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The proposed European Union (EU) investment plan could receive an annual boost of €120 billion in public money if Europe clamped down on tax dodging, says Oxfam.
The worldwide organization released this new figure as EU leaders meet today to discuss the €315bn investment proposal put forward by European Commission President Jean-Claude Juncker to kick-start Europe's economy. Juncker believes the €315bn needed could be raised from a €21bn investment fund, assuming every euro invested produces 15 in return. However, most European Investment Bank (EIB) evaluations show much lower leverage ratios.
Tax evasion by the wealthy costs the EU €50 billion a year, with tax dodging by multinationals costing around €70 billion annually - a problem highlighted by the recent ‘LuxLeaks’ scandal showing the industrial scale of corporate tax dodging. Extra revenue could also be raised from the Financial Transaction Tax that 11 EU countries will be implementing in 2016.
Natalia Alonso, Oxfam’s Deputy Director of Advocacy and Campaigns, said: “Putting an end to tax dodging in Europe by wealthy elites and multinationals could free up the much needed cash to both revive the European economy and replenish the healthcare and other public services crushed by austerity. It’s as simple as that.”
“It’s good news that President Juncker has devised an investment plan for Europe, but it’s not clear how he’ll manage to turn the theory into practice. Doubts remain over how €1 billion of European money will result in €15 billion being available for investment across Europe. Juncker can address these investment doubts by making multinationals and the rich pay their fair share of taxes rather than forcing ordinary people to pay more while the public services they rely on are eradicated.”
Europe needs a fairer tax system that places transparency ahead of corporate interests by forcing companies in all sectors to publish where they really make their profits and where they actually pay taxes. A Europe-wide approach to taxing companies should also be introduced to put an end to the ‘tax war’ between states that results in businesses paying little or no tax. Europe also needs public registries of the beneficial owners of companies and trusts to prevent individuals hoarding their money in murky offshore accounts.
The money raised from fairer taxation should be used to revive public services decimated by austerity policies, such as healthcare and education. Funding should also be provided for energy efficiency and renewable energy projects across Europe that are key to fighting catastrophic climate change, rather than developing infrastructure for the fossil fuel industry. The EU and the European Investment Bank must now openly assess what projects to finance and ensure their decisions put the long term interests of European citizens first.
Notes to editors
- The EU investment plan was announced on 25 November. A Q&A and summary of where money comes from are also available.
- Oxfam estimates that the EU loses €70 billion every year as a result of corporate tax dodging. The figures are based on the estimate of the EU corporate tax gap - the difference between what the EU member states expect to collect in corporate income taxes and the actual revenues they collect. Oxfam has used corporate income data from the European Commission for the period 2007-2012. Since not all EU countries release data on the corporate tax gap, Oxfam has looked at the tax gap in the UK, Sweden, the US and Mexico and how much of it is due to corporate income. Oxfam has applied the lower figure to estimate the EU tax gap.
- According to estimates by economist Gabriel Zucman in his book "La richesse cachée des nations", Europe losses €50 billion in tax revenues every year as a result of wealth stacked away by individuals in tax havens.
- Oxfam believes the 1:15 leverage ratio applied by the European Commission is optimistic. It is based on one single facility and most actual return evaluations conducted by the EIB do not provide an estimate of leverage ratios. The evaluations which do look into this issue show a much more moderate leverage effect. A report from the European Court of Auditors (ECA) looking into EIB finance for small to medium sized businesses found a maximum leverage ratio of 1:2.75, while many projects failed to show any additionally leveraged finance. The ECA also mentions that higher leverage ratios of 1:5 and 1:6 have been registered in the past. Other EIB evaluations show similar leverage ratios - a maximum of 1:5 for guarantees and a similar figure in the case of the Risk Sharing Facility.