More than €200bn in lost revenue for EU

Published on 5 April 2013 at 14:04

“Without going after tax havens, the countries of the EU could take in an additional €200bn to €250bn in revenue [every year],” points out Ekonom. “Tax havens are not the only option for multinationals that are determined to avoid paying tax.”

The Czech weekly reports on the widespread use of transfer prices for the services of associated companies, which are very often foreign subsidiaries of the same corporation. This allows multinationals to ensure that “their profits are declared in low-tax countries while their losses are declared in high-tax jurisdictions.” According to Ekonom

this system is especially advantageous for technology companies, which have intellectual property that is licensed to subsidiaries at very high prices. Using this method, Google was able to cut its tax bill by $2bn (€1.5bn) in 2011.

A survey conducted by Ernst & Young, which is quoted by the weekly, found that two-thirds of the world’s financial transactions happened between related companies. The recourse to transfer prices, however, is not a simple as it might seem. As Ekonom points out, transactions between different entities in the same group must be based on market prices. Infringement of this rule can expose companies to heavy penalties.

Are you a news organisation, a business, an association or a foundation? Check out our bespoke editorial and translation services.

Support independent European journalism

European democracy needs independent media. Voxeurop needs you. Join our community!

On the same topic