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European banks profited €25bn from tax havens last year

European banks profited €25bn from tax havens last year
A report by Oxfam suggests Europe’s largest banks have registered over a quarter of their profits in offshore tax havens last year. The continent's top 20 lenders avoided paying tax on an estimated €25 billion, the study finds.

The report follows increased international scrutiny of corporate tax avoidance.

The lenders paid no tax on profits of €383 million posted in seven tax havens last year while booking earnings of €4.9 billion in Luxembourg – more than they did in the UK, Sweden, and Germany combined.

In 2015 European banks posted at least €628 million in profits in tax havens where they employ nobody, Oxfam reported. Luxembourg and Ireland are the most favored tax havens, accounting for 29 percent of the profits banks posted offshore in 2015.

“The French bank BNP Paribas made €134 million tax-free profit in the Cayman Islands despite having no staff based there,” explained the report.

The report also showed some banks were reporting profits in tax havens while reporting losses elsewhere. Germany’s Deutsche Bank registered small profits or losses in many major markets in 2015 while booking almost €2 billion in profits in tax havens.

Bank employees in tax havens appear to be four times more productive than the average bank employee, Oxfam said. They generate an average profit of €171,000 per year compared to just €45,000 a year for an average employee, the organization calculated.

The study was based on data released under new European Union regulations requiring banks to report earnings on a country-by-country basis.

“The EU’s transparency rules are starting to open up the often murky world of corporate taxation to public scrutiny,” said Oxfam’s Senior Tax Justice Advocacy Officer Manon Aubry.

“These rules must now be extended to ensure all large corporations provide financial reports for every country where they operate. This will make it easier for all countries – including the poorest – to establish if companies are paying their fair share of tax or not,” she added.

According to Oxfam, tax dodging deprives countries throughout Europe and the developing world of the money they “need to pay for doctors, teachers and care workers.”