Leading lenders in Europe continue to use tax havens to book chunks of profits. According to a report by EU Tax Observatory, this practice has lingered without much hindrance since 2014, despite the fact that country-by-country disclosures have now been made mandatory, the EU Tax Observatory said in a report on Monday.
The independent research body, which is co-financed by the European Union, said disclosures posted by 36 major European lender revealed that they booked a compiled 20 billion euros ($23.77 billion), accounting for 14% of total profits, in tax havens, despite the fact they have only a few employees in these regions.
When compared, profits booked by banks in tax havens would be splitted to about 238,000 per employee, while profits for non-tax haven territories would be splitted at 65,000. “This suggests that the profits booked in tax havens are primarily shifted out of other countries where service production occurs,” the report indicated.
Taxes are now an increasingly sensitive issue, as cash-strapped governments work to plug the holes in a COVID-stricken economy and seek common ground on what/how to tax, specifically Big Tech. Country-by-country reporting imposed to bring some clarity to the inner operations of banks has failed to serve its purpose, neither has it changed the practices of most banks.
“More ambitious initiatives — such as a global minimum tax with a 25% rate — may be necessary to curb the use of tax havens by the banking sector,” the report revealed.
Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.