Oxfam International has backed down from claims that leading Dutch banks ING Groep NV and Rabobank Group NV are among 20 leading European banks that earned 26 percent of their profits in tax havens, reports Bloomberg.
There is no “strong evidence’’ that leading Dutch banks ING and Rabobank NV are “overusing tax havens,” according to Oxfam International.
The March 29 U-turn from the U.K.-based non-governmental organization comes after it insisted in a March 27 report that the two Dutch banks were part of a group of 20 European banks booking disproportionate amounts of profits in tax havens, despite a low number of employees in those jurisdictions.
The organization’s reversal track was triggered by opposition to its report from the Dutch banks and the European Banking Federation, which represents 32 national bank associations in Europe and approximately 4,500 large and small financial institutions, including all 20 banks listed in the report.
Oxfam spokeswoman Anna Ratcliffe said the report “highlights that there are differences between the banks, with some behaving better than others.”
In a March 29 email to Bloomberg BNA, Ratcliffe said that specifically, “there is no strong evidence that either of the Dutch banks—ING or Rabobank—are overusing tax havens unlike with banks such as Deutsche Bank and Societe Generale.”
The profits “the Dutch banks report on tax havens are largely in line with the size of their operations in these countries and the effective tax rates that Dutch banks pay on these profits are roughly in line with the effective tax rates paid by the banks outside tax havens,’' Ratcliffe said.
European Politicians Urge State Aid Investigation
Oxfam’s admission comes amid a call—triggered by its report—by European politicians for the European Commission to investigate Europe’s leading banks over illegal state aid.
The European Parliament’s second largest political group, the Socialists and Democrats, accused the European banks of violating European Union competition rules by using tax havens to book profits.
The 20 banks listed by the Oxfam report include the U.K.'s leading financial institutions led by Royal Bank of Scotland Plc., Barclays Plc. French-based banks BNP Paribas S.A. and Societe Generale S.A. are on the list. Germany’s leading banks, Deutsche Bank A.G. and Commerzbank A.G., were also included, along with Italy’s top two financial institutions, Unicredit, S.p.A. and Intesa Sanpaolo S.p.A.
Spain-based Banco Santander S.A. and Banco Bilbao Vizcaya Argentaria S.A. are also on the list.
Letter to Juncker
In a letter to commission President Jean-Claude Juncker, the Socialists and Democrats said the Oxfam report—compiled from information available as a result of new country-by-country tax and profit reporting rules that took effect in 2015—showed that a large proportion of banks’ profits were declared in countries in which they had few or no employees.
The tax havens themselves account for only 12 percent of the banks’ total turnover and 7 percent of their employees, the March 27 report states, “signaling a clear discrepancy between the profits made by banks in tax havens and the level of real economic activity” in those countries. “We therefore ask the commission to launch all the proper investigations to assess the potential infringement of competition rules,” the group said in its letter to Juncker.
But Oxfam’s report—which included EU member states Ireland, Luxembourg and Ireland in its “tax havens” definition—has been opposed by the European banking sector as well as the Dutch banks cited.
ING Groep NV told Bloomberg BNA March 26 that the only reason it was listed among the top 20 EU banks cited in the report is that Oxfam considers Belgium, Luxembourg, Ireland and Austria to be tax havens.
“We are present in these countries because we have substantial banking businesses in these countries, not for tax reasons,’' ING spokeswoman Carolien van der Giessen told Bloomberg BNA. “We serve millions of customers every day in these countries, we have thousands of employees and we pay our taxes in these countries.”
Ratcliff insisted that the Oxfam report “was not designed to single out the behavior of individual banks—but rather to highlight the overuse of tax havens of the sector as a whole and the benefits of transparency rules in highlighting possible cases of tax avoidance.’'
The European Banking Federation insisted that Oxfam’s methodology for drawing its conclusions “are up for debate,” especially when it comes to matching profits with the number of employees.
“When saying that a certain percentage of bank’s activities are undertaken in tax havens Oxfam is comparing apples and pears,” federation spokesman Ray Franken told Bloomberg BNA in a March 29 statement. “Banking includes various types of activities: structuring and booking loans, custody banking, investment funds and wealth management often include transactions of multi-billion dollars that require less staff than transactions involving small amounts in retail banking.”
Ireland and Luxembourg have also disputed the report.
“We reject any allegations that Ireland is a tax haven,’' Irish Ministry of Finance spokesman David Byrne told Bloomberg BNA in a March 26 email statement. “The report outlines four criteria that Oxfam suggests should be used to determine which countries are considered to be tax havens. However Ireland does not meet any of these criteria.’'
Bob Keiffer, a spokesman for the Luxembourg Ministry of Finance, also rejected the tax haven tag. He noted that Luxembourg has been an “early adopter of the automatic exchange of information for tax purposes. In particular Luxembourg has been among the few countries that have already implemented several actions of the OECD BEPS initiative.”
The European Commission told Bloomberg BNA in a March 29 email that it has “taken note of the request” from the Socialists and Democrats.
“We will of course investigate breaches of competition rules and Commissioner [Margrethe] Vestager has already taken very robust action in this area,” the commission said in the statement.
The commission has already concluded that illegal state aid decisions were made in relation to Starbucks in the Netherlands, Fiat in Luxembourg, a Belgian tax rulings scheme and Apple in Ireland. “Other investigations are underway,” it added.
The demand for an EU illegal state aid investigation comes as EU member states renewed discussion March 29 to expand country-by-country reporting to all EU-based companies with an annual turnover of 750 million euros ($809 million). The European Parliament wants to lower the threshold to 40 million euros.
Pablo Micallef, a spokesman for Malta—which holds the rotating EU presidency and is chairing the negotiations in the Council of Ministers on the pending country-by-country reporting proposal—wouldn’t comment on whether or not progress was made.
In a March 29 email, he told Bloomberg BNA that new negotiations would take place May 17.
Micallef also refused to say how the Maltese presidency would deal with conclusions drawn in December of 2016 by the Council of Minister’s legal service that the pending legislation should be considered tax legislation and another EU single market law.
A host of EU member states insist the pending country-by-country reporting legislation should have a legal base as tax law and therefore the European Parliament should not have co-decision powers. In addition it would require unanimous consent in the Council of Economic and Finance Ministers instead of qualified majority in the Council of Competitiveness.