Tax Policies in EU Promote Tax Evasion in Developing Countries

November 14, 2014 International Tax Cooperation

Tax Evasion in the EUNew research has shown that most EU countries are either not doing enough to fight international tax evasion, or are, in fact, supporting measures which make it easier for large firms to unfairly minimize their taxes in developing countries.

In its latest report, released on November 12th, the non-government organization European Network on Debt and Development (EURODAD) has claimed that the tax policies implemented by the governments of EU countries are actively hindering developing countries by depriving them of much needed tax revenues.

In the report it was suggested that a lack of legislation to enforce transparency and to prevent companies from dodging their tax obligations in other countries are allowing large multinational firms to unfairly reduce their tax obligations in developing countries, despite having earned profits in those countries.

The EURODAD’s analysis was based on assessments of local tax system conducted by civil society organizations based on the respective countries, which showed that some countries are not only not taking steps to prevent tax evasion, but are also implementing some measures which makes international tax dodging easier.

The experts of EURODAD pointed out that currently Ireland, Luxembourg and Netherlands all promoting legislation under the guise of “tax competitiveness” which facilitates tax dodging, and allows entities to structure their affairs in a manner which reduces tax obligations in developing countries.
It was also pointed out that some countries, name the UK and France, are actively participating in a large number of tax treaties which reduce the amount of taxes that multinationals are obligated to pay in developing countries.

Most of the countries which were analyzed also do not have enough measures to promote transparency regarding the ownership of business entities, a move which helps large firms obscure the ownership of businesses, ultimately helping reduce the taxes paid overseas while simultaneously helping move profits to low tax jurisdictions, either in the EU or abroad.