Survival of the Richest

Recommendations

Info

Europe's role in upholding an unjust tax system Figure 2: 'Sweetheart deals' in force at the end of 2013, 2014 and 2015 Luxembourg Belgium Netherlands United Kingdom Hungary Italy Average Spain France Czech Republic Germany Finland Poland Denmark Ireland Portugal Sweden Romania Norway Lithuania Greece Latvia Slovakia Bulgaria Croatia Cyprus Estonia Malta Slovenia Austria Number of Advance Pricing Agreements – also known as sweetheart deals – in force in the EU and Norway. Source: Eurodad calculations based on data from the European Commission 95 and the Norwegian tax administration. 96 Key 2015 2014 2013 100 200 300 400 500 600 20 • Survival of the Richest
Europe's role in upholding an unjust tax system One might have thought that the LuxLeaks scandal would have led to a reduction in the number of APAs between governments and multinational corporations. However, official data from the European Commission indicates quite the opposite – it seems that these ‘sweetheart deals’ are becoming a rapidly growing trend in Europe (see Table 1 and Figure 2). At the end of 2014, the total number of APAs had grown to 972 from 547 in 2013 – an increase of 78 per cent. 97 At the end of 2015 – one year after the LuxLeaks scandal – that number had grown to 1,444, an additional increase of 49 per cent since 2014. 98 One question that remains unanswered is how many of these APAs are simply legitimate agreements to ensure tax certainty for multinational corporations, and how many are the type of instruments of large-scale tax avoidance that have been exposed in the LuxLeaks scandal and the state aid cases. Meanwhile, the ongoing state aid court cases show that there is clearly no consensus on what is legally acceptable in terms of tax advantages given to multinational corporations through APAs. It is clear that APAs – or secret sweetheart deals – remain an issue of great concern in Europe. Tax treaties A tax treaty is an agreement between two countries that aims to create a framework originally intended to prevent companies or individuals that are operating across borders from having to pay tax twice on the same income (also known as double taxation). One of the main reasons for developing countries to sign on to these agreements is that they are expected to increase foreign investment. However, empirical evidence does not support this. 99 Rather, the global network of more than 3,000 tax treaties poses several challenges from a developing country perspective, since many of the agreements have been designed in a way that deprives poor countries of tax revenues. 100 Civil society organisations are also very alert to the potential risks with tax treaties, and there is particular awareness about the risks associated with tax treaties signed with countries that have high levels of financial secrecy or low levels of taxation. Tax Justice Network Africa (TJN-A) has filed a law suit on behalf of Kenyan taxpayers against the Kenyan government, challenging the constitutionality of the tax treaty signed between Kenya and Mauritius. 101 Whilst the treasury defended the tax treaty in court as a way to attract investments, 102 TJN-A argues that the agreement ‘significantly undermines Kenya’s ability to raise domestic revenue to underpin the country’s development by opening up loopholes for multinational companies operating in the country and super-rich individuals to shift profits abroad through Mauritius to avoid paying appropriate taxes’. 103 The court case is still pending. Another key concern related to tax treaties is that they often include provisions to lower - or remove - withholding taxes on cross-boundary financial flows, and thus can lead to lower tax income in the countries signing on to such treaties, including developing countries. For example, research by ActionAid shows that a tax treaty between Uganda and the Netherlands, signed in 2004, completely takes away Uganda’s right to tax certain earnings paid to owners of Ugandan companies if the owners are resident in the Netherlands. Ten years later, half of Uganda’s foreign investment is owned from the Netherlands, at least on paper, which means Uganda will not be able to tax it. 104 Uganda has since announced its intention to renegotiate unfavourable tax treaties. 105 Figure 3 provides an overview of which European countries that have ‘very restrictive’ tax treaties with developing countries in Asia and Africa. However, it is not only the worst tax treaties that have negative impacts on developing countries. Tax treaties that are less extreme also contain reductions of developing country tax rates. Table 2 and Figure 4 provide an overview of the total number of tax treaties between developing countries and the European countries covered by this report, as well as the average reduction in withholding taxes in developing countries that has been introduced through these treaties. Survival of the Richest • 21
Page 1 and 2: Survival of the Richest Europe’s
Page 3 and 4: Contents Acronyms 4 Glossary 5 Exec
Page 5 and 6: Glossary Advance Pricing Agreement
Page 7 and 8: Glossary Tax treaty A legal agreeme
Page 9 and 10: Executive summary Global solutions
Page 11 and 12: Global developments 2016 Developing
Page 13 and 14: Global developments 2016 Box 1 Conc
Page 15 and 16: Europe’s role in upholding an unj
Page 17 and 18: Europe's role in upholding an unjus
Page 19: Europe's role in upholding an unjus
Page 35 and 36: Report findings Financial and corpo
Page 37 and 38: Specific findings Survival of the R
Page 39 and 40: Methodology for country rating syst
Page 41 and 42: AUSTRIA TRANSPARENCY REPORTING TAX
Page 43 and 44: FINLAND TRANSPARENCY REPORTING TAX
Page 45 and 46: ITALY TRANSPARENCY REPORTING TAX TR
Page 47 and 48: NORWAY TRANSPARENCY REPORTING TAX T
Page 49 and 50: SWEDEN TRANSPARENCY REPORTING TAX T
Page 51 and 52: Recommendations 7. All EU countries
Page 53 and 54: Austria Taxation Tax treaties Austr
Page 55 and 56: Belgium Taxation Tax treaties In to
Page 57 and 58: Belgium Global solutions Belgium di
Page 59 and 60: Czech Republic According to the 201
Page 61 and 62: Denmark Taxation Tax treaties Tax t
Page 63 and 64: Finland Ownership transparency Finl
Page 65 and 66: France “Of course, the fight agai
Page 67 and 68: France Taxation Tax treaties In tot
Page 69 and 70: Germany In July 2016, the European
Page 71 and 72:
Ireland Furthermore, it should be n
Page 73 and 74:
Italy “After our meeting in Milan
Page 75 and 76:
Latvia “We still have a high inco
Page 77 and 78:
Latvia Global solutions The Latvian
Page 79 and 80:
Luxembourg One Luxembourg newspaper
Page 81 and 82:
Netherlands One of the most crucial
Page 83 and 84:
Norway Overview Once the Panama Pap
Page 85 and 86:
Poland “It seems to us that those
Page 87 and 88:
Slovenia In May 2016, the Financial
Page 89 and 90:
Slovenia Global solutions Despite p
Page 91 and 92:
Spain Taxation Tax treaties The Spa
Page 93 and 94:
Sweden Taxation Global solutions Ta
Page 95 and 96:
United Kingdom Anti-Corruption Summ
Page 97 and 98:
United Kingdom There are broadly tw
Page 99 and 100:
References 34. Government of the Un
Page 101 and 102:
References 87. European Parliament.
Page 103 and 104:
References for the screening of thi
Page 105 and 106:
References legal-content/EN/TXT/?ur
Page 107 and 108:
References 255. Rekenhof (2011), In
Page 109 and 110:
References 321. Response to questio
Page 111 and 112:
References com/section/euro-finance
Page 113 and 114:
References 451. Irish Government, D
Page 115 and 116:
References da-savu-solidaritati 511
Page 117 and 118:
References 583. Tweede Kamer. (2016
Page 119 and 120:
References http://www.ft.com/cms/s/
Page 121 and 122:
References 720. Questionnaire answe
Page 123 and 124:
References Rules. Article published
show all

Survival of the Richest

Create successful ePaper yourself

Delete template?

Save as template?