Exposing The Real Economic Activity Of European Banks

On March 27, Oxfam published a report based on an analysis of Country-by-country reporting data exposing Europe’s 20 biggest banks that are registering over a quarter of their profits in tax havens, but just 12% of their revenue and 7% of their employees.

Oxfam Report

Oxford-based Oxfam, an international confederation of charities focused on the alleviation of global poverty, tried to prove dodgy practices of banks by pointing out at the gap between real activity (number of employees and turnover) and declared profits. According to the report, Banks’ subsidiaries in low-tax jurisdictions are twice as profitable as offices elsewhere and employees are four times more productive, generating an average profit of €171,000 per person annually compared to €45,000 on average.

Profit versus Tax

Oxfam criticized Barclays, Europe’s fifth biggest bank in 2015, that it booked profits of €557m in Luxembourg and paid only €1m in taxes, an effective tax rate of 0.2%. However, in its CbC file, Barclays commented that ‘Luxembourg tax was not paid on the great majority of the pro­fits due to either an offset of tax losses or as a result of dividends not being taxed under Luxembourg law.’

Zero Staff Employment

The report also uncovered that European banks posted €628m in profit in tax havens where they employed zero staff. For example, in the Cayman Islands, France’s BNP Paribas booked €134m in profit tax-free without a single employee present. In the Cayman Islands, “for every €100 of revenue, there is an average of €167 profit”.

Favored Tax Havens

Luxembourg and Ireland were the most favored tax havens for EU banks, the report said. Europe’s 20 biggest banks posted more profits in Luxembourg than they did in the UK, Sweden and Germany combined.

All banks were asked to comment on the findings of the report before publication – their responses are outlined in the report.    

Source: OXFAM, Euractiv, The Business Times 


We Provide Solutions - Let's Talk Business!

Implementation of BEPS Action 13 - Argentina, Mexico and other countries of Central America
Wednesday, 22 November, 2017 | 5:00 PM - 6:00 PM (CET)
Tuesday, 12 December, 2017 | 5:00 PM - 6:00 PM (CET)
Tuesday, 11 January, 2017 | 5:00 PM - 6:00 PM (CET)

Webinar - Increased controversy in Africa after BEPS – An analysis of recent TP disputes
Thursday, 30 November, 2017 | 4:00 PM - 5:00 PM (CET)

Copyright © 2017
Transfer Pricing Associates BV.
All rights reserved.

H.J.E. Wenckebachweg 210
1096 AS Amsterdam
T: +31 20 462 3530
E: info@tpa-global.com
I: www.tpa-global.com