Tax avoidance by corporations is widespread in Europe and costs governments more than €70bn annually. This revenue loss, and the legal ramifications of strategies that multinational companies use to avoid paying taxes, starves public services of funding, limits the bargaining power of trade unions and undermines employee rights. This ETUI policy brief outlines the scale of the problem, describes some of the ways that corporations limit their tax liabilities, and suggests some practical solutions. The brief shows that corporations have a range of strategies for avoiding paying taxes, including: declaring themselves to be multinationals; use of ‘transfer pricing’ to shift sales from high to low tax jurisdictions; and concluding secret tax deals with governments. Wealthy individuals also have a number of accounting and legal tricks available to them to conceal their assets.
Nevertheless, the brief argues that a number of solutions to tax avoidance are already on the table - although they require that the political will be summoned to act upon them. Greater transparency in companies’ tax affairs, new international rules to limit transfer pricing and better protection for whistleblowers are all needed. Public awareness of the magnitude of the problem in an era of squeezed public budgets has put the issue of tax justice firmly on the agenda, providing trade unions and other reformers with an impetus to pressure governments and EU institutions to take action.