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28 • Fifty Shades of Tax Dodging Report findings 4.1 Tax policies Tax rulings i Tax rulings are common in most of the countries covered in this report, although more so in a few countries (most notably in the Netherlands and Luxembourg). In all except one of the 15 countries covered in the report (Slovenia), the governments allow for the granting of Advance Pricing Agreements (APAs) to multinational corporations. ii Several of the countries covered are currently subject to European Commission state aid investigations in relation to their tax rulings (Luxembourg, the Netherlands, Ireland and Belgium). Shell companies iii In relation to shell companies, one of the biggest changes of the year was that a number of countries covered in this report for the first time started to report separately on the foreign direct investment (FDI) flows going through their special purpose entities (SPEs). Of the countries covered in this report, the available data shows that routing of FDI through SPEs is commonplace in almost half of them (Luxembourg, the Netherlands, Hungary, Denmark, Spain and Ireland). Patent boxes iv The harmful tax practice commonly known as ‘patent boxes’ continues to spread in the EU. Out of the 28 EU Member States, 12 countries have either already introduced or are in the process of setting up a patent box, while Germany is still considering the option. Despite the tough rhetoric against tax dodging from many governments, it is noteworthy that half of the EU’s patent boxes have been introduced within the last five years, dispelling the notion that the EU has effectively halted the implementation of new harmful tax measures. Several of the countries covered in this report are either adopting (Italy) or preparing legislation to adopt a patent box (Ireland) in 2015. Despite the newly adopted OECD BEPS package, which includes new guidelines on patent boxes, existing patent boxes can – in accordance with the guidelines – continue business as usual until 2021. Tax treaties v The number of tax treaties with developing countries continues to increase, but the increase is higher in some countries (such as in Luxembourg) than others (for example, in Sweden where no new treaties with developing countries came into force in the period covered in this report). Other countries (such as Hungary, Slovenia and Belgium) are expanding their treaty network with low-tax jurisdictions. In the past year, more of the 15 countries covered in this report are beginning to include anti-abuse clauses in their treaties with developing countries (for example, in the Netherlands, Denmark, France and Poland). In other countries, governments are increasingly pressured to acknowledge the potential negative impact of their treaties with developing countries (such as in Ireland, where the government conducted a spillover analysis and in Denmark where a Parliamentary hearing was held on the topic). Some treaties with developing countries were also renegotiated (as was the case in the Netherlands and Ireland) with some improvements. On average, Spain tends to be the worst among the 15 countries in terms of lowering withholding tax rates in its treaties with developing countries. Spain’s new treaties with Senegal (2014) and Nigeria (2015) cemented this trend. 4.2 Financial and corporate transparency Banking scandals in some countries (notably Germany and Sweden) turned the spotlight on the role of the financial sector in Europe as far as facilitating tax dodging and money laundering is concerned. vi Ownership transparency vii During the EU negotiations on the anti-money laundering directive towards the end of 2014, some countries played a constructive role (including France and Italy), while others played a more negative role (such as Germany, Spain and Poland). However, as the directive is being implemented by the EU Member States, it is becoming clear that countries that took the most ambitious stand in the negotiations are not the ones showing leadership in implementation. Both France and Italy have rejected the idea of establishing a public register for beneficial owners of companies, for example. The UK is in advanced stages of introducing a public register of the beneficial owners of companies but regrettably not for trusts. It seems they will be joined by Slovenia and Denmark, which both state that they plan to implement registers that will be available to the public without any qualifying criteria. Unlike the UK, Slovenia and Denmark are either in the process of restricting, on in the case of Slovenia have refrained from offering, alternative opportunities for concealing ownership, such as trusts, for example. Some of the most troubling countries are still Luxembourg and Germany, which together offer a diverse set of options for concealing ownership and laundering money. However, a significant number of countries have not yet formed a position and will hopefully decide to implement fully public registers in the year to come.
Fifty Shades of Tax Dodging • 29 Public reporting for multinational corporations viii Large movements have been seen on country by country reporting over the past year. Of the 15 countries covered in the report, nine governments state that they intend to implement the OECD BEPS recommendations (France, Germany, Ireland, Luxembourg, Poland, Slovenia, Spain, Sweden and the UK), which will keep the reporting confidential and only apply to very large companies. The former champion, France, is no longer pushing this demand and has instead joined the group of countries introducing confidential country by country reporting. However, some governments (the Netherlands, Belgium and the UK) have indicated varying degrees of willingness to look into the possibility of making the information public. 4.3 Global solutions ix None of the 15 countries covered in this report broke with the official EU line at the July 2015 Financing for Development conference, which regrettably opposed and successfully blocked the establishment of an intergovernmental body on taxation under the auspices of the UN. Among all of the 28 EU Member States, the UK and France played the leading role in blocking the demand from developing countries to have a seat at the table when global tax standards and policies are being decided. Today, only the Slovenian government is prepared to state that it supports the establishment of such a body. i. For more information, see section 3.6 on ’Tax rulings’ as well as the national chapters ii. For more information, see figure 5 in section 3.6 on ‘Tax Rulings’ iii. For more information, see section 3.3 on ’Letterbox companies’ as well as the national chapters iv. For more information, see section 3.4 on ‘Patent boxes’ as well as the national chapters v. For more information, see section 3.5 on ’Tax treaties’ as well as the national chapters vi. For more information, see the national chapters of Germany and Sweden vii. For more information, see section 3.9 on ’Hidden ownership of companies and trusts’ as well as the national chapters viii. For more information, see section 1.3 on ’Will BEPS stop tax dodging’ as well as the chapters on the European Parliament, the European Commission and the national chapters ix. For more information, see section 3.7 on ’Excluding developing countries from decision making’ as well as the national chapters
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