European banks still active in tax havens – archyde

Despite several scandals over the taxation of multinationals, European banks have not reduced their presence in tax havens in recent years, according to a study published on Monday. But they defend themselves by claiming to declare their profits in the countries where they are made.

The main European banks record 20 billion euros each year, or 14% of their total profits, in 17 territories with particularly favorable taxation, calculated the European Tax Observatory, an independent research office housed at the School of economy of Paris. This percentage has remained stable since 2014, despite several scandals revealing the questionable practices of multinationals to evade tax.

“Despite the growing importance of these questions in public debate and in the political world, European banks have not significantly reduced their use of tax havens,” says this body which is funded by the European Commission and led by the French economist Gabriel Zucman, specialist in these questions.

The Observatory reviewed the data published by 36 financial institutions over the period 2014-2020. It identifies 17 states and territories as preferred destinations, including the Bahamas, the British Virgin Islands, the Cayman Islands, Jersey and Guernsey, Gibraltar, Hong Kong, Macao, Panama and the EU Member States of Malta and Luxembourg.

“The profits recorded in tax havens are abnormally high: 238,000 euros per employee, against 65,000 euros in other countries. This suggests that the profits recorded in tax havens are mainly displaced from other countries where the production of services takes place. “, say experts from the Observatory.

Among the big banks, they identify HSBC as the champion of these practices. More than 62% of its pre-tax profits were recorded in tax havens between 2018 and 2020, against 49.8% for the Italian Monte dei Paschi (BMPS) which comes in second. Standard Chartered (29.8%) completes the podium. The German Deutsche Bank and NordLB come in 4th and 5th position.

– Banks defend their presence –

“HSBC is the largest bank in Hong Kong with 30,000 employees, and because of our heritage, size of operations and strategy, a significant proportion of the group’s profits continue to flow here,” argued the British bank, interviewed by AFP.

Its counterpart Standard Chartered has declared that it does not “artificially” transfer its profits to low-tax countries. “We have a global business and we operate commercially in both high and low tax jurisdictions,” the group said.

Deutsche Bank recalls for its part that of the 60 countries in which it operates, none is present on the European list of non-cooperative countries. She adds that her profits are taxed where they are made.

Monte dei Paschi assured that the study “does not correctly represent the reality of BMPS because it is based on incomplete information”, insofar as it “probably” took into account “only the profit declared in Luxembourg in 2018” without including “the loss of a similar amount” declared in this country in 2017.

As for French establishments, Societe Generale – which declined to comment – is the most exposed, with 13.8% of its profits in tax havens. Its compatriots Crédit Agricole and BNP Paribas point respectively to 11.5% and 6.9%. But the three groups have reduced their activity in these countries compared to the period 2014-2016, according to the study office.

The LuxLeaks scandals in 2014, followed by the Panama Papers, brought the subject of tax evasion to the forefront and led to a tightening of financial transparency obligations.

Negotiations are underway at the OECD for a minimum taxation of the profits of multinationals in order to fight against tax havens.

The Observatory estimates that a minimum rate of 15% on banks would generate 3 to 5 billion euros in additional revenue for European countries. These figures would triple to reach 10 to 13 billion with a rate of 25%.

aro-ktr-bh / bt