BUSINESS NEWS TAX HAVENS COST THE EUROPEAN COMMUNITY EUR 170 BILLION A YEAR EU Member States lose EUR 170 billion a year due to tax avoidance practices exercised by the wealthiest citizens and multinational corporations operating in the EU. – As the sense of small and large entities facing unequal treatment fuels populism across Europe, we must definitely tackle this problem – said French Minister of Finance Bruno Le Maire at the Polish House in Davos.
tech companies (Google, Amazon, Face book, Apple). France has made a conces sion to avoid the outbreak of tariff war, postponing the tax payment from April to December 2020. EU companies transfer their profits from the countries of their operations to other EU Member States due to less stringent tax systems.
The Polish Prime Minister also stressed that the declared VAT gap value in all Member States (EUR 150 billion), or loss on tax evasion by corporation or wealthy citizens (EUR 160 billion), has been nearly equal to the annual EU budget.
During the 50th Global Economic Forum in Davos, findings of a report on EU tax havens, drawn up jointly by the Polish Economic Institute (PIE) and Bank Gospo darstwa Krajowego (BGK), provided grounds for a discussion at the Polish House.
As revealed by the PIE and BGK report, the countries which benefit most from this artificial profit shifting process, and are regarded by the European Commis sion as EU tax havens, include Belgium, Cyprus, the Netherlands, Ireland, Luxem bourg and Malta. In 2016, the Polish State Treasury lost 11% of the total CIT revenue (corresponding to approx. PLN 3–4 billion) due to profit transfers abroad.
The report by PIE and BGK lists sugges tions for solving the tax evasion issue. A “black list” of Member States considered to be internal tax havens and a system of sanctions imposed by the European Commission are only a few of the ideas. Setting a minimum CIT rate for the entire EU might also help.
The discussion was attended by Polish Prime Minister Mateusz Morawiecki, French Minister of Finance Bruno Le Maire, and OECD Secretary-General Jose Angel Gurria, with Piotr Arak, Director of the Polish Economic Institute, acting as the moderator. The countries worst-hit by tax avoid ance include Germany (losing 29% of its potential tax revenue, corresponding to EUR 18 billion) and France (24%, i.e. EUR 11 billion). The losses arising from cross-border tax avoidance within the last seven years clearly reflect the scale of EU tax havens. Their aggregated sum exceed by one-fourth the entire EU budget for 2014-2020 set at EUR 960 billion. According to Le Maire, whether this problem is solved once and for all depends not only on measures taken by individual EU Member States but also on their concerted effort. The French Government has struck a preliminary deal with the USA regarding a digital tax impacting, inter alia, the U.S. leading
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by wealthy citizens, and EUR 64 billion loss on frauds and other unlawful activ ities related to VAT payments in intra-EU transactions.
The Polish Economic Institute (PIE) is a public think-tank dealing with economic issues. The research focus of PIE covers predominantly international trade, macroeconomics, energy and digital economy, as well as strategic analyses related to the key areas of Poland’s social and public life. PIE provides analyses To effectively bring to justice the wealthiest and expert opinions for the purpose citizens evading taxes, OECD is applying of delivering the Strategy for Respon the system of automatic exchange sible Development, and disseminating of information for tax purposes covering Polish research in the field of economics a hundred countries. This facilitated and social studies across the country the processing of reports on 50 million and abroad. bank accounts where a total of EUR 5 trillion was deposited (which is roughly Bank Gospodarstwa Krajowego (BGK) is a third of the value of American economy). a state development bank whose mission This way EUR 102 billion due tax has been is to support the social and economic recovered. By the end of 2020, OECD is development of Poland and the public planning to announce its recommenda sector in the fulfilment of its tasks. tions for modifying international tax law. The Bank is a financial partner actively supporting entrepreneurship and Only in the EU, the aforementioned EUR making effective use of development 170 billion of loss per year includes EUR programmes. It is the initiator of, and 60 billion on account of profits shifted the participant in, cooperation between to tax havens by corporations, EUR 46 business, the public sector, and financial billion on account of assets shifted abroad institutions. Legal regulations which are less strin gent encourage artificial profit shifting. In addition, such countries act as inter mediaries in the process of transferring funds further to traditional tax havens such as the Cayman Islands.
Outsourcing&More | March–April 2020
