havens for corporate tax dodging’

EU members censured in Eurodad report on loopholes in national legislation

Germany, Luxembourg and France have come in for stinging criticism in a major new report on EU tax frameworks for multinationals.

Published on 3 November by the European Network on Debt and Development (Eurodad), Fifty Shades of Tax Dodging states that, in the past year, “scandal after scandal has exposed companies using loopholes in the tax system”.

In its investigation, Eurodad found that several EU countries still offer a “diverse menu of options” in their legislation for multinational companies to conceal ownership and launder money. Germany and Luxembourg were cited as the worst culprits.

In parallel, a growing number of EU governments are pushing for stricter confidentiality to conceal where multinationals do business, and what sums of money they pay in taxes.

According to Eurodad, even France – which had once sought to open up public access to details about multinationals’ tax payments – has backtracked on the issue.

Added to that, more than 100 developing countries are frequently excluded from key decision-making processes in talks where global tax rules are pieced together.

Indeed, Eurodad points out that, this year, the UK and France played leading roles in blocking developing countries’ demands for seats at the table at the latest United Nations Financing for Development (FfD) summit.

On a more positive note, Denmark and Slovenia are both working to introduce public registers of company ownership.

Meanwhile, Spain has emerged as by far the most aggressive tax-treaty negotiator, and has managed to lower the rates of the developing countries it has treaties with by an average of 5.4%.

The report recommends that EU nations should:

1. Ensure transparency, including by allowing citizens to access information about where multinational corporations do their business, and how much tax they pay;
2. Dismantle secrecy structures that enable anonymous company ownership and provide opportunities for money laundering;
3. Give developing countries a seat at the table when global tax standards are negotiated, and refrain from lowering their tax rates through double-taxation treaties;
4. Fix loopholes that allow multinational corporations to lower their tax rates to extremely low levels, plus scrutinise new legislation to ensure that no new loopholes are created; and
5. Create real opportunities for developing nations to receive information from EU governments about tax dodgers who use the EU as a place to hide money from tax evasion.

Eurodad tax justice coordinator Tove Ryding said: “The citizens of Europe have now waited a year for the EU to get its act together and put an end to a system that allowed hundreds of multinational corporations to dodge taxes.

“Instead, although a few loopholes have been closed, new ones have also appeared. This report shows how inadequate the response has been so far: it’s clear that in the EU it is business as usual for multinational corporations who want to dodge the rules to lower their tax bills.”

She added: “The fact that the EU has failed to stop corporate tax dodging and ensure transparency has serious negative impacts on citizens in the world’s poorest countries, as well as in the EU itself.”

Download the full Eurodad report.