Hidden Profits

News

11 November 2014

Last week, the Luxembourg Leaks investigation exposed the secret deals which have allowed transnational companies to dodge taxes on a colossal scale. In its wake, a new report – ‘Hidden profits’ – compares 15 EU countries’ performance on combatting tax dodging and ensuring financial transparency – and finds they are still failing to address urgent problems which cost both developed and developing countries billions of euros every year.

SOMO contributor Indra Römgens: “We’ve examined whether EU governments are delivering on their promises to fight tax dodging and financial opacity, and the result is very disappointing. Progress is extremely slow and some countries even seem to be moving backwards. “But while our leaders are failing to fix our tax system, transnational corporations continue to dodge taxes in Europe as well as in the world’s poorest countries, where income from corporate taxation is desperately needed. Thanks to our flawed European policies, tax dodgers still have a place to hide.”

Hidden profits

A direct comparison of the fifteen countries finds that:

France is currently the strongest country on issues of transparency and reporting rules for transnational corporations and has actively championed the issue. However, recent developments seem to indicate the government may be back-tracking. Its vast range of tax treaties have a caused substantial lowering of developing country tax rates, meaning vital revenues are being lost.
Germany, Luxembourg, the Netherlands, Spain and Sweden are all bad performers on transparency, either in relation to the lack of information they give about company ownership at the national level or because they are resisting EU-wide initiatives to promote transparency on company ownership. This secrecy is helping companies to dodge taxes and shift profits.
Spain has managed to negotiate the largest reductions in tax rates through its tax treaties with developing countries, which are then losing out on tax revenues.

Beneficial ownership

The EU is currently in the middle of intense negotiations about whether to put an end to anonymous company structures by establishing a registry of the owners of companies and trusts.

“This is a crucial time for financial transparency. We know for a fact that dodgy anonymous shell-companies and trusts are being abused to launder money from tax evasion and other types of crime. The EU governments have a unique chance to put an end to this by establishing a public registry of the owners of companies and trusts. However, our report shows that many EU governments are still hesitating to take the action they’ve promised their citizens and create the financial transparency we need”, says Indra Römgens.