Tax havens causing major headaches for European governments trying to balance their books.
In a detailed analysis, economist Gabriel Zucman reveals the large impact tax havens have had on global profit-shifting over the last 50 years.
“Profit shifting” are strategies used by multinational companies to move their profits from higher-tax jurisdictions to lower-tax jurisdictions (often tax havens) in order to reduce their overall tax burden.
According to Zucman, companies are increasingly reporting a higher share of their overseas profits in tax havens without corresponding increases in actual business activities in these locations—a clear sign of profit-shifting.
Top tax havens include countries like Ireland, Switzerland, and Singapore, where foreign firms appear far more profitable than domestic ones, which is further evidence of this trend.
Countries like Ireland collect significantly more corporation tax revenue per capita than their European neighbours, such as France and Germany, who are effectively losing out.
Zucman estimates that in 2015, 36% of multinationals’ profits were shifted to tax havens, with high-tax countries like the UK being the biggest losers—Britain’s corporate tax revenues are 18% lower due to profit shifting.
Basically, jurisdictions like Ireland gain at the expense of others.
Centrist Ltd.