Weak EU tax haven blacklist allows corporate tax dodgers to pocket millions of euros in bailouts – Oxfam

Published: 5th October 2020

The weak EU tax haven blacklist is undermining attempts to stop government bailouts going to corporate tax dodgers, said Oxfam, ahead of the publication of a revised EU blacklist tomorrow, 6 October.

The international agency says there is mounting evidence that countries across Europe and the developing world are paying a high price for the failure to properly crack down on tax havens:

  • New Oxfam analysis reveals that Denmark gave €89 million in state aid to corporations with links to tax havens that do not feature on the EU blacklist by the end of June – despite prohibiting bailouts to corporate tax dodgers in May 2020. Researchers found that 131 of the 500 biggest recipients of state aid in Denmark had 2319 corporate entities based in tax havens such as the UK, Luxembourg, and the Netherlands. Italy, which has passed similar legislation, also uses the EU blacklist to decide on corporate eligibility for state aid, while France, Belgium, and the Netherlands use their own national blacklists that are beset by similar problems.
  • A recent report by the Centre for Research on Multinational Corporations revealed that European tax havens such as Luxemburg and Malta helped the biotech giant Qiagen avoid millions in tax, including an estimated $105 million in the Netherlands. The German company is a leading producer of COVID-19 testing kits and has seen its profits shoot up since the start of the crisis. It has received at least €2.38 million in grants and subsidies from the EU since 2009 and over €503,233 ($598,000) from the US government to develop a test for COVID-19.
  • Many corporations use letter box companies in the Netherlands to avoid tax, and the Netherlands is also facilitating corporate tax avoidance through bilateral tax deals. For example, a tax agreement between the Netherlands and Uganda gives Dutch subsidiaries of the French oil multinational, Total, and its partner CNOOC special tax advantages. Last week Oxfam revealed that, unless renegotiated, the treaty could allow the companies to avoid an estimated € 245 million ($ 287 million) in tax in Uganda over a 25-year period. Loss of tax revenues will reduce the funding available for public services such as healthcare in a country which has one of the highest maternal mortality rates in the world.

Chiara Putaturo, Oxfam’s EU tax policy advisory said:

“With health services across Europe crying out for resources to respond to the pandemic, and governments in need of money to fund the COVID-19 recovery, the EU can no longer afford to go easy on tax havens, wherever they may be. Communities in Europe and across the globe are paying the price for a third-rate blacklist while corporate tax dodgers are pocketing millions in unpaid taxes and millions more in bailouts.”

The review is unlikely to result in significant improvements to the blacklist which currently includes just 12 tax havens.  Media reports suggest that Cayman Islands and Oman will be removed from the blacklist, while Barbados and Anguilla will be added.  The Cayman Islands is one of the world’s worst tax havens – it has a zero-percent corporate tax rate, and according to the IMF it is one of ten economies that host more than 85 percent of all phantom investments.

“The EU must blacklist countries that operate as tax havens wherever they are. This means blacklisting all countries with zero corporate tax rates, and all countries where the corporate investments bear little relationship to the amount of real economic activity taking place,” added Putaturo.

Notes to editors

  • EU governments publish a revised blacklist twice a year and are committed to a review of the blacklist criteria during 2021. The European Commission issued guidelines in July 2020, recommending member states bar companies with links to countries on the EU blacklist from receiving state aid.
  • According to a draft text from the Council of the European Union dated 28 September 2020, seen by Agence Europe, the Cayman Islands and Oman will be removed from the European 'black' list of non-cooperative jurisdictions for tax purposes, while Barbados and Anguilla will be added to it.
  • Oxfam analysis suggests the following countries should be included on the EU tax haven blacklist: American Samoa, Cayman Islands, Fiji, Guam, Oman, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu, Seychelles, UK, Hungary, Netherlands, Cyprus, Malta, Ireland, Luxembourg, Hong Kong SAR,  British Virgin Islands, Bermuda, Singapore, Switzerland, Mauritius. This list includes the EU blacklisted countries, EU member states identified by the European Commission as facilitating aggressive tax planning (European Semester), and 10 jurisdictions mentioned by the IMF for being responsible for the 85% of phantom foreign direct investment. In the analysis of Danish corporate bailouts, American Samoa and US Virgin Islands could not be considered since data on companies’ structures for these countries are not available
  • In May 2020, Denmark was the first European country to introduce regulations denying bailouts to corporations that have a tax residency or a legal owner with a controlling stake in the company resident in an EU blacklisted country. Oxfam assessed the 500 biggest corporate recipients of state aid in Denmark which account for 30 percent of the €943 million committed for state aid as of 22nd of June. 131 of the companies had links to tax havens that do not feature on the EU blacklist. The 500 companies were part of groups made up of 16059 corporate entities, of which a total of 2319 were based in tax havens that do not feature on the European blacklist.  794 entities were based in European tax havens such as the Netherlands (442) and Luxembourg (176), and 1525 in non-European tax havens including the UK (1027) and Switzerland (188).  Oxfam’s analysis is based on data from ORBIS.
  • Oxfam’s report, ‘The Money Pipeline: How the Netherlands - Uganda Tax Agreement is denying Uganda a fair share of oil revenues’ was published on 1 October 2020.
  • SOMO (Centre for Research on Multinational Corporations) published ‘Profiting from the Pandemic: How COVID-19 test producer Qiagen receives public money but avoids taxes’, on 2 October 2020.
  • The Cayman Islands has a zero-percent corporate tax rateThe Rise of Phantom Investments (IMF, 2019) says the Cayman Islands is one of ten economies that host more than 85 percent of all phantom investments.

Contact information

Anna Ratcliff | Oxford, UK | anna.ratcliff@oxfam.org | mobile +44 7796 993288

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