New ranking shows which countries allow corporate tax abuse | attac Austria

Today the Tax Justice Network publishes the new ranking of the most important tax sumps for corporations (Corporate Tax Havens Index, CTHI). It shows which states allow profit shifting and tax abuse by multinational corporations the most. (1)

The first six places in the ranking go to OECD countries or areas that are dependent on them. Overall, the OECD countries are responsible for more than two thirds of the global opportunities for tax abuse by corporations. The top three, with the British Virgin Islands, Cayman Islands and Bermuda, are areas where the UK government has full powers to legislate or block. The Netherlands, Switzerland and Luxembourg come in fourth, fifth and sixth.

The most important tax sumps for corporations:

1. British Virgin Islands (British Overseas Territory)
2. Cayman Islands (British Overseas Territory)
3. Bermuda (British overseas territory)
4. Netherlands
5. Switzerland
6. Luxembourg
7. Hong Kong
8. Jersey (British Crown Dependency)
9 Singapore
10. United Arab Emirates

Complete ranking on the Corporate Tax Haven Index 2021 website

OECD countries shape the global tax system according to the wishes of the corporations

The ranking makes it clear why the OECD, which sets the rules in global taxation, has made little progress in the fight against tax abuse by corporations. “Under pressure from corporate giants and powerful tax swamps such as Great Britain and the Netherlands, the OECD has designed the global tax system in such a way that the wishes of the richest corporations take precedence over the needs of everyone else,” explains Alex Cobham of the Tax Justice Network.

The diluted OECD standards classify states as “not harmful” (and thus legitimize them) which, according to the CTHI ranking, are responsible for 98 percent of the global opportunities for harmful tax practices. In response to pressure from the OECD, at least 2018 countries have watered down their laws for country-by-country reporting for corporations since 11. Since the OECD aggregates and anonymizes this data before publication, it has so far not been possible to identify the profit shifts of individual multinational corporations. (2)

Attac and Tax Justice Network are demanding total group tax

“Even the current plans of the OECD for a reform of the global tax rules do not contain a fundamental solution against the tax tricks of multinational corporations. The corona pandemic should be an occasion for corporations to finally make a fair contribution to financing the crisis costs, ”criticizes David Walch from Attac Austria. (3)

Attac and the Tax Justice Network therefore propose a simplification of international corporate taxation - the so-called Total group tax with a minimum tax rate of 25 percent. The global total profit of a group is divided proportionally according to the value added between the states and then taxed.

Democratic UN process instead of secret OECD deals

The global movement for tax justice is also calling for the OECD tax rules to be replaced by a globally inclusive process within the framework of the United Nations.

Dereje Alemayehu, Executive Coordinator of the Nobel Peace Prize-nominated Global Alliance for Tax Justice: "Relying on the OECD on global tax issues is like trusting a pack of wolves to build a fence around your henhouse." Cobham adds: "The rules of where and how global corporations pay taxes must be laid down at the UN in the daylight of democracy - and not by a small club of rich countries behind closed doors."

Austria ranks 33rd on the Corporate Tax Haven Index and is responsible for 0,69 percent of global corporate tax abuse.

Notes:

(1) The Corporate Tax Haven Index, CTHI, rates the tax and legal systems of every country with a “haven score” of 100, with a zero meaning no leeway and a 100 meaning unlimited scope for tax abuse by corporations. This score is then combined with the volume of financial activity of multinational corporations in that country to calculate how much cross-border tax abuse is enabled by the country.

The CTHI complements the so-called Shadow financial index (Financial Secrecy Index, FSI) of the Tax Justice Network. Together, the indices provide a complete picture of international tax abuse and fraud. The CTHI documents which countries allow multinational corporations to pay less tax on their profits than they should. The FSI documents how countries enable wealthy individuals to hide their money from the rule of law. Different tax sumps have specialized in different aspects - but some in both: The Cayman Islands, Switzerland, the Netherlands, Luxembourg, Hong Kong, Singapore, the British Virgin Islands and the United Arab Emirates are among the top ten in both indices.

(2) In the EU there has been a majority among governments since March 3, 2021 in favor of obliging corporations to publish their country-by-country financial reports. However, this could leave many loopholes. For details see here.

(3) The OECD proposes a complex dichotomy of the system: Part of the profits that companies generate through digital business models should be taxed even without a physical presence in the countries in which the consumers are located. The exact calculation and distribution of these profits is still unclear, but could have similar loopholes in the old system. The remaining profit as well as the profit of all other companies should continue to be calculated according to the old, abuse-prone system.