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Europe has a major fiscal problem: internal tax havens. Yes, it is unfortunate that although important steps have been taken in the harmonization of company legislation, there are still territories where there is not a sufficient tax burden or a sufficient level of transparency to determine where the benefit was generated and how the fiscal architecture was achieved designed.
In general, it is possible to talk about European tax havens. Luxembourg, Belgium, the Netherlands, Ireland, Cyprus and Austria are clear examples of States engaging in anti-competitive European behavior in such a way that the tax burden is relocated and is located in a territory that the virtual point of connection with it. These are the countries that deserve the classification of European tax havens, which have consequences that go beyond a single ethical judgment but fundamentally affect the taxes collected by the European States where economic activities are carried out. All this at a time when funds are needed and when the debate on Eurobonds or mutuals is clearly limited by the lack of unanimity in Europe.
In previous articles I have called for the aspect of tax havens to be opaque and lack of automatic exchange of information. This time, however, I will look at the features of an extremely low tax burden and how design features of the taxes paid by companies are allowed, to the detriment of third States since they include activities carried out outside them . It should be added that European states are places with a high level of opacity in many ways, which, as we will see later, could be attacked through national legislative instruments, as France is doing.
It is necessary to emphasize that the general reduction of the fiscal pressure is a problem in the legislative policy of each of the States (and that their internal judgment must be given by their voters, if they know it, which is not certain). The most serious thing is that its consequences extend, in addition to the States concerned, to all the other members of the European Union whose companies have relocated activities in those States for tax purposes. The impact is immediate: they do not pay taxes i wealth generating country, which will significantly reduce the amount of taxes paid to support the cost of social rights and public infrastructure.
Holland as a big new problem.
Despite the fact that there are five major tax havens in Europe, the Netherlands is the final point of profit relocation for tax reasons.
Its network of international double taxation agreements, the facilities for secret agreements with companies in which they determine the tax burden, the generation of corporate structures that facilitate the location of tax benefits and an extremely low tax burden (7%) allow extremely high benefits . based on the workers those companies have there. The average is about 575,000 dollars per worker, about ten times the average in other European countries.
Perhaps the most striking fact about the weight of the Netherlands in this matter is that there are only three countries (the British Virgin Islands, Bermuda and the Cayman Islands). above as a port of tax havens in the world. Spain is, at this point, in a place that will not recover in the world: 27th..
How does the European Union act against its tax havens?
European inaction is the central element of the policy against tax havens. The link between taxation and State sovereignty continues to be a flawed argument against progress in tax harmonization policy for companies. It is unacceptable that one of the great freedoms of the community, the free movement of capital, should be promoted without harmonizing the tax burden on companies. This indirectly favors the usual tax haven measures. It would be no more than an imitation of a measure that citizens have been paying for years, the Value Added Tax.
That is to say, the years of the existence of the European Union were not enough to express a common denominator of minimum fiscal pressure so that there would be no economic attacks between States and against citizens; that is ultimately a consequence of this fierce struggle between States to achieve the fiscal position of activities carried out outside their territory.
The efforts being made to have reports on activities from country to country – as seen in relation to banking and we will see later – are paralysed. In particular, the processing of the directive on the composition of the shareholding is paralyzed.
What instruments could be useful against the use of tax havens by multinational companies?
Legal approval regarding the economic transparency of companies including a country-by-country report of all companies with activities or subsidiaries abroad that would serve as an instrument to order Corporation Tax.
The data that emerged from the French banking report is particularly noteworthy about how they use tax havens as an instrument to obtain large benefits without contributing to public spending support.
The unbundling of activities for the sake of its fiscal transparency and activities should affect those elements, taken from the French banking law:
- its implantation in all ends and the nature of its activities;
- His turnover in each territory.
- His personal staff (it is paradoxical to see how French banks have advantages in territories where they have no workers).
- The benefits received before taxes – being able to control what is the real fiscal pressure of each of the territories).
- The taxes they paid.
- Subsidies and other public assistance received.
- But, at the same time, it would be necessary to prohibit companies located in tax havens (directly or indirectly) from awarding public contracts.
The consequences of the opacity of the companies’ activity means that States must take a step forward and implement effective measures to make the essential details of their activities public. What appears to be some journalistic documents about the tax pressure of companies+ is only the tip of the iceberg of tax havens where the activity of companies is much more harmful to the national Public Treasuries. It is also a problem with national techniques that could be very active as an instrument to prevent and design an effective fiscal policy.