Because taxes are lower elsewhere, some companies prefer to move their business abroad. The German state is losing a lot as a result, as a new evaluation shows.
According to calculations by the Ifo Institute, the tax authorities are escaping billions of dollars through tax avoidance by major German corporations. As the “Frankfurter Allgemeine Zeitung” reported, referring to the figures, the state lost 1.6 billion euros every year in the 333 largest German multinational companies alone.
If you also include smaller companies with foreign business and German subsidiaries of foreign multinational companies, this results in a tax loss of 5.7 billion euros per year.
Ireland, Liechtenstein, and Luxembourg are popular tax havens
The figures that Ifo President Clemens Fuest calculated together with other researchers are based for the 333 large companies on their country-specific reports, which the researchers were able to evaluate for the first time.
The researchers included Ireland, Liechtenstein, Luxembourg, Malta and Cyprus as tax havens within Europe, and Bermuda, the British Virgin Islands and the Cayman Islands as oases outside Europe.
Profiting in tax havens does not necessarily mean tax avoidance
According to “FAZ”, the researchers were able to shed light on many more details on the basis of the reports from the companies. A total of 47 billion euros – that is nine percent of the total global profits of large corporations – went to subsidiaries that are based in tax havens.
However, according to economists, profits in tax havens do not automatically mean tax avoidance. Rather, 62 percent of the profits in tax havens can be traced back to real economic activities. “38 percent is the result of profit shifting to avoid taxes,” the newspaper said in the report.