A new report from Tax Research UK commissioned by the Green group in the European Parliament shows there are strong indications for profit shifting in the banking sector. The report highlights that the 26 banks surveyed have been systematically over-reporting their profits in some low tax jurisdictions or places identifiable as tax havens, whilst appearing to under-report them in those places where they have major centres of operation. The report concludes that country-by-country reporting data is a useful and powerful tool in helping to identify tax dumping. We are now urging banks to explain the findings.
The report shows a potential reallocation of profits – for the purpose of reducing tax liabilities – exceeding €100 million Euro into or out of 39 jurisdictions. These surveys show that some European Union jurisdictions emerge as potential destinations for the relocation of profits. In particular Ireland, Luxembourg and Netherlands seem to stand out as possible banking tax havens.
Deutsche Bank is, right after Royal Bank of Scotland, on top of the list in the overall ranking of banks showing the highest potential risk of base erosion and profits shifting. Using the „unitary taxation risk assessment” method, the report suggests that Deutsche might have reallocated 17.9% of its total declared profits. The bank, known for doubtful business pracitces, records its highest profit per capita of employees in Malta which is equally known to be a significant tax haven for German companies.
You can download the full CbCR report here.