Ireland, Holland and Luxembourg are tax havens that undermine the EU. Word of Antitrust

Ireland, Holland and Luxembourg are tax havens that undermine the EU. Word of Antitrust

Ireland, the Netherlands and Luxembourg implement aggressive tax practices which damage the economies of other Member States and which, thanks also to these practices, have very high growth rates. What Antitrust President Roberto Rustichelli said in the hearing in the Chamber

(Excerpt from the hearing of President Rustichelli in relation to the European Commission's work program for 2020 and to the programmatic report on Italy's participation in the European Union in the year 2020)

The problems of unfair tax competition are increasingly at the center of the economic and political debate in the European Union.

The experience, unique in the history of our continent, of a monetary union accompanied by a growing integration of real and financial markets is increasingly flawed by the absence of stringent common tax and social security rules.

This regulatory vacuum makes it possible for some Member States to engage in tax and contributory dumping practices, which can undermine the foundations of the European construction itself.

Countries such as Ireland, Holland and Luxembourg are real tax havens in the Euro area, which implement aggressive tax practices that damage the economies of other Member States and which, thanks to these practices, also record very high growth rates .

Proof of this is the fact that in the last five years Italian GDP has grown by only 5%, while Ireland's GDP has grown by 60%, that of Luxembourg by 17% and that of Holland by 12%.

Equally significant are the figures relating to per capita income in the various countries. Against a per capita income in Italy of 28,860 euros in 2019, a per capita income of 83,640 in Luxembourg, 60,350 euros in Ireland and 41,870 euros in the Netherlands.

The Union treaties do not directly refer to tax competition. Through the December 1997 resolution on a Code of Conduct for business taxation, Member States have politically committed themselves to refraining from harmful tax practices, while EU state aid rules prevent the granting of favorable tax treatment to certain businesses.

However, neither the Code of Conduct nor state aid rules has significantly limited countries' ability to use their tax system as an unfair competitive lever, with negative effects on the economy and on the cohesion of the European Union as a whole. .

As I have already seen in the past, unfair tax competition generates clear advantages for certain countries: Luxembourg, a country of about 600 thousand inhabitants, is able to collect corporate taxes equal to 4.5% of GDP, against of 2% of Italy.

Ireland (2.7%) also does better than Italy, despite a particularly low rate, which is, however, able to attract highly profitable companies with an average gross operating margin of 69.4% of the added value product.

International investments adapt to the geography of tax competition: Italy attracts foreign direct investments equal to 19% of GDP; Luxembourg at over 5,760%, Holland at 535% and Ireland at 311%.

Such high values ​​cannot be explained in the economic fundamentals of these countries, but are largely attributable to the presence of special purpose vehicles. In fact, foreign-controlled companies represent more than one in four companies in Luxembourg, while they generate 73.6% of the total gross operating margin produced by companies in Ireland, compared to 12.7% in Italy.

A study commissioned by the Dutch Ministry of Finance shows that the only financial flows (dividends, interest and royalties ) that cross the Dutch shell companies amount to 199 billion euros (27% of the country's GDP).

But if some countries make money, it is the European Union that loses, given that multinationals react to tax competition, locating their offices in European countries with more favorable taxation.

This drains resources from the states where value is actually produced.

Some research estimates that, due to unfair tax competition at European level, the Italian tax authorities lose the possibility of taxing over $ 23 billion in profits: 11 billion in profits are moved to Luxembourg, over 6 billion to Ireland, 3.5 billion in Holland and over 2 billion in Belgium.

This leads to damage for Italy which can be estimated between 5 and 8 billion dollars a year.

Finally, it cannot be said that Ireland, the Netherlands and Luxembourg collect approximately $ 270 billion in "sidetracked" profits, and that these tax havens do not even take charge, as the industrial factories of the companies that have moved the own tax office, the costs of social safety nets. This is a phenomenon that assumes a further problematic implication in the case of countries that combine these unfair tax practices with the claim of strict budgetary rigor from countries from which resources drain.

Unfair tax competition also reduces the ability of the European Union as a whole to raise resources, thereby preventing more equitable taxation of corporate profits.

In fact, as evidenced by a study by the European Commission itself, profit-shifting practices have generated in the last 20 years less revenue for the European Union in the order of 35-70 billion euros per year.

Unfair tax competition also has a negative impact on the sustainability of public finances and on the composition of the tax levy.

In fact, taxation tends to move on non-transferable tax bases such as buildings, employees, vehicles and fuels.

However, these are dynamics that can also undermine the level playing field on the market, disproportionately benefiting certain types of companies and their employees.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/irlanda-olanda-e-lussemburgo-sono-paradisi-fiscali-che-minano-lue-parola-di-antitrust/ on Sun, 05 Jul 2020 05:25:40 +0000.