According to a tax report by the European Union (EU) Tax Observatory (ETO) on the activities of some thirty-six (36) European Banks, the banks have been identified to book an average of €20 billion ($23.7) in tax haven annually.

This amount, an analysis from the ETO’s report disclosed, represents 14 percent of the banks’ total annual revenues.

Banks’ use of “tax havens comes amid growing pressure on multinational companies to pay up after a slew of scandals in recent years, which include the Panama papers and Lux leaks”.

These recent scandals have galvanized international talks to set a global minimum effective corporate tax rate of 15 percent, which countries agreed in principle to implement in July 2021.

However, the findings from the report revealed that, 25 percent of the banks’ profits were booked in countries with effective tax rates lower that 15%.

“Taken together, this evidence indicates a significant presence and stable use of tax havens by European banks over the years.”
European Union (EU) Tax Observatory

The report revealed that the 36 banks which are headquartered in 11 European countries were “subjected to mandatory country-by-country reporting on their operations since 2015”.

The 36 European banks that were subject to scrutiny include, Société Générale, Standard Chartered, Unicredit, Barclays, Deutsche Bank, HSBC, Nationwide, Crédit Mutuel, Danske Bank, DZ Bank, ERSTE, Handelsbanken, Helaba, Lloyds, Monte dei Paschi, and Nord LB.

Also included in the tax investigation were Abn Amro, Banco Sabadell, Banco Santander, Bankia BFA, Bayern LB, BBVA, BNP Paribas, BPCE, Commerzbank, Crédit Agricole, ING, Intesa Sanpaolo, KBC Bank, LBBW, Nordea, Nykredit Realkredit, Rabobank, RBS, SEB Bank, and Swedbank.

Additionally, the report on the banks’ operations revealed that “the use of tax havens varies from bank to bank”.

The choice location of the banks’ tax haven activities was in some seventeen (17) low-tax countries, such as: the Bahamas, British Virgin Islands, Bermuda, Cayman Islands, Isle of Man, and Jersey.

Also included in the choice destination for the tax haven operations were Gibraltar, Guernsey, Hong Kong, Ireland, Luxembourg, Kuwait, Macao, Malta, Mauritius, Panama, and Qatar.

The ETO report, by focusing on “financial companies with annual revenue of at least €750 million” between 2014 and 2020, has been disclosed that about “65% of banks’ profits were reported as being made abroad through affiliates”.

Profit match for employees in tax-haven countries were discovered to far outweigh that of employees in non-tax haven countries, the report disclosed.

“Bank profitability with tax havens is abnormally high: 238,000 euros per employee, as opposed to around 65,000 euros in non-haven countries.”
European Union (EU) Tax Observatory

Stakeholder response

Meanwhile, in the banks’ defence while responding to the report, Santander and ING dismissed any accusation of profit shifting, while Barclays, Danske Bank and UniCredit declined to comment on account they have yet to see the report. Deutsche Bank didn’t immediately respond to the claims raised by the report.

“Grupo Santander pays its fair share of taxes in the jurisdictions where we operate. We do not divert profits to low tax jurisdictions and declare profits where we obtain them.”
Santander Bank

“Overall, our tax rate is around 30 percent for the Group as a whole but also for most countries we are active in, although circumstances do differ in different geographies.”
ING Bank

Meanwhile, the European Parliament’s tax subcommittee chair, Dutch MEP Paul Tang, called these happenings “disappointing” that the banking sector draws on public support during downturns while “still avoiding its contributions to the public coffers”.

Tang, who also belongs to the Socialists and Democrats Group, further disclosed that, these financial misconducts “shows the need for a minimum effective tax rate for banks”.