Transparency International EU reveals the murky tax affairs of Europe’s biggest banks

New research by the anti-corruption watchdog Transparency International EU (TI EU) on the tax affairs of some of Europe’s largest banks from 2015 to 2019 suggests widespread use of tax havens and profit shifting. The findings have been published today on TI EU’s Corporate Tax Tracker platform and analysed in the new report “Murky havens and phantom profits: the tax affairs of EU and UK banks”.

Among the 39 EU and UK banks looked at in the study, 31 were using low-tax or zero-tax havens, while 29 of them appeared to be declaring high profits in countries where they did not actually employ any staff. These ‘ghost operations’ may indicate that banks are shifting their profits to reduce their tax bill. Without full details on banks’ operations in the countries concerned it is impossible to tell,

Several banks discussed in the research, including HSBC, Barclays, Deutsche Bank and Standard Chartered, were implicated in the recent FinCEN scandal, which alleged their involvement in moving dirty money across the globe.

“The questionable practices highlighted by our research are still escaping full public scrutiny,” said Elena Gaita, senior policy officer at Transparency International EU. “For instance, in the last five years, HSBC reported €1.59 billion of profits in Saudi Arabia, despite not having a single employee in the country. Likewise, Deutsche Bank made €418 million from its Maltese operation, which has been unstaffed since 2016. European economies are on their knees because of the pandemic, so it’s now more important than ever that banks and other multinational companies are seen to pay their fair share of tax.”

Since 2015, EU banks have been required to publish country-by-country reports of their profits, taxes and number of employees for every jurisdiction in which they operate. The banking and extractives sectors are the only industries that are subject to such regulations.

The researchers analysed five years’ worth of these reports and used the data to build an online platform, the Corporate Tax Tracker, which will enable closer public scrutiny of major banks.

“We were only able to scrutinise the tax behaviour of banks because they are subject to EU public country-by-country tax reporting rules,” explained Gaita. “This is probably just the tip of the iceberg when it comes to aggressive tax planning, so it is essential that these rules are extended to other sectors of the economy. The EU member states that are still blocking this legislation should put the interests of their citizens and their economic well-being over the interests of large companies, especially in these times of economic uncertainty.”

“The current German EU Council Presidency has an opportunity to ensure that Member States finally adopt a position on public country-by-country reporting rules for large companies, so we are calling on them to include it in the upcoming Competitiveness Council meeting.”

OECD/G20 Inclusive Framework on BEPS invites public input on the Reports on Pillar One and Pillar Two Blueprints

As part of the ongoing work to develop a solution to the tax challenges of the digitalisation of the economy, the OECD/G20 Inclusive Framework on BEPS is seeking public comments on the Reports on Pillar One and Pillar Two Blueprints.

The top priority of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) has been to develop a solution to the tax challenges of the digitalisation of the economy. On 12 October 2020, the Inclusive Framework released a package consisting of the Report on the Pillar One Blueprint and the Report on the Pillar Two Blueprint. These Blueprints reflect the convergent views on many of the key policy features, principles and parameters of both Pillars, and identify remaining technical and administrative issues as well as policy issues where divergent views among Inclusive Framework members remain to be bridged.

The Inclusive Framework welcomes stakeholder input on the Blueprints and will hold public consultation meetings on them in January 2021. This will assist members of the Inclusive Framework in further refining the package and addressing remaining issues. To help focus the input of stakeholders, the public consultation document sets out a series of questions for each of the Pillars.