Europe’s damaging impact on developing countries via bilateral double tax treaties has been laid bare in a new study released by the European Parliament’s European United Left/Nordic Green Left (GUE/NGL) today.
Written by the LSE’s Martin Hearson, ‘The EU’s Tax Treaties with Developing Countries – Leading By Example?’ looks into 172 tax treaties currently in place between EU member states and the global south. It analyses why the vast majority are biased in favour of the bloc whilst depriving poorer countries of taxing rights and much needed revenue.
In particular, multinationals benefit greatly from such sweetheart deals that tax their subsidiaries and headquarters – often based in low-tax EU member states – as opposed to where they operate and earn income – in developing countries.
Amongst the key findings highlighted are:
- The EU’s stated desire to alleviate poverty in developing countries is undermined by unfair tax treaties, which usually favour EU member states – directly contravening Article 208 of the EU treaty;
- The EU plays a dominant role in setting the global agenda for international taxation when negotiating bilateral treaties. 40% of the world’s tax treaties include an EU member state as signatory;
- Developing countries are powerless in signing away their taxing rights during negotiations with EU member states, and in the process, with multinationals;
- EU member states impose more restrictions on their source taxing rights with developing countries, than with other OECD countries;
- ‘Spillover’ analyses are badly needed to rectify the inequality – something that has long been ignored by member states.
The study also recommends how EU member states should tackle such inequality, and how they can show more leadership – both moral and economic.
“EU member states have siphoned off much-needed tax revenues from developing countries through their unjustly designed double tax treaties. This has to stop. More than half of all double tax treaties worldwide have an EU member state as a signatory. The scope for leading by example is therefore huge. It’s high time for member states to come clean on this issue if their commitment to the UN’s development goals is to be taken seriously,” said German MEP Martin Schirdewan (DIE LINKE.).
This study marks the latest in a series of GUE/NGL-commissioned studies looking into tax evasion and tax justice encompassing the role of the Big Four accountancy firms, CCCTB, Apple’s tax dodging and the Panama Papers over the past year.