STOP

18 • Fifty Shades of Tax Dodging
Table 2: Number of listed companies that would report on
a country by country basis using the OECD BEPS threshold
and the proposed threshold of the European Parliament
Country
Source: Eurodad calculations 118
No. of listed
companies,
OECD BEPS
threshold
No. of listed
companies,
European
Parliament
proposed
threshold
Belgium 28 85
Czech Republic 3 6
Denmark 26 72
France 154 418
Germany 138 442
Hungary 3 14
Ireland 36 61
Italy 69 195
Luxembourg 26 54
Netherlands 61 110
Poland 29 237
Slovenia 6 27
Spain 48 108
Sweden 57 223
United Kingdom 262 778
EU 28 1,053 3,396
The OECD BEPS recommendations for country by country
reporting has a further shortcoming in that it only applies to
very large companies with an annual consolidated turnover
of more than €750 million. A current proposal from the
European Parliament 119 would extend country by country
reporting to all ‘large undertakings’ as defined in an existing
EU directive. 120 As Table 2 illustrates, the BEPS threshold
would only apply to a relatively small number of companies
while the threshold proposed by the European Parliament
would apply to significantly more companies. As the figures
in Table 2 only show listed companies they are merely
illustrative as both thresholds would also apply to non-listed
companies. They nonetheless show the large difference
in coverage with almost four times more listed companies
covered by the threshold suggested by the European
Parliament compared to the OECD BEPS threshold.
With the BEPS process jeopardising progress on country
by country reporting for developing countries, it is now up
to the EU and its Member States to push back, reaffirm that
its decision to make country by country reporting public for
banks was correct, and insist that public country by country
reporting should apply for all economic sectors and for a
wider group of companies than those under the high BEPS
threshold, for the benefit of all countries in the world.
3.3 Letterbox companies
Letterbox companies, or special purpose entities (SPEs),
are legal entities constructed to fulfill a narrow and specific
purpose. They usually have few or no employees and little
economic substance but they are often able to handle
large amounts of funds due to the favourable tax treatment
granted them in many countries. While the corporate income
tax rate is around 29 per cent in Luxembourg, for example,
their popular letterbox companies are only subject to a tax
of between 0.01 per cent and 0.05 per cent of the company’s
assets. 121 As UNCTAD highlighted in 2013: “…international
efforts … have focused mostly on [offshore financial centres],
but SPEs are a far larger phenomenon.” 122 Letterbox
companies can be managed by so-called trust and corporate
service providers. Financial Action Task Force (FATF) defines
such providers as “all those persons and entities that, on a
professional basis, participate in the creation, administration
and management of trusts and corporate vehicles.” 123
Research by authorities and journalists has shown that such
corporate service providers help companies to avoid and
evade taxes. 124 They can even be used for money laundering
activities, 125 and at least in the Netherlands many have not
collected sufficient information about the risks associated
with their clients. 126