European banks store €20bn in tax havens every year

Leading banks in Europe are storing €20 billion, or 14 per cent of their total profits, in tax havens each year.

According to a new report from the EU Tax Observatory, the percentage of profits has remained the same since 2014, despite the introduction of mandatory information disclosure.

The organisation, which conducts research on taxation, said that bank profitability in tax havens is “abnormally high” at €238000 per employee, in comparison to €65000 in non-haven countries.

This suggests that the profits booked in tax havens are primarily shifted out of other countries where service production occurs.

Around 25 per cent of the profits made by the European banks in the report’s sample are booked in countries with an effective tax rate lower than 15 per cent.

Seven banks in the sample exhibited a particularly low effective tax rate, lower or equal to 15 per cent. Three of these were British institutions: RBS (NatWest), Barclays, and HSBC.

The other banks identified as having a lower tax rate were: Bayern LB, Nord LB, HSBC, KBC, and Intesa Sanpaolo.

“HSBC is the largest bank in Hong Kong, with c. 30,000 employees, and because of our heritage, size of operations and strategy, a significant proportion of the Group’s profits continue to arise there," said an HSBC spokesperson. "HSBC does not employ tax avoidance strategies to artificially divert profits to low-tax jurisdictions.”

Barclays said that it was not making any comment on the report, however noted that the bank was ranked as the fifth largest UK taxpayer in the most recent PwC Total Tax Contribution survey of the One Hundred Group.

FStech has reached out to the NatWest for comment.

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