16 March 2016

Oxfam: New report reveals prominent role of tax havens for banks

The five banks investigated in today’s new study disclosed having 16 subsidiaries in the Cayman Islands alone – with no staff – from which they still declare €45 million in profits.

The study by Oxfam, CCFD-Terre Solidaire and Secours Catholique-Caritas shows that the “big five” French banks make a third of their international profits in tax havens –  close to €5 billion – even though they pay only a fifth of their taxes to these jurisdictions (€825 million).

The report also highlights that subsidiaries in tax havens are on the average 60% more lucrative for banks than those elsewhere. For every €1000 of turnover, for example, Société Générale declares profits of €557 in tax havens – compared to €144 of profits declared in other countries - just €34 in France itself.

Oxfam’s analysis further reveals that the banks’ most risky and speculative activities, such as portfolio management or structured finance instruments based on derivatives are almost always located in tax havens.

A two-year-old EU law now requires banks to disclose basic information on their activities and the taxes they pay within each country they operate. France is the first to have translated this provision into national law.

The report “Following the Money: French Banks' Activities in Tax Havens” uses this data to analyse international activities of the five largest banks in France – BNP Paribas, BPCE, Société Générale, Crédit Agricole, and Crédit Mutuel - CIC.

The report highlights the disconnection between profits and taxes, and the role tax havens play for companies in avoiding higher tax bills, for example:
  • The five banks investigated declare a third of their international profits in tax havens (€4.907 billion out of a total of €15.349 billion), even though their business in these jurisdictions represents only a quarter of their international turnover (€13.540 billion of €53.054 billion), a fifth of their taxes paid (€825 million compared with €4.043 billion), and only a sixth of their staff (42,968 of 263,893).
  • “Profits per employee” is a clear indicator of how much money is channelled through tax havens, with employees working in tax havens appearing 2.6 times as “productive” to the banks as staff who are working elsewhere.
  • In 34 cases, banks have subsidiaries in offshore territories that have no staff at all. In the Cayman Islands, the five French banks disclose a total of 16 subsidiaries which generate €45 million in profits without a single employee..
  • The French banks concerned are paying half the effective rate of tax in these secrecy jurisdictions compared to the rates they are subjected to in other countries. In 19 cases, French banks even pay no tax at all in tax havens, although they declare profits there.

It was shocking to realise the sheer volume of money that banks are routing through tax havens to maximise their profits when we investigated this new data. We are sure that banks and big businesses in other European countries will be doing the same,” said Manon Aubry, advocacy adviser at Oxfam France.

"This is the first transparency exercise that can be conducted on the basis of data that has been made available and publically accessible thanks to new legislation. Although reporting is still not perfect, they reveal that public disclosure of basic business information is feasible and beneficial to better understand the activities of banks in tax havens. It is clearly a first step to fight tax dodging,” Aubry added.

Under current legislation, only banks are required to report on a country-by-country basis and make this information available to the public. This requirement must be extended to apply to all multinationals. Our parliaments, the press and all citizens have the right to know which companies are paying their fair share of tax. How many more tax scandals are necessary for EU governments to want to unmask aggressive tax planning strategies of multinationals?” said Lucie Watrinet, advocacy adviser at CCFD-Terre Solidaire.

The European Commission is currently considering legislation to extend public country-by-country reporting to all sectors, with a proposal to be announced in April. 

Citizens are tired of seeing how big companies abuse weak legislation to set up tricky accounting schemes and pay very little tax. Public services in both Europe and developing countries are lacking vital resources for services such as health care and education, while ordinary citizens carry a heavier tax burden. It is time for decisive EU action to stop this shameless trickery of large companies”, Watrinet added.

All eyes are now on the European Commission from whom we expect an ambitious proposal that pioneers real tax transparency. This includes clear rules for companies to break down their reported figures country by country on a global level to capture the full picture of their business in international tax havens. It is not sufficient to restrict these reports to subsidiaries in the EU, as the European Commission is currently expected to propose,” Aurore Chardonnet, EU policy adviser at Oxfam International, concluded.

Full report in English and French

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