EU tax havens: more than one in every 3 euros of the profits of multinationals are transferred to tax havens around the world: the EU, the most affected.
The Panama Papers, among other publications, targeted the term offshore: although it can refer to offshore or extraterritorial, it is also used to designate those opaque companies or with tax advantages or certain territories considered tax havens due to their lax taxation and special conditions, such as not having to operate economically in the country in which you have domiciled.
Thus, a company in Spain or Germany fictitiously diverts part of its profits to Ireland, and then continue to the Caribbean or Bermuda.
EU tax havens
It is not a random example, but representative of the journey that money makes in the XXI century: some (the company) enjoy less taxes; others (the country) manage to attract profits and capital from abroad thanks to reducing their tax rates.
The countries considered to have high taxation, such as Spain, lose: the 14,000 million of diverted profits are equivalent to 1.2% of GDP.
36% of the profits of multinationals are transferred to tax havens around the world, calculates a research — based on data from 2015, but recently updated, and conducted by Thomas Tørsløv (National Bank of Denmark), Ludvig Vier (Danish Ministry of Finance) and Gabriel Zucman (University of Berkeley, USA, and National Bureau of Economic Research) — that describes the problem from its title: The lost profits of nations.
In total, they are 616,000 million dollars (about 617,000 million euros) a year, of which almost 3 out of every 4 euros come from high-tax countries, such as Spain, Germany or the United States. 35% come from the European Union, 23% of the total are 'born' in the USA and 12% come from other OECD countries.
The EU is doubly the protagonist, being at the same time a 'sink' of corporate profits and the most affected by these tax tricks of multinationals, which represent 1.5% of the GDP of the Twenty-Seven, collects the Country.
EU tax havens problem
Among the main destinations of those 617,000 million euros diverted fictitiously are:
Ireland: with about 106,000 million dollars (similar amount in euros, at the current exchange rate)
Caribbean: 97,000 million
Singapore: 70 billion
Switzerland: 58 billion
Netherlands: 57 billion
Other territories: 51,000 million
Luxembourg: 47 billion
Puerto Rico: 42,000 million
Hong Kong: 39 billion
Bermuda: 24 billion
Belgium: 13 billion
Malta: 12 billion
Why such an intermediate stop in an EU member country? "This result is relevant from a legal and political perspective. The EU treaties prohibit member states from taxing payments (such as interest or intra-group royalties) to other [Union] countries," the authors explain.
EU tax havens statements
"A country like Germany can impose taxes on payments to Bermuda, but not on payments to Luxembourg. By shifting profits first to Luxembourg and then to Bermuda, a multinational can circumvent the German anti-circumvention rules," they add.
"The subsidiaries of foreign multinational companies are an order of magnitude more profitable than local companies in a number of low-tax countries," they argue after the research, in which they point out that American ones displace twice the profits of other multinationals in relation to the size of their income abroad.
If displaced profits were reallocated to their countries of origin, national profits would increase by approximately 20% in high-tax European Union countries, 10% in the United States and 5% in developing countries, while falling by 55% in tax havens, the researchers summarize.
"Capital is reappearing all over the world, but its increase is hidden by the tax evasion strategies of multinational companies," they conclude.
