Germany helping firms launder money and avoid tax

Germany has joined Luxembourg as the biggest offender in the EU for helping companies launder their money and avoid paying tax, according to a new report.

However, their kindness to the financial and other business sectors is being paid for not just by their citizens, but by the third-world, according to the European Network on Debt and Development.

The report, 50 Shades of Tax Dodging, coincides with the first anniversary of the Luxleaks scandal that showed the extent of state collusion with multi-nationals to help them avoid paying tax.

The study says Germany and Luxembourg are introducing new methods to allow companies hide who the real owners of companies are, and so help them avoid tax.

Earlier this year Luxembourg was ranked as the country offering the highest risk of money-laundering followed by Germany, Italy, Spain and the Netherlands. Ireland was ranked 10th — just below the EU average.

While money laundering is normally associated with criminals and terrorists it also indicates how easy it is for companies to hide their profits from revenue authorities. One way of defeating this is put the beneficial owners of such companies in a public register, as Denmark and Slovenia have done. Britain is exempting trusts which are widely used; while Germany and Ireland are against making this information public.

The study of 14 eurozone countries says that while EU leaders claim they are solving the problems revealed by the LuxLeaks and other scandals, in many cases they are creating new loopholes for big business to avoid paying their share of tax.

“Although tweaks have been made and some loopholes have been closed, the complex and dysfunctional EU system of corporate tax rulings, treaties, letterbox companies and special corporate tax regimes still remains in place,” Eurodad said. For instance while Ireland is phasing out the ‘double Irish’ and stateless companies, we are introducing patent boxes that allow companies offset spending in research and development against their tax.

Ireland ranks fifth in the world for over-reporting of profits with multinationals channelling their money through the country, says Éilis Ryan of Debt and Development Coalition Ireland.

The country could also improve its trade agreements with third world countries. For instance the report says the deal with Zambia costs the African country €1 for every €14 they receive from Ireland’s development aid.

“Some of Ireland’s investment in poorer countries is just replacing revenue lost through the multinationals tax arrangements. It’s a waste of Irish taxpayers’ money,” she said. There will be demonstrations in Brussels today to mark the first anniversary of LuxLeaks.