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Germany second only to Luxembourg in money laundering risk, says report
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By James Crisp | EurActiv.com 3 nov 2015 (updated: 3 nov 2015)
Germany’s secretive financial sector is second only to Luxembourg in its vulnerability to money laundering, and is one of the worst member states for tax dodging, according to an analysis of EU nations published a year after the Luxleaks scandal.
Most of the 15 countries scrutinised were failing to tackle tax evasion and avoidance, the report coordinated by the European Network on Debt and Development (Eurodad) said, with “ample opportunities” for multinationals and wealthy individuals to hide money.
“Some of the most troubling countries are still Luxembourg and Germany, which offer a diverse set of options for concealing ownership and laundering money,” the network of 48 NGOs, including Oxfam and Christian Aid, said.
Money laundering is turning the proceeds of crime into ostensibly legal money or assets, and has been linked to international terrorism. The Luxleaks scandal pushed corporate tax avoidance, which is technically legal, and tax evasion, which is illegal, up the political agenda.
On 5 November 2014, an International Consortium of Investigative Journalists exposé revealed that Luxembourg gave sweetheart tax deals to multinationals, when European Commission President Jean-Claude Juncker was the country’s premier, and finance minister.
22 of the EU’s member states use tax rulings to make deals with corporations, the report, 50 Shades of Tax Dodging, said. “With provision for tax rates lower than 1% in some cases [..] such tax rulings have now become a key tool in corporate tax avoidance,” it added.
Eurodad looked at just one kind of tax ruling, Advance Pricing Agreements (APAs). At the end of 2013, Luxembourg had 119, the United Kingdom was second with 73. Germany had 21 APAs in force, two more than the EU average.
In October, member states agreed to the automatic exchange of information on their tax rulings. The deal will come into force in January 2017.
The European Commission has launched state aid investigations against several member states, including Luxembourg, over their tax deals with companies.
Tove Ryding, coordinator of Tax Justice at Eurodad, said, “The citizens of Europe have now waited a year for the EU to get its act together and put an end to a system that allowed hundreds of multinational corporations to dodge taxes.
“Instead, although a few loopholes have been closed, new ones have also appeared. It’s clear that in the EU it is business as usual for multinational corporations who want to dodge the rules to lower their tax bills.”
European Commission tax spokeswoman Vanessa Mock told EurActiv, “The fight against tax evasion and tax fraud is one of the top priorities of this Commission. Since the launch of our Tax Transparency Package last March and our Action Plan on Corporate Taxation in June, we have already managed to deliver concrete results [see positions].”
Secrecy and money laundering
Luxembourg was criticised in the report for making it even more difficult to identify the real owners of companies and assets by introducing new financial structures.
On a scale based on the Basel Institute of Governance’s Anti-Money Laundering Index 2015, Luxembourg was given 5.9 out of ten. Germany scored 5.5, higher than the EU average of 4.4.
Italy, Spain and the Netherlands, France and the United Kingdom follow close behind on the list.
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