New Oxfam report: Europe’s biggest banks post quarter of their profits in tax havens

PRESS RELEASE - Northern Ireland

• Average effective tax rate of only 6% paid by top European banks in Ireland
• Transparency standards needed to prevent Northern Ireland being used as a tax haven 

Monday 27th March, 2017: Immediate release

Europe’s 20 biggest banks registered over a quarter (26 per cent) of their profits (at least £18 billion/€25 billion) in global tax havens in 2015, an Oxfam report revealed today – an amount at odds with the actual economic activity taking place in those countries. Tax havens accounted for only 12 percent of the banks’ global turnover and 7 percent of their employees.

The report – Opening the Vaults – suggests the discrepancy may have arisen because some banks are using tax havens to avoid paying their fair share of tax, to facilitate tax dodging for their clients, or to circumvent regulations and legal requirements.

The research for the report was only possible because of new EU transparency rules, requiring European banks to publish a country-by-country breakdown of their profits and tax payments, to assess their use of tax havens.

Michael McCarthy Flynn, Oxfam Ireland’s Senior Policy and Research Coordinator, said: “New EU rules give us a glimpse into the tax affairs of Europe’s biggest banks and it’s not a pretty sight. Governments must change the rules to prevent banks and other big businesses using tax havens to dodge taxes or help their clients dodge taxes.”

The research by Oxfam and Fair Finance Guide International reveals that Ireland is facilitating significant corporate tax avoidance, while UK-linked tax havens also proved popular with Europe's biggest banks. The report found that in Ireland European banks paid an average effective tax rate of no more than 6 percent – half the statutory rate of 12.5% – with three banks (Barclays, RBS and Crédit Agricole) paying no more than 2 percent.

Key findings from the report include:

• Banks often pay little or no tax on the profits they post in tax havens. European banks paid no tax on €383 million of profit they posted in seven tax havens in 2015. In 2015 European banks posted at least €628 million in profits in tax havens where they employ nobody.
• The 20 biggest banks posted €4.9 billion of profits in the tiny tax haven of Luxembourg in 2015 – more than they did in the UK, Sweden and Germany combined. 
• Ireland appears to be a very productive location for European banks studied with just the Cayman Islands, Curacao and Luxembourg having a higher average profit per employee. An average employee in Ireland generated €409,000 in profits in 2015, more than nine times the average for employees worldwide.

Oxfam said countries are being denied large amounts of potential tax revenue and this is contributing to inequality and poverty as governments are forced to decide between increasing indirect taxes such as value-added tax (VAT), which are paid disproportionately by ordinary people, or cutting public services, which hits the poorest hardest. At the same time, increased profits as a result of lower corporate taxation benefit wealthy companies’ shareholders, further increasing the gap between rich and poor. The report highlights the importance of financial transparency rules to help detect and stamp out tax dodging.

The UK Government has already secured the power to expand public country-by-country reporting rules (which require companies to publically report on a country by country basis where they make their profits and pay their taxes) from banks to other big businesses, but has not yet introduced this legislation. It has been waiting to see what steps the EU will take.

Mr. McCarthy Flynn added: “No changes to Northern Ireland’s corporate tax system should be undertaken until these transparency rules are implemented throughout the UK, including Northern Ireland. Such rules will ensure that companies have to report on their profits and the tax they pay in every country where they operate, as a safeguard to prevent companies from taking advantage to avoid tax owed elsewhere. Otherwise there is a risk that Northern Ireland could be used as a tax haven, leaving the most vulnerable to pay the price of reduced public services such as health and education.” 

ENDS

Contact: To arrange an interview or for more information, please contact:

Alice Dawson on 00 353 (0) 83 198 1869 / alice.dawson@oxfamireland.org

NOTES TO EDITORS

The report, Opening the vaults: the use of tax havens by Europe's biggest banks, a breakdown of bank data, infographics and a methodology document is available at https://oxfam.box.com/s/wn9mdt217isfp4ji8dzossuyxphb698d. The complete data on which Oxfam based its calculations is also available.

The 20 European banks assessed by Oxfam include: HSBC, Barclays, RBS, Lloyds and Standard Chartered (UK); BNP Paribas, Crédit Agricole, Société Générale, BPCE, and Crédit Mutuel-CIC headquartered (France); Deutsche Bank, Commerzbank AG, and IPEX (Germany); ING Group and Rabobank (Netherlands); UniCredit and Intesa Sanpaolo (Italy), Santander and BBVA (Spain); and Nordea (Sweden). All banks were asked to comment on the findings of the report before publication – their responses are outlined in the report.

More statistics from the report:

• Subsidiaries in tax havens are on average twice as lucrative for banks as those elsewhere. For every €100 of activity, banks make €42 of profit in tax havens compared to a global average of €19.
• Bank employees in tax havens appear to be 4 times more productive than the average bank employee – generating an average profit of €171,000 per year compared to just €45,000 a year for an average employee.
• In 2015 European banks posted at least €628 million in profits in tax havens where they employ nobody. For example, the French bank BNP Paribas made €134 million tax free profit in the Cayman Islands despite having no staff based there.
• Some banks are reporting profits in tax havens while reporting losses elsewhere. For example, Germany’s Deutsche Bank registered low profits or losses in many major markets in 2015 while booking almost €2 billion in profits in tax havens.

Oxfam is an international confederation of 19 non-governmental organisations working with partners in over 90 countries to end the injustices that cause poverty. www.oxfamireland.org

Fair Finance Guide International is an international civil society network, initiated by Oxfam that seeks to strengthen the commitment of banks and other financial institutions to social, environmental and human rights standards. http://fairfinanceguide.org/