European banks active in tax havens despite scandals: survey

European banks have not reduced their presence in tax havens, despite several scandals that have revealed the dubious practices multinationals use to avoid taxes, according to a study published on Monday.

Mockery aside, advanced economies have found it hard to counter the lure of tax havens JUSTIN TALLIS AFP/File

Europe's leading banks each year book €20 billion, or 14 percent of their total profits, in 17 territories with particularly favourable tax regimes, a report by the EU Tax Observatory, which is housed at the Paris School of Economics, claimed.

That percentage has remained stable since 2014 when a wave of revelations, like those contained in Lux Leaks and the Panama Papers, exposed tax practices used by companies and high-wealth individuals to avoid paying tax.

"Despite the growing importance of these issues in the public debate and in the political world, European banks have not significantly reduced their use of tax havens," the report, called "Have European banks left tax havens?" reads.

❓To what extent are banks still present in tax havens?

How did their presence change since the introduction of CbCR requirements?

What amount of revenue can countries in Europe collect when a minimum tax rate is introduced?

Read our new report here 👇https://t.co/KAyt0EC56n pic.twitter.com/V2mNmlYJsm

— EU Tax Observatory (@taxobservatory) September 6, 2021

The Observatory is headed by Berkeley University professor and tax expert Gabriel Zucman, a Frenchman who worked together with wealth inequality specialist Thomas Piketty.

The outlet reviewed data published by 36 financial institutions over the 2014-2020 period, with a special focus on big banks HSBC, Deutsche Bank, and Societe Generale.

"We observe a diversity of situations: for HSBC, the bulk of haven profits come from just one haven (Hong Kong), while in other cases multiple tax havens are involved," it said.

HSBC was tipped as a leader of these practices with more than 62 percent of its pre-tax profits booked in tax havens between 2018 and 2020, compared to 49.8 percent for Italy's Monte dei Paschi, which came in second place.

Standard Chartered rounded out the podium.

To be sure, both HSBC and Standard Chartered are -- while domiciled in London -- leading Hong Kong retail and commercial banks. HSBC derives the vast majority of its profits in Asia, with China and Hong Kong the major drivers.

Germany's Deutsche Bank and NordLB come in fourth and fifth.

The report identifies 17 states and territories as preferred destinations for profits, including the Bahamas, the British Virgin Islands, the Cayman Islands, Jersey and Guernsey, Gibraltar, Hong Kong, Macau, Panama and the EU member states of Malta and Luxembourg.

A report by the EU Tax Observatory lists 17 tax havens where European banks are active. © EU Tax Observatory

"Profits booked by banks in tax havens are abnormally high: 238,000 euros per employee, as opposed to around €65,000 in non-haven countries," the report claims.

"This suggests that the profits booked in tax havens are primarily shifted out of other countries where service production occurs."

• France hails 'tax revolution' opportunity as G20 back plan to deter tax havens

The study comes as countries negotiate the final stretch of an international framework for the taxation of multinationals, which is backed by the G20 and the OECD.

The plan would introduce a tax floor of 15 percent on the profits of the largest international firms, though the financial sector could be excluded in the final compromise.

(With AFP)