MULTINATIONALS HIDING BILLIONS, SAYS REPORT
Tax: Luxembourg among countries helping US firms cut their tax bills by more than a quarter, campaigners say.
The abuse of holding company structures in the Grand Duchy, and fiscal regimes in several other countries, allows American firms to avoid paying billions of dollars in corporate profit taxes, two NGOs stated this week. US companies are routing a disproportional level of profits through subsidiaries in tax-friendly jurisdictions, the paper argued.
“Profit shifting to reduce taxes is happening on a massive scale,” according to the report, “Still Broken: Governments must do more to fix the international corporate tax system”, issued by the Tax Justice Network, a campaign group, and Oxfam International, an anti-poverty organisation.
“In 2012, US multinationals alone shifted $500-700bn, or roughly 25 percent of their annual profits, mostly to countries where these profits are not taxed, or taxed at very low rates. In other words, $1 out of every $4 of profits generated by these multinationals is not aligned with real economic activity.”
Grand Duchy among top 5 “winners”
“Most of the profits that multinationals shift around end up in a handful of countries including the Netherlands, Luxembourg, Ireland, Bermuda and Switzerland. Although these are very different countries, they have in common that they are often used in the tax planning structures of multinationals–in part because they provide low–or zero–tax environments.”
The paper stated that the Grand Duchy is “known for offering abusive tax rulings that were not exchanged with other countries and for providing low effective taxation”.
Elsewhere, the Bermuda operations of US multinationals booked $80bn in profits in 2012, the report stated, which: “is more than the profits that these companies reported in Japan, China, Germany and France combined”.
Among the “biggest losers” are the treasuries of the US, Germany, Canada, China, Brazil, France, Mexico, India, UK, Italy, Spain and Australia, the study said.
Insufficient reform
“The measures recently announced by the OECD leave the fundamentals of a broken tax system intact and do not stop the race to the bottom in corporate taxation.”
The research: “shows that the country-level data currently available is far from sufficient for a detailed analysis or to monitor base erosion and profit shifting (BEPS).”
In conclusion the groups: “urge individual G20 members to proceed to adopt public country-by-country reporting requirements for all large companies.”
The TJN-Oxfam report (PDF) was issued Tuesday.
