European banks and tax havens: evidence from country-by-country reporting

ABSTRACT

Banks in the European Union have recently started publicly reporting data on profit, employee numbers, turnover and tax on a country-by-country basis; this new data source is capable of indicating to what extent banks’ profits are geographically aligned with their activities. I introduce one of the largest, hand-collected, publicly available data sets of its kind, which covers almost 50 banks for up to 5 years between 2013 and 2017. Using the data set, I identify the main locations of European bank’s profits, which include major European economies as well as countries often considered tax havens. I find that some of the tax havens have maintained high shares of profits in contrast with their much lower shares of employees or, to a lesser extent, turnover. These results indicate that while banks are likely shifting their profits to tax havens, even more detailed data would need to be published by banks to facilitate a direct observation of profit shifting.

KEYWORDS:

• Country-by-country reporting
• banks
• tax havens
• profit shifting
• European Union

JEL CLASSIFICATION:

• F21
• F23
• G21
• G28
• H25

Acknowledgements

I acknowledge support from the Czech Science Foundation (P403/18-21011S). I am grateful for useful discussions and comments on an earlier version of this research paper provided by Stephen Abbott Pugh, Alex Cobham, Jonathan Gray, Ondřej Kopečný, Dominika Langenmayr, Markus Meinzer, Richard Murphy, and Miroslav Palanský. This paper uses the December 2018 version of the banks’ country-by-country reporting data set that has been put together by myself and my colleagues at Charles University, Prague, Czechia. A number of individuals contributed to the data collection; in particular, I am grateful to Eliška Jelínková, Petr Procházka, Anna Bartoňová, Lukáš Bíro, Jakub Siegl, and Tereza Palanská. Data collection took place from early 2016 until late 2018 and has benefited from feedback from an array of experts at different stages of preparation. The data set has been published online at Open Data for Tax Justice (https://datahub.io/StephenAbbott/eu_banks_country_by_country_reporting).

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ Table A1 indicates e.g. that all banks had on average 10–15% shares of the four variables in each of France, United Kingdom and Germany. Furthermore, by dividing the country-level numbers for tax and profit, it is possible to derive a rough estimate of effective tax rates applicable to banks in each of the countries (not shown in the table due to space constraints). For example, among the ten countries with most profit reported, only three countries have the effective tax rate below 20% and all of them are sometimes considered tax havens: Luxembourg (16%), Ireland (5%) and Singapore (13%).

Additional information

Funding

This work was supported by the Grantová Agentura České Republiky [P403/18-21011S].