EU tax treaties deprive developing countries of rights and revenue – Matt Carthy MEP
Sinn Féin MEP Matt Carthy has launched a new report examining the impact of EU Member states’ tax treaties with developing countries. The study was commission by Carthy together with other MEPs from the European United Left group in the European Parliament. It was carried out by Martin Hearson, a fellow at the London School of Economics.
Carthy announced the report in a hearing of the Parliament’s TAX3 special committee on financial crimes, tax evasion and tax avoidance today in Brussels.
The Sinn Féin MEP said: “Tax avoidance is often facilitated by bilateral tax treaties, but even more important is the fact that these treaties reduce the taxing rights of developing countries, which results in significantly lowering the amount of revenue these countries can raise.
“The report we are publishing today analyses why the vast majority of double tax treaties are biased in favour of the EU member states whilst depriving developing countries of their taxing rights and much-needed revenue.
“Tax treaties place too much emphasis on the taxing rights of the countries of residence of multinational companies, imposing too many restrictions on the countries that are the source of those companies’ income, often developing countries.
“The EU’s stated desire to alleviate poverty in developing countries is undermined by unfair tax treaties, which usually favour EU member states – directly contravening Article 208 of the EU treaty.
“This study finds that EU member states impose more restrictions on their source taxing rights with developing countries than with other OECD countries.
“The Permanent Establishment threshold, above which developing countries can tax foreign companies’ profits generated in their borders, is getting much lower in tax treaties signed among developing countries, and a gap is opening up between these treaties and those signed with EU countries.
“This report finds that the EU plays a dominant role in setting the global agenda for international taxation when negotiating bilateral treaties. More than half of the tax treaties in place across the world, and 40 percent of those with developing countries, have an EU member state as signatory.
“Developing countries are powerless in signing away their taxing rights during negotiations with EU member states, and in the process, with multinationals.
“The study makes several important recommendations, which I will be following up through the TAX3 committee when we produce our recommendations, and also directly with the Irish government.” ENDS
Note to editors:
The report, The EU’s Tax Treaties with Developing Countries – Leading By Example?, is available to download at the following link: http://www.guengl.eu/uploads/publications-documents/LeadingByExample.pdf