According to a study published on Monday (September 6), although several scandals exposed suspicious practices used by multinational companies to avoid taxes, European banks have not reduced their existence in tax havens.
According to a report from the European Union Tax Observatory at the Paris School of Economics, major European banks register 20 billion euros (US$24 billion) in 17 regions with special tax regimes each year, accounting for 14% of their total profits. .
This ratio has remained stable since 2014, when a wave of revelations, such as Lux Leaks and Panama Papers, exposed the tax practices used by companies and high wealth individuals to avoid taxes.
The report stated: “Despite the increasing importance of these issues in public debate and the political world, European banks have not significantly reduced their use of tax havens.”
The observation station led by Berkeley University professor and tax expert Gabriel Zuckerman reviewed the data released by 36 financial institutions during the period 2014-2020, with special attention to the large banks HSBC, Deutsche Bank and Societe Generale.
“We have observed multiple situations: For HSBC, most of the tax haven profits come from only one haven (Hong Kong), while in other cases multiple tax havens are involved,” it said.
HSBC is considered a leader in these practices, with more than 62% of its pre-tax profits recorded in tax havens between 2018 and 2020, compared with 49.8% for Monte dei Paschi, Italy, which ranks second.
Standard Chartered Bank on the podium.
To be sure, although both HSBC and Standard Chartered are located in London, they are both leading Hong Kong retail and commercial banks. The vast majority of HSBC’s profits come from Asia, with China and Hong Kong being the main driving forces.
Germany’s Deutsche Bank and NordLB ranked fourth and fifth respectively.
The report lists 17 countries and regions as preferred destinations, including the Bahamas, the British Virgin Islands, the Cayman Islands, Jersey and Guernsey, Gibraltar, Hong Kong, Macau, Panama, and the EU member states Malta and Luxembourg.
The report stated: “The profits of tax haven banks are exceptionally high: 238,000 euros per employee, compared to approximately 65,000 euros in non-tax haven countries.”
“This shows that profits registered in tax havens are mainly transferred from other countries where service production takes place,” it added.
After a series of international financial scandals were exposed in a major investigation called Lux Leaks and the Panama Papers by the media, people have high expectations for financial institutions to change their practices.
This study was conducted during the final stage of negotiations between countries on an international framework for taxation of multinational corporations, which was supported by the G20 and the OECD.
The plan will impose a 15% tax floor on the profits of the largest international companies, but the final compromise may not include the financial sector.
