EU clampdown on tax avoidance to release hidden billions to fight poverty

International development agency Oxfam and the European Network on Debt and Development (Eurodad) welcome the European Commission’s initiative to step up action against tax fraud and tax evasion, which cost billions in tax revenues in Europe but also in developing countries.

Oxfam and Eurodad are calling on Member States to follow the lead of the European Commission and agree on a common set of measures to counter harmful tax practices, such as corporate trade mispricing, which results in lost tax revenues and ultimately reduced essential services at the expense of the poorest. It is particularly important that they adopt a tougher definition of tax havens in order to minimise their impact and step up efforts to increase the automatic exchange of information.

Catherine Olier, Oxfam’s EU policy adviser, said:

“Coordinated action is the only way to clamp down on capital flight associated with tax avoidance. If the EU adopts a unified stance in tackling tax dodging, it will not only balance the books but also release the finance many developing countries and European governments desperately need to pay for essential public services, like health and education. In developing countries alone, tax avoidance costs €123 billion per year. These hidden billions should be spent building schools and hospitals.”

 Javier Pereira, Policy Officer at Eurodad, said:

“By promoting the automatic exchange of tax information between countries, Member States will close some of the main tax loopholes in existing regulations and provide for greater transparency of capital flows.

“To efficiently crack down on tax avoidance, the EU should hold companies accountable for their tax practices, ensuring that they pay the right amount in the countries in which they work. It is only fair that multinational companies, like Starbucks and Google, pay their share of state spending in line with their real economic activity.”  

Notes to Editors

• The proposed Action Plan presented today by the European Commission will now need to be approved by Europe’s finance ministers.
• Developing countries lose out on an estimated $160 billion (€123 billion) each year as a result of trade-related tax dodging, according to Christian Aid. This represents almost twice the amount developing countries receive in international aid.
• Tax avoidance vs tax evasion : Tax avoidance is usually considered as using complex techniques to exploit legal loopholes in order to pay less tax than is due, while tax evasion (also known as tax fraud) consists of using illegal methods to pay less tax.
• Corporate trade mispricing: Transfer mispricing happens when a subsidiary in one country charges a vastly reduced rate for goods or services to another subsidiary based elsewhere to minimise their tax liability. It is the largest component of illicit financial flows globally, representing around 65 per cent of the total.

Read the Eurpoean Commission's press release: Clamping down on tax evasion and avoidance: Commission presents the way forward